Trending Now

Building a Resilient Supply Chain with Advanced Predictive…

New Articles

What Transportation Professionals Need to Know About the U.S.-Mexico Border Situation

Archives, Commentary, Global Trade Daily

What Transportation Professionals Need to Know About the U.S.-Mexico Border Situation

Leave a comment

On March 27, U.S. Customs and Border Protection issued a notice detailing the re-assignment of over 750 officers from various ports of entry along the U.S.-Mexico border to help process people crossing the border. This past weekend, rhetoric increased significantly regarding the potential of closing the border completely. While this threat is not new, it certainly feels different this time around, and specifically raises questions for those involved in regular cross border freight movements. With the news that Secretary Nielsen is cutting short a trip to Europe, what can supply chain professionals anticipate regarding cross-border operations?

Fluid announcements

We have seen over the course of this administration that policy is often refined and revised from the first announcement or tweet to the final policy implementation. It is clear that the White House has received tremendous feedback from businesses regarding the impacts of border delays and closures across the country. It appears that some type of new policy is being seriously considered at the border, but as of today the final details are still to be determined.

Scenario planning

While we may not know if and how policy may change and impact freight for a few days or weeks, we can scenario plan for a reasonable number of outcomes. Some of those may be:

-A temporary total closure that aims to extract policy goals much like the government shutdown in January

-A partial closure at the border based on type of vehicle, product, or mode

-A partial closure at the border based on port of entry or days of the week to reassign more resources to processing people

-Continued uncertainty as policy making is delayed

Supply chain strategies

In addition, supply chain professionals can consider the following strategies to mitigate U.S.-Mexico border delays in an uncertain atmosphere:

Look for opportunities to convert modes of services

With possible closures effecting ports of entry along the U.S. southern border, additional planning will be needed. Work with your account managers and transportation service providers to review time critical and urgent freight shipments. Access a broad network of transportation modes to mitigate against the risk of closures by leveraging air and rail services to make sure your freight keeps moving.

Utilize warehouses and secured carrier yards as drop points

Should your freight get stuck at the border due to the closure, make sure your transportation service provider has secure trailer yards and warehouses to temporarily store your shipment. If the freight can be delayed prior to dispatch, consider holding the shipment at your facility to diminish unplanned demurrages and delay in transit.

Get your customs documents in order

Work with both your U.S. and Mexican customs broker to pre-validate all customs documents prior to dispatching your shipment. Additional delays can be avoided once the ports of entry open by making sure all paperwork is correct and ready to be transmitted immediately to customs. This includes verifying all commercial invoices, certificates of origins, POAs, Bills of Lading, and special import/export permits.

Actively communicate with your procurement team

Make sure that all internal team members and external customers understand the current volatility and are validating purchase orders before being shipped to or from the border. Should port of entries close, and commercial traffic disrupted, freight arriving to the border without prior preparation could experience significant clearance delays.

Resources to monitor the situation

C.H. Robinson will be issuing a client advisory daily on the U.S.-Mexico border situation with both on the ground updates regarding port delays and operational impacts, as well as policy updates from Washington, D.C.

Archives, Global Trade Daily, International Trade

What to Consider when Planning for the Post-Brexit Period

Leave a comment

The past weeks have seen a flurry of parliamentary activity in London, none of which has yielded any more clarity regarding the status of the UK’s membership in or relationship with the European Union. At time of writing, British lawmakers have twice voted down a proposed Brexit deal that EU officials have said is non-negotiable, and subsequently voted against leaving the EU without a deal.

Even in the likely event the EU agrees to delay the Brexit deadline, the future of Brexit remains very much in question, as Britain’s divided Parliament won’t be any more likely in the coming months to reach consensus than European officials are likely to re-open negotiations.

The innocent bystanders, of course, are the countless businesses on both sides of the English Channel, which have hitherto relied on seamless trade between the two entities, and which are increasingly reconsidering their relationships with suppliers and vendors across what has the potential to become a hard border.

Unprepared for Brexit

While the impending Brexit deadline has generated expected urgency in Britain’s parliament, the inevitability of Brexit has been known for nearly three years. Yet, as it stands today, many businesses are unprepared for the very real possibility of a hard Brexit. In fact, a recent report in the Wall Street Journal, citing a study by the Chartered Institute of Procurement & Supply (CIPS), notes only 40 percent of British businesses would be prepared to comply with a new customs compliance regime.

