- by Igor Jakomin, Ph. D., Chief Strategist and Member of the Board of CargoX, is an expert on topics of international transport, logistics, supply chain management, shipping, and technology transfer
Global trade is set to benefit from numerous opportunities to digitalize key processes in everything from logistics, finances, and compliance to, as the most recent development, customs processing.
It’s time for frictionless customs processing
Technological advances over the past decade have powered the complete digitalization of business. The recent standardization of the electronic bill of lading in global shipping has provided the final building block to make goods in global trade and information about those goods flow faster, better, and more securely around the world.
The stage is set for customs authorities and agencies focused on controlling the flow of goods and collecting duties in international trade to leverage these new technologies and facilitate smoother import processing, with far greater security and visibility.
Advance Cargo Information
A standardised, modern Advance Cargo Information process, compliant with the World Customs Organization’s SAFE Framework, provides customs authorities with information about cargo even before it arrives in the country of import.
This enables the Customs Authorities to streamline their workflows, support pre-clearance of shipments, and conduct documentation checks even before shipments depart from the country of origin.
WCO SAFE Framework
The WCO brings together customs organizations from 183 countries. It adopted the SAFE Framework of Standards to Secure and Facilitate Global Trade in 2005 to act as a deterrent to international terrorism, safeguard tax revenues, and promote trade facilitation worldwide.
The SAFE Framework is regularly updated to effectively address new and emerging developments in the international supply chain. In 2018, updates to SAFE included the Advance Cargo Information Implementation Guidance.
The electronic Advance Cargo Information (ACI) are records of information needed to identify high-risk cargo prior to loading and/or arrival by WCO members. In this regard the WCO SAFE harmonizes the ACI information requirements for inbound, outbound, and transit shipments by providing the WCO Data Model, to ensure compatibility with cross-border regulators and international organizations.
Advantages of the ACI protocol for customs and customers
ACI-compliant pre-processing immensely benefits all parties involved. First and foremost, it results in clear visibility of inbound shipments to customs, reduced daily workloads for customs officers, and the ability to establish the practice of green lanes for known customers with a proven track record and simplified clearance processes upon shipment arrival. Yellow and red lanes allow customs officers to additionally verify documentation or conduct physical inspections of incoming shipments.
The ACI process helps resolve congestion at customs clearance offices and terminals or seaports through improved predictive workload planning and organization.
The implementation of the ACI process prevents customs and tax fraud.
The introduction of electronic pre-arrival processing helps save money both for the companies involved and the customs authorities, as all documentation is submitted, transferred, and stored electronically. There is no need for printing, mailing, acquiring approval at the embassy or consulate, or shipping with expensive courier services.
Adopting the ACI protocol for processing provides governments and customs offices with a new revenue stream, as the exporter pays for the filing of the documents, covering the processing costs. In the U.S., Canada, Japan, and Brazil the fee ranges from $15 to $40, averaging about $25 per filing. These sums are paid by the exporter directly into the importing country’s government budget.
Non-compliance by the exporter
If the exporter violates compliance in the importing country, the exporter must resubmit the document until the filing is accepted. The documents required for the declaration are usually the draft transport document, i.e. bill of lading, air waybill, railroad waybill, or similar, an itemized commercial invoice and itemized packing list, various certificates, and other documents required under the regulations of the country of import.
ACI implementation worldwide
Historically, one of the earliest electronic implementations of Advanced Cargo Information Systems (ACIS) was started in the African states of Burundi, Kenya, Uganda, Rwanda, Tanzania, and Zambia under a donation from the European Union in 1995 - even before the conception of the global WCO SAFE Framework.
Today, ACI data is used in shipping worldwide. The most recent implementation is the United States’ STOP Act, which requires overseas mailers using the USPS system to provide advance electronic data on the sender, recipient, and contents of the mail, to better detect potentially illegal packages.
Another recent development is the European Union’s ICS2 scheme, which will require all express parcel carriers to provide an electronic Entry Summary Declaration (ENS) for all goods consignments they are responsible for bringing into the EU, while the existing Import Control System (ICS) will be phased-out by 2024.
According to research by IATA - the International Air Transport Association - at least 70 countries are already requesting ACI submissions with specific references to the WCO SAFE implementation.
ACI on the CargoX Platform
Using the CargoX Platform for ACI, customs authorities no longer need to rely on declarations from importers. Instead, each document can be easily traced back to its origin, directly to the issuer, thanks to CargoX’ solutions based on the public blockchain.
The CargoX Platform for Blockchain Document Transfer (BDT) is built on neutral, public Ethereum blockchain technology and enables fast, cost-effective, secure, immutable, tamper-proof, auditable, and confidential transfer of documents of title transfer and registration of original digital documents on the blockchain.
It is intended for use in global trade, finance, and the governmental and regulatory sectors, as well as manufacturing, energy, and services, for:
Document transaction legitimization and data validation
Pre-processing of shipments
Centralized document storage with extreme cryptographic protection
Collaboration of distributed teams with multiple users at multiple levels
Neutral, public blockchain-based security and transparency
Solutions enhanced with Internet-of-Things sensors and data flows
Solutions enhanced with Artificial Intelligence
The platform is secure, fast, decentralized, transparent, automated, flexible, neutral, accessible, interoperable, trustworthy, confidential and user-friendly. It can be used as a stand-alone online service, or in a custom single-window system integrated via API.
In 2020 CargoX was approved by the International Group of Protection & Indemnity Clubs (IGP&I), the global federation of 13 insurance associations that provide liability coverage for approximately 90% of the world’s maritime tonnage and that includes 22 of the world’s largest 25 reinsurers (as in 2019).
Implementation of the CargoX Platform ACI functionality
Implementing this technology into the destination country’s customs system is straightforward. It requires minimal investment on the part of the government and provides levels of complete visibility and transparency not previously seen in international trading.
Nobody knows whether the world of shipping will digitalize because of pressure from the companies to digitalize their processes, or because governments will demand digital information transfer and document delivery. But one thing is certain - the document flow will be completely digital, sooner or later, to provide better transparency, process planning, and safety for all participants in the logistics and shipping undertakings.