Best Practices in Managing Customs Services

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By: Abraham Siju Cherian -- Research Analyst, Logistics and Warehousing

22 May, 2022

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Best Practices in Managing Customs Services
ARTICLE

customs service

International trade has been continuously evolving over the last few years and has become much simpler now than it was years ago because of the lowering of trade barriers, simplification of rules, and introduction of new technologies. However, some companies still find managing the international trade process challenging because of continuous improvement initiatives and rules by different countries. This has been exacerbated by the recent pandemic, which has caused delays in some processes. The selection of the most efficient service provider can considerably improve the return on investment on Customs Management Services as it will lead to higher administrative efficiency and reduce the shipping, handling, haulage, warehousing, and staff costs.

Assessment of Different Options for Customs Management

Customs Compliance teams in companies have three major options for managing the administration, compliance, and optimizing international trade operations—developing on-premises or in-house systems, outsourcing to customs brokers or agents, or a SaaS-based Customs Accounting System.

In-house System Development

Levers Remarks Benefit for the client*

Flexibility

This option provides the client maximum control over different software features, timely changes, and quick access to the servers and setups.

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Price

The upfront cost for the system setup is high as this requires not only money but also the client’s workforce time to set up the system, which includes training and development.

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Maintenance/
Updates

The client is responsible for any software customization, update installation, and maintenance work of the system.

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Big Changes

The client has to regularly access whether the systems have the flexibility to manage significant changes in the system. For example, in the event of Brexit, many changes may still be anticipated.

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Insights

The system can develop automated foolproof solutions. This can help the client to leverage using data analysis to improve the client’s overall supply chain by identifying the pain points.

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Please note that more stars (*) are better for the client

Outsourcing to Customs Brokers

Levers Remarks Benefit for the client*

Flexibility

The flexibility in this option is less as the client has to depend on the service partners for any customizations or changes required in the operational flow.

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Price

Most multinational clients engage multiple brokers in a country or region, which raises issues on the variable cost and the budget (the cost per declaration is typically Euro 40–60, excluding internal staff costs).

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Maintenance/
Updates

In this option, the responsibility to update the installation and maintenance of the system lies with the customs brokers. Any delays/discrepancy directly disrupts the client’s supply chain.

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Big Changes

The service partner becomes liable for any inaccuracies in declarations or non-compliance with customs regulations. Customs brokers have the expertise and regularly track the market for any regulatory changes.

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Insights

As multiple brokers are involved in most cases, gaining real-time management information and instant insights is a tedious task for the client.

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Please note that more stars (*) are better for the client

Using Cloud SaaS Platform

Levers

Remarks

Benefit for the client*

Flexibility

The client has a moderate benefit concerning the flexibility of the system, depending on its complexity.

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Price

The full cost of ownership is estimated to be Euro 1–10 per declaration, after the implementation year; thereafter, the price also becomes more predictable.

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Maintenance/
Updates

The service provider has the expertise and regularly modifies the regulations and changes in the system's operational flow.

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Big Changes

The service partner becomes liable for any inaccuracies in declarations or non-compliance with customs regulations.

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Insights

The system can develop an automated foolproof solution. This can help the client to leverage using data analysis to improve the client’s overall supply chain efficiency.

rating

 Please note that more stars (*) are better for the client

Cost Comparison with Outsourcing to Customs Brokers

From an organization’s perspective, the differences in the costs of implementing and maintaining any of the three customs management options depend on many factors. The estimates provided below are for guidance purposes only.

 

SaaS system integrated with SAP, WMS, ERP

Customs broker with no integration ($)

Implementation

Min 256K–Max 288K euros

Min 160K–Max 190K euros

Scope: 16 logistics flows

Alignment 8K–10K per flow, including:
- definition of procedures
- request authorizations

Implementations: 8 unique customs flows—16K per flow; 2 declarations per flow (1 import at departure country, 1 export at destination country)

Alignment 10K–12K per flow, including:
- definition of procedures
- request authorizations

Implementation : No implementation

Yearly recurring cost

Min 260K–Max 260K euros

Min 1,972K–Max 2,900K euros

Cost excludes customs duties and optimization options

License Cost of the SaaS platform

Cost per declaration Euro 20–40
Extra manipulation per declaration: 1/2 hour
Extra waiting per truck: Euro 50

 

Checklist to select the SaaS provider for Customs Service

Sl.no.

Checklist to ensure a good SaaS provider for customs service management

1

Should have the expertise and resources in managing legal compliance, which ensures all declarations are error-free and not subject to delays or fines.

2

Ability to automate daily customs and excise operations, which helps to save time and money and reduce human errors.

3

Ability to provide a transparent dashboard that provides a comprehensive overview of all shipments and is easily accessible 24/7/365, which ultimately helps in financial savings.

4

A system that helps in the optimization of customs duty costs.

5

A system that provides flexibility to scale up or down to meet business dynamics or market conditions. Example: Changes in post-Brexit regulations and new regulations and trade agreements between the countries

6

A system that can seamlessly integrate between customs software and other business systems (SAP or other ERP or WMS).

7

The service provider should be able to smoothly implement, onboard, and train employees in new procedures.

8

The service provider should have the capability of rapid system deployment across multiple global sites and with multilingual capabilities.

9

KPI’s to ensure minimal downtime risk in the system and with a continuous customer service team.

10

The service provider should have the flexibility to have a future-proof process to manage events such as Brexit or other changes in international regulations.

 

Key Takeaway

  • The initial implementation cost of integrating a SaaS system with the current ERP is higher, whereas the ongoing annual costs are significantly lower and more predictable.
  • The dashboard obtained from the SaaS platform provides automated data consolidation and document production, resulting in lower workforce costs for the client in the medium to long term (the estimated cost saving is 40 percent).
  • An automated and fully integrated SaaS platform minimizes the waiting time for customs clearance procedures, which generates cumulative benefits and cost savings along the entire supply chain of the client.



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