The developments in the Customs and Indirect Tax areas are moving rapidly. Especially within the European Union (EU) there are a lot of developments in the Customs area which are poised to harmonize customs handling processes across the whole EU region.

Some of the recent developments that are taking place in the area of Trade & Customs regulations and processes are:
· The AEO (= Authorized Economic Operator) concept and the related concept of green/ red lanes.
· The eCustoms initiative within the European Union (where in the future, goods will only be checked once upon first entry into and first exit out of the European Union).
· The US CT-PAT (Customs and Trade Protection Against Terrorism) anti-terrorism rules relating to ‘security & safety’.
· ISPS (International Security Port Shipping) and CSI (Container Security Initiative) rules relating to security and safety around maritime transport.
· The introduction of the Export Control System (ECS) for EU exporters starting on July 1, 2007, which enables different customs offices to exchange electronic information. This system is supposed to be the predecessor of the Automated Export System (ECS) which will be introduced in 2009.
· The ‘pre-arrival’ and ‘pre-departure’ notification system which is currently developed by the European Union for the communication of goods flow data before arrival at and departure from customs offices. The customs authorities will analyze this pre-arrival and pre-departure information to execute risk analysis. Electronic systems of any market players need to be adapted to the pre-arrival and pre-departure notification system before July 1, 2009.

Because of the globalization and harmonization of customs processes and requirements, the increasing focus on risk management on all global trade, there is an increasing tendency for large international corporations to start Global Trade Management (GTM) projects to globally harmonize their Customs & Indirect Tax processes, to improve the monitoring of their Compliance with export controls and to improve risk management across their global supply chains.

Capgemini’s definition of Global Trade Management (GTM) is “The total optimization of the end-to-end international Supply-Chain, from product conception to final delivery — with focus on the integration of key cross-border (i.e., Trade and Customs) regulatory, strategic and system components — to ensure a seamless, secure, and cost-effective flow of goods, data and payments, across international borders.”

While trade compliance has historically been the driver of many global trade management projects, we increasingly see that trade optimization is becoming more and more important. We typically encounter the following issues around global trade management:
· high degree of dependence on brokers for mitigating compliance risk
· continued documentation errors resulting in compliance risks
· limited to no visibility of import/ export transactions
· inaccurate and unshared information
· unpredictable disruptions in the supply chain
· unknown or unresolved trade compliance risk
· delays with customs due to missing, incomplete, or inaccurate trade documentation
· reactive “fire fighting” due to poor visibility of incoming product and/ or communication with vendors
· increased shipment examinations

Trade compliance needs to be addressed with a holistic, supply chain-focused approach where global trade management is comprised of equal parts, risk management and trade optimization. Risk management focuses on defining the understanding where risk can disrupt your supply chain & proactively planning on risk mitigation:
· Regulatory Compliance; reducing corporate exposure to regulatory penalties while improving import cycle times through customs
· Trade Security; complying with new security initiatives, such as “C-TPAT”, and understanding how “quality processes equate to quality security”
· Planning and Preparedness; proactively identifying and integrating risk considerations into global sourcing/ transportation decisions, and developing contingency plans to mitigate the impact when disruptions do occur

Trade optimization focuses on understanding the various trade-related programmes, strategies, and enabling systems:
· Duty/ Tax Minimization Planning; planning process that focuses on identifying opportunities to reduce, defer, recover, and even legally avoid the payment of import duties/ taxes.
· Trade Process; determine where and how to drive cost efficiencies through the trade process and define and deploy the leading strategies and systems that enable the operations.
. Logistics & Transportation; integration of logistics best practices, data, and documentation to ensure a seamless execution of physical movement of goods with their regulatory requirements.

As such, global trade management transcends the complete end-to-end supply chain.

Many large international companies have started executing Global Trade Management (GTM) projects to make sure their processes, organization and IT systems are ready to cope with these changes:
· To enable pre-notifications for import, export and transit flows to the Customs authorities as required under the current and upcoming Customs legislations to enable a continuous goods flow for materials, intermediate products and finished products.
· To comply with new security regulations and the upcoming Authorized Economic Operator (AEO) concept within the European Union (EU) where government organizations must be shown that the company is “in-control” – meaning that the processes, IT systems and organization is sufficiently equipped to ensure a proper execution of the corresponding regulations.
· To comply with the requirements from AES (Automated Export System)
· To ensure that the global goods flows are meeting the restrictions emposed by export controls.
· The need to develop simulation models and reporting functions to support strategic decision making around Customs & Indirect Tax related issues in the Procurement and Supply Chain processes. Transparent reporting is also required for global risk management within the supply chain operations.
· The potential realization of cost reductions through global coordination of the Customs and Indirect Tax processes and more efficient processing of the operational Customs and Indirect Tax processes.
· To replace the often outdated IT systems which are currently supporting the Customs and Indirect Tax processes at many companies. By consolidating these many local systems companies can typically reduce their Total Cost of Ownership (TCO).

Supply chain disruptions in the global supply chain caused by issues in the Import and Export processes can lead to large costs and risks in the manufacturing processes and can even result in a complete stop of the manufacturing process. Any new solution should therefore be low-risk and efficient and support a seamless flow of communication between the company and the different customs authorities.

Source: CapGemini

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