That’s a daunting number and serves as a call to action for those who have yet to prepare for Brexit’s rapid approach. Should a hard Brexit occur, it will serve as much more than a milestone; it will turn Britain’s customs regime on its head, sowing confusion and uncertainty that will inevitably result in disruption to supply chains, administrative headaches and unexpected costs. Industries heavily integrated with European supply chains, such as aerospace, pharma, food manufacturing and autos will face acute disruption.

Increasing Landed Costs

Perhaps the most urgent consideration for those who engage in trade will be the spike in associated landed costs. In the event of a hard Brexit, the current European customs regime will cease to apply to imports. The immediate effect will be the application of tariffs and Value-Added Taxes (VATs). Those tariffs will be based on Most Favored Nation (MFN) rates, which will vary by product and could be quite substantial. While the British government has already stated that, in the event of a hard Brexit, it plans to waive seven percent more tariffs than which  currently exist, VATs will still apply as will tariffs on virtually all imports from non-EU origins. That includes countries with which the EU currently maintains free trade deals, such as the Comprehensive and Economic Trade Agreement (CETA) recently signed between the EU and Canada.

Compliance (New customs regime)

While tariffs for EU imports may be reduced for the most part, customs declarations will still be required. This is a critical development. Given that approximately half of the UK’s imports come from the EU, and the EU has several trade agreements with key trading partners, there’s been little need for customs declarations in the UK to this point. However, after Brexit, the number of customs declarations is estimated to increase almost 400 percent (from 55 million to 205 million) at a cost of approximately £6.5billion or USD $9.1 billion to businesses. In addition, there will be 180,000 British business who will be filing a customs declaration for the first time, while those who have already been filing declarations will need to adjust to a new regime of customs classification.

The importance of correctly classifying these cross border movements cannot be overstated. In a best-case scenario, such as declarations with missing information, importers will face delays at UK border crossings, which are already anticipated to be backlogged. In a worst-case scenario in which goods are misclassified, importers may face retroactive payments on top of financial penalties and – in extreme cases – lose their authorizations to import.

Border Delays

According to CIPS, 10 percent of UK businesses could lose EU business if there are delays at the border, and about 20 percent will see their EU buyers demand discounts for delays of more than a day.

The organization notes 38 percent of EU businesses have already changed suppliers because of Brexit and up to 60 percent of EU businesses would look to switch suppliers if border delays were to extend to two weeks or more.

Delays are almost inevitable given the more robust customs administration requirements. Today, tractor trailers pass through the UK-EU border without stopping. At the Port of Dover, the UK’s busiest and closest port to mainland Europe, some 17,000 tractor trailers pass through on a daily basis with only about two percent being stopped. After Brexit, almost all of them are likely to be stopped. Even if that stop is only for a few minutes, it’s going to result in a significant backlog of transports.

In short, importers into the UK and exporters out of the UK will need to factor in additional time in transit and set expectations with their trade partners on the other side of the English Channel.

Preparation is Key

Given the shrinking time window for preparation, businesses that haven’t done so already should be working with their trade services partners – carriers, freight forwarders, trade lawyers and consultants and customs brokers – to ensure they’re able to minimize the negative impact of Brexit on their trade activity.

The UK’s official leave from the EU may very well be imminent, or potentially months or even more than a year away, but given the consequences of inaction, getting prepared late is still better than not being prepared at all.

Mike Wilder is vice president of Managed Services at trade services firm Livingston International. He has 30 years of experience in trade compliance. He can be reached at mwilder@livingstonintl.com.

David Merritt is a director in the Global Trade Consulting division of trade services firm Livingston International. He can be reached at dmerritt@livingstonintl.com.

 

 

Archives, Global Trade Daily, Special Reports

AI Will Transform Our Borders – From Travel to Trade. Here’s How.

Leave a comment

Technology is evolving at a dizzying pace, and artificial intelligence is no exception. Today, artificial intelligence is being deployed in our cars, computers and social media networks.

It would be easy to assume a crisis of public confidence and trust in AI – not least around its use in public services. As with any emerging technology, there are concerns about the implications and impact of different AI applications, such as “black box” problems relating to machine learning management and regulation. However, Accenture’s recent Citizen Survey across six countries found that 50 percent of respondents support the use of AI in the delivery of public services and that support rises noticeably when presented with specific benefits. One of the most promising public applications of AI? For our border agencies.

Although government executives often reference “smart border” capabilities, this vision has not been fully realized.  Today, the focus is largely on merging historical data from border and customs systems and applying analytics to realize process efficiencies.  This approach is valuable but limited. Rather than playing a supporting role in border management technology, AI should take centre-stage.

If deployed fully, AI has the potential to vastly improve travel and trade across our airports, shipping ports and other ports of entry. Border agencies must not be daunted or overwhelmed by the latest AI capabilities – or let fear of the unknown detract from the valuable opportunities this technology affords.

As cross-border trade and travel value chains become increasingly digitized, five value-drivers can help border agencies maximize the benefits of AI:

Responsible AI

People must feel confident that AI decisions are ethical and reliable. Fortunately, agencies are already working to establish public trust in AI. According to Accenture’s Technology Vision 2018 report, 78 percent of public service executives say they’re seeking to gain citizen confidence by being transparent in their AI decisions. Since these AI systems can make choices that affect trade, border agencies must think carefully about how they’re adopted, understand the implications for public sector organizations and their workforces. At the same time, border agencies must teach AI systems to act with both accountability and transparency.  Given the right strategy and controls, combined with a willingness to learn from other sectors, ‘responsible AI’ offers great benefits for border agencies.

Intelligent automation

With artificial intelligence gaining momentum across enterprises and industries, we’re entering the era of intelligent automation. Intelligent automation is much more than the simple transfer of tasks from man to machine; its real power is to transform traditional ways of operating by revealing what can be accomplished by integrating systems, data and people. Most process automation currently deployed by border agencies handles mundane and repetitive tasks rather than those requiring cognitive intelligence. However, that’s rapidly changing. Future AI use cases might include a chatbot that answers complex questions to an entirely autonomous port where humans’ only role is monitoring and security.

Enhanced judgements

It will be many years before AI can reliably make decisions on complex issues, such as determining what goods or visitors pass through a border and into a country. But AI does have a valuable role to play in augmenting human judgement and supporting choices about the “next best action” on case work. Take an area where humans’ visual perceptions are used as the basis for decisions – as in the classification of goods for customs declarations. Currently, these decisions may differ from port to port and from person to person, often resulting in delays. Artificial intelligence and machine learning can crunch vast amounts of data 24×7, removing subjectivity, inconsistencies and delays – especially when deployed uniformly across border agencies, shippers and traders.

Enhanced interactions

One of the biggest benefits of digitization is the ability to eliminate paper forms and provide more personalized online and in-person service. With AI, personalization can be elevated to a whole new level – and in an environment like customs, the impact on user experiences can be transformational. A border agency’s wealth of existing and historical data about each transaction or entity means routine information-gathering can be almost completely automated, enabling the agency to focus on providing a positive experience and facilitating the safe and frictionless passage of people and goods. In the airport of the future – humans will collaborate effortlessly with machines, combining instantaneous facial recognition with flight data to validate each passenger’s identity and travel itinerary, drawing on his or her full travel history and other data to assess risk levels. Then, if necessary, the AI system will prompt its human counterpart with questions for additional human-human screening.

Intelligent product categorization

Customs classifications processes are notoriously complex and bureaucratic, and the descriptions often are esoteric – yet any individual or organization that gets the classification wrong can face severe penalties. Artificial intelligence has enormous potential for simplifying these complex nomenclatures, making it easier to find the right classification while improving understanding, reducing costly errors and fostering the effective flow of trade.

It’s the nature of emerging technology to have ups and downs. Whatever the latest headlines may say, the genuine promise and business case for Artificial Intelligence at the border remain as compelling as ever.  It’s vital that border agencies stay focused on the value that AI can deliver – and don’t let short-term concerns distract them. So far, most border and customs agencies have only scratched the surface of AI’s potential. It’s now time to dig deeper into AI capabilities – and combine humans and machines in ways that don’t just improve efficiency at the border but reinvent border processes altogether.