Industry progress
Players in the U.S. import game are now on the tail end of an interim period between entirely old-school paper-based processes and full digitalization, wherein forwarders have had to accommodate both mediums of communication.
The Automated Commercial Environment (ACE), put forth by the U.S. Customs & Border Patrol (CBP), was a colossal 2001 measure that provides a single channel for all customs-related data for shipments entering the U.S. Prior to ACE, a more rudimentary electronic data-sharing system was in place.
The upgrade brings basic electronic customs processes to the next level – eliminating redundancies in communications by moving communications away from phone and e-mail onto a digital platform that is accessible to all relevant parties. Finishing touches to the system were made late last year. Forwarders importing to the U.S. are now required to submit documents via the interface.
The E.U.’s Multi-Annual Strategic Plan (MASP) sets a comparable bar for the airfreight hubs in the 28 (soon to be 27) countries connected by the E.U., which has strongly nudged the European supply chain to embrace digitalization.
Federal mandates like ACE and MASP are a surefire way to incentivize companies to invest in digitalization, but the footwork of creating and implementing such systems is largely left up to the forwarding community and its software partners.
Alejandro Palacios, DHL Global Forwarding’s vice president of customs brokerage and domestic freight forwarding for the Americas region, explained why industry players may be “gun shy” when it comes to embracing new technologies. “In brokerage, the challenges have to do with compliance, with all sorts of levels of fines and regulatory implications that impact not only an organization and its ability to do business going forward, but also personal implications for executives – legal implications,” he said.
Disrupting the long-established status-quos of data flow to customs does open companies up to some amount of risk. “So if you asked me what would be the one biggest thing we should be careful about before rushing into new tech, is compliance,” Palacios said.
Beyond dealing with the customs departments themselves, forwarders also have to submit the necessary information to regulatory bodies like the U.S. Environmental Protection Agency (EPA) and the U.S. Food and Drug Administration (FDA), to which certain cargo, like dangerous goods and pharma, are subject. These regulations add another obstacle to the already tumultuous three-legged race.
C.H. Robinson’s Ben Bidwell said that despite any challenges forwarders initially faced in ensuring their compliance with ACE, the initiative has been a boon in spurring on the digitalization of other documentation required by other parties at borders, helping to push the entire process surrounding customs closer and closer to paperless.
“The customs process has come a long way, and in many cases, become automated,” he said. “A lot of those forms and permits used to have to be submitted by paper. If you were importing a pesticide, for example, you’d have to submit your approval forms by mail or e-mail. Now, most of those forms are submitted within the customs entry for ACE. The partner government agencies have caught up recently … but there’s still room to go.”
Joe Cipolla, senior director of airfreight at Crane Logistics has also been witness to the progress that ACE has fostered. He’s a big advocate of digitalizing logistics communications. Cipolla said that a security endorsement required by the TSA is the only document that Crane still physically delivers in the customs process.
“Now, it’s the touch of a button, and all the FWBs [freight waybills] and the customs manifest … automatically flow,” he said. “In our system, once you hit ‘print master air waybill,’ that’s the trigger that sends all our documents electronically to our destination.”
The forwarders Air Cargo World talked to all seemed to be strong supporters of the benefits of digitalization, advocating their ability to catch snags in customs more quickly, or prevent them from happening in the first place by catching data-entry errors upon their entry into the system.
Cipolla said his goal for Crane is for such processes to become 100 percent paperless by the end of 2019, but that it is admittedly, “a very aggressive goal.”
DHL is also moving full-steam ahead toward a paperless future. In the past three years, the industry juggernaut started what Palacios describes as a “very comprehensive process” in renovating its brokerage systems, that began with upgrading its processes for customs clearance to prepare for the roll-out of its own cloud-based global EDM platform, which has minimized time spent on operations like data entry and document scanning.
While regulatory mandates have been effective in motivating parties to digitalize that are directly required to comply, like forwarders, such initiatives are not necessarily trickling down to members further back in the cargo supply chain, e.g. manufacturers or shippers – the providers of the data source. Some forwarders say they have clients that still conduct internal operations with paper-based processes that have been grandfathered in, which extends to their method of communications with the forwarder.
The resistance of other industry members to digitalize likely comes from a similar fear that forwarders had with ACE: the fear of disrupting a system that already works “well enough,” if not optimally. The fear that the learning curve of adopting the innovation will cause more harm to air cargo forwarders and the supply chain than good.
While this perspective is understandable, it is a contributing factor inhibiting ventures like the Argentine e-tailer from reaching its full potential.