The globalisation and fragmentation of manufacturing has increased the cross-border movement of industrial products significantly. At the same time, business models and supply chains have become significantly more complex. Many customs and trade laws were written with simple cross-border buy-sell transactions of finished products in mind. Reality is, many cross-border transactions these day are between related parties, do not involve a change in ownership, cover intermediate products and so on.
The possibility to run a supply chain across multiple countries around the world continues to provide flexibility in decisions about where to design, make and service products. From a customs and international trade perspective, this makes managing compliance and controlling duty costs increasingly difficult. It is no longer enough to consider a factory floor in isolation. A more holistic strategy which engages with the wider business, including functions such as legal, corporate affairs, finance, procurement and logistics, is needed to achieve competitive advantage in the global market place. Contract wording, pricing, transport insurance, lobbying are only a few examples of how the customs and trade function needs to be involved in all aspects of a manufacturing business to safeguard efficiencies in international supply chains.
Many manufacturing organisations run state-of-the-art ERP systems. Perhaps surprisingly, the automating the customs function has been slow to the table, perhaps because of the inherent difficulties in automating decisions such as dual use, essential character, condition of sale and similar factors impacting customs and trade compliance. Nevertheless, expectations of the authorities on processes and procedures for managing customs and trade compliance, whether or not automated, have risen sharply in recent times. Customs audits are more detailed and pervasive, and knowledge of modern national and international customs regulations on tariff classification, customs valuation and preferential or non-preferential origin is assumed.
This puts enormous pressure on companies whose margins tend to be extremely narrow, and requirements on costs and efficiencies contrastingly high. Small mistakes may lead to large duty liabilities and penalties, and disruptions to their supply chain that could easily lose them impatient but important customers.
A thorough understanding of duty planning opportunities, trade facilitation and incentive options and best-in-class customs compliance management are but a few necessities to remain relevant in this world.
To assist manufacturers in taking advantage of as many opportunities as possible while safeguarding risk and compliance, WMS offers resources of significant width and depth to help you with:
Out client had spread responsibility for customs and trade compliance over a number of different business functions, with little coordination or alignment. WMS were called in to conduct a pre-audit review of compliance levels after the logistics function had filed an application to a local Customs authority to assess its readiness of the company for an upgrade of its Customs Enterprise rating from A to AA, without informing the trade compliance team. The application triggered an inspection by Customs that the other functions were not prepared for. The trade compliance team even considered that there was a real risk of a downgrade in its Customs Enterprise rating.
How we helped
The WMS team quickly equipped itself an understanding of the company’s business model, manufacturing processes (including processing trade handbook) and organization of the customs and trade function. This enabled WMS to create a set of SOPs where none had previously existed, but which were essential to the Enterprise rating sought.
Additionally WMS conducted an in depth customs compliance review, identified the high risk areas which could lead to a downgrade in Enterprise status and provided suggested remedies.
Benefit for client
The highest level of management was alerted to the case and how critical customs and trade compliance was to maintaining an efficient supply chain. This meant that the necessary resources have been directed to resolve the non-compliance issues.
The manufacturer did not receive notification of a downgrade to their Customs Enterprise rating after the audit and is pro-actively working to implement the SOPs provided by WMS to allow for a future upgrade to its rating.