As the globalized economy becomes increasingly interconnected, more and more data flows are crossing national and customs borders along with the flow of goods. With this data volume, the degree of digitization in the customs sector is also increasing. For companies involved in the import and export of goods, the digitization of customs clearance offers great potential for speeding up customs processes. On the other hand, market participants face the challenge of adapting to the new digital customs world.
Digitization in Customs: Automation, AI, and Blockchain
In the customs sector, there is already a trend away from national and regional systems towards a uniform system with improved data exchange. The long-term goal is to fully digitize all processes in customs clearance.
And as is often the case when it comes to digitizing economic processes, three aspects are at the center of interest: automation, artificial intelligence (AI), and blockchain technology.
Automation Requires Interfaces
The automation of customs declarations is a key aspect of the digitization of customs. Automated clearance and monitoring of cross-border goods traffic can only work on the basis of comprehensive digital data. On the authorities’ side, IT procedures such as the German ATLAS (Automated Tariff and Local Customs Clearance System) already enable this task automatically, but only because the data was previously entered by others. For the authorities, consistency checks of master and transaction data are then possible at the touch of a button, so to speak, and the systems involved in the customs procedure generate the customs tariff classification or violation reports.
But while automated authority systems are speeding up and simplifying processes, it still takes a lot of effort for freight forwarders to enter the various pieces of information into the systems to complete an electronic customs declaration. To achieve efficient automation also on the business side, digital customs assistants and automated interfaces are mandatory. They help transfer the relevant data from the company’s IT infrastructure to the official customs system. This ensures not only fast but also accurate transmission of the data records for the customs declaration.
AI for Speed and Accuracy
The digital assistant leads to the next keyword. Without AI, digital assistants and customs automation are basically unthinkable. AI technologies can help to significantly reduce the amount of work and time required for customs declarations. Machine learning enables systems to recognize data patterns and anticipate the required documents and information. This not only reduces processing time, but also improves data quality.
A concrete example of AI in customs processing is the automated evaluation of trade documents. AI-powered systems extract the relevant information and transfer it to the appropriate input fields of the customs declaration. This reduces incorrect or incomplete information due to human error and avoids potential delays and additional costs. With AI-enabled internal verification processes, companies can stay ahead of customs. Errors or discrepancies are corrected prior to customs inspection, preventing problems from occurring in the first place.
Blockchain Solutions in Customs
In line with the nature of the blockchain idea, blockchain in customs is primarily about security and transparency for all process participants. This is exactly the core of the blockchain concept: decentralized, equal, and tamper-proof network databases. Unlike AI, blockchain technology currently plays only a minor role in customs.
The blockchain’s benefits are obvious: blockchain technology enables the secure archiving of digital processes and documents for all parties involved, and their continuous reconciliation with the physical flow of goods in real time. This means that all information is traceable at all times for consignors, consignees, logistics service providers, carriers, customs agencies, and customs authorities.
Blockchain Europe, a project led by the the Fraunhofer Institute for Material Flow and Logistics IML to establish a European blockchain institute, launched the blockchain software system BORDER (blockchain-based organisation of relevant documents in external trade with regulatory compliance), a digital solution for customs clearance in foreign trade, as open source in December 2022. For BORDER, customs authorities create a digital export accompanying document and transfers it to the software, making the document available to all partners involved along the supply chain by means of blockchain technology.
Rarely before has the topic of digitization been so present in the customs sector.
Thomas Weins, VP Customs & CEO Gerlach Germany
Why Companies Need to Adapt to Digital Customs
Companies in the EU are facing changes in foreign trade. Most of the amendments to EU customs law are related to digitization. To keep up with the growing volume of international trade, customs is to be brought up to date and, above all, controls are to be made more digital. The main objective of the EU customs reform is to harmonize and simplify customs procedures in the member states.
EU Customs Reform and the Central Data Hub
At the heart of the EU customs reform is the new customs data platform, which is designed to manage the growing volume of customs data more efficiently. This central data hub will improve data availability by enabling the central storage of customs information and its exchange between member states. High data availability allows for faster and more efficient processing of customs declarations. In addition, the central validation processes in the hub improve data quality, which increases the accuracy of declarations.
An important aspect of the reform concerns the new Trust and Check Traders (T&C Traders) status. The introduction of the single digital customs clearance system, which provides better traceability and management of customs data, will strengthen the position of T&C Traders in the market. Simplified procedures and faster access to customs services will benefit all businesses operating across borders.
Phased Introduction of the EU Customs Data Platform
According to current plans, the EU customs data platform will be mandatory for e-commerce consignments from 2028 and optional for all other consignees from 2032. There are plans to extend the platform to all economic operators by 2035, with a view to making it mandatory for all from 2038. The platform promises to provide European customs authorities with a comprehensive overview of supply chains and potential risks. The system will use AI to analyze and monitor data and identify problems even before goods are on their way to the EU.
Companies Must Take Action Now
Digitization in customs processing is also a question of meeting numerous legal requirements in customs and foreign trade. This is another reason why an early response is important. 2028, 2032, 2038: on the one hand enough lead time, but on the other hand also high time to proactively prepare for the digital future of customs so as not to miss the boat when it comes to automation. In the short to medium term, there is no way for any company to do without a highly automated system infrastructure for the digitization of customs processes. It is advisable for all companies involved to take the appropriate steps.
Advantages of Digital Customs Clearance
However, the need for digitization should also be seen as an opportunity. Digitization in customs offers companies the opportunity to save time, human and financial resources.
When implemented systematically, the digitization of customs processes enables:
- Increase in efficiency: Digital technologies speed up customs processes. Platform solutions and digital interfaces accelerate the processing of documents and the release of goods, thus reducing throughput times.
- Process optimization: Digitization combined with AI makes it possible not only to collect data, but also to analyze it and identify deficits, risks, or opportunities. This permits proactive, data-driven management of business processes and improves business performance.
- Error minimization: Manual data entry and paper-based customs processing pose a significant risk of data entry errors and data inconsistencies. By using AI-powered systems and automated verification processes, errors can be avoided and data quality can be improved. This ensures compliance and reduces the costs associated with errors and corrections.
- Automatic updating: Customs and trade regulations are volatile and vary widely from region to region. Digital solutions ensure that you are informed about changes in regulations in real time and can react accordingly. This also guarