Published on March 27, 2023
Customs and trade compliance is a complex and dynamic field that requires constant attention and expertise. Companies engaged in global trade face challenges such as changing regulations, tariffs, duties, border security, documentation, and reporting obligations. Managing these tasks in-house can be costly, time-consuming, and risky.
Outsourcing customs and trade compliance processes can offer a solution that can help businesses save costs, increase efficiency, improve quality, and reduce risks. Outsourcing can also free up internal resources to focus on core competencies and strategic goals. However, outsourcing is not a one-size-fits-all approach. Businesses need to consider several factors when choosing a partner for carrying out customs and trade compliance tasks.
What are the typical challenges?
Global trade management involves complying with the laws and regulations of multiple jurisdictions that govern the movement of goods across borders. Some of the typical challenges that businesses face in this area are:
- Lack of internal capacity or expertise: Customs and trade compliance requires specialized knowledge and skills that may not be available or sufficient within the organization. Hiring and training staff for these tasks can be expensive and time-consuming.
- Lack of transparency or consistency: Customs and trade compliance processes may vary depending on the country, product, or transaction. Keeping track of the different requirements and procedures can be difficult and prone to errors.
- High costs and risks: Customs and trade compliance can involve significant costs such as tariffs, duties, fees, penalties, fines, or delays. Non-compliance can also result in reputational damage, legal liability, or loss of market access.
- Complexity and volatility: Customs and trade compliance is subject to frequent changes due to geopolitical events, trade disputes, policy shifts, or technological developments. Businesses need to stay updated and adapt quickly to these changes.
How can outsourcing help?
Outsourcing customs and trade compliance processes can help businesses overcome these challenges by leveraging the expertise, resources, and technology of a trusted partner. Some of the benefits of outsourcing are:
- Cost savings: Outsourcing can reduce the fixed costs of maintaining an in-house team and infrastructure for customs and trade compliance. It can also help businesses take advantage of special trade programs or incentives that can lower tariffs or duties.
- Efficiency gains: Outsourcing can streamline and automate customs and trade compliance processes, reducing manual work and human errors. It can also improve speed and accuracy of data entry, documentation, reporting, and communication.
- Quality improvement: Outsourcing can ensure that customs and trade compliance processes are performed according to the best practices and standards of the industry. It can also enhance quality control and audit readiness by providing reliable records and evidence.
- Risk mitigation: Outsourcing can help businesses comply with the complex and changing regulations of multiple jurisdictions, avoiding penalties, fines, or delays. It can also help businesses manage risks such as supply chain disruptions, fraud, or security breaches.
Which processes can be outsourced?
Customs and trade compliance processes can be divided into two categories: operational tasks and strategic tasks. Operational tasks are those that involve routine or transactional activities that are necessary for complying with customs and trade regulations. Strategic tasks are those that involve planning or decision making that are related to the business objectives or goals of the organization.
Operational tasks are more suitable for outsourcing than strategic tasks because they are more standardized, repetitive, labor-intensive, or technology-dependent. Some examples of operational tasks that can be outsourced are:
- Product classification: Assigning the correct tariff codes or export control classifications to products based on their description, origin, destination, use, or value.
- Documentation: Preparing or verifying the required documents for customs clearance such as invoices, packing lists, certificates of origin, declarations, licenses, permits, or certificates.
- Filing: Submitting or receiving the required data or documents to or from the relevant authorities such as customs agencies, port authorities, carriers, brokers, or agents.
- Duty calculation: Determining or verifying the applicable tariffs or duties for products based on their classification, origin, destination, value, or special trade programs such as free trade agreements, preferential tariffs, duty drawbacks, or bonded warehouses.
- Audit support: Assisting with customs audits by providing relevant documentation, records, and analyses, as well as offering expert advice and representation.
Strategic tasks may be outsourced to a limited extent or in collaboration with the in-house team, as they may involve more sensitive or confidential information or require more direct involvement of the management. Some examples of strategic tasks that can be outsourced are:
- Trade advisory: Providing updates, analyses, and recommendations on the latest developments in customs and trade regulations, policies, procedures, or best practices.
- Compliance management: Designing, implementing, or monitoring a compliance program that includes policies, procedures, controls, training, reporting, or assessments.
- Risk assessment: Identifying, evaluating, or prioritizing the risks related to customs and trade compliance, such as regulatory changes, non-compliance, enforcement actions, or supply chain disruptions.
- Duty optimization: Identifying opportunities for duty savings, risk reduction, or process improvement, such as tariff engineering, customs valuation planning, or free trade agreement utilization.
How to choose the right partner?
When choosing a partner for outsourcing customs and trade compliance tasks, businesses should consider the following factors:
- Expertise and experience: Look for a partner with a proven track record in customs and trade compliance services across various industries, markets, and jurisdictions. Check their credentials, certifications, references, and case studies.
- Technology and innovation: Look for a partner that is used to advanced software solutions, tools, or platforms that can automate, integrate, or optimize customs and trade compliance processes. Evaluate their adaptability to your existing GTM solution and/or IT infrastructure, scalability and technology capabilities.
- Flexibility and adaptability: Look for a partner that can customize their services, pricing models, or service levels to meet the unique needs and preferences of the business. Assess their responsiveness, agility, and customer focus.
- Security and compliance: Look for a partner that follows industry best practices, standards, or regulations for data privacy, information security, or quality management. Verify their authorization, certifications, audits, or reports, such as AEO, ISO, SOC, GDPR, or C-TPAT.
- Communication and collaboration: Look for a partner that values open, transparent, and timely communication with their clients. Establish clear expectations, roles, and responsibilities for both parties.
By carefully selecting a partner and outsourcing the right tasks, businesses can unlock the full potential of global trade, while minimizing the costs, risks, and complexities of customs and trade compliance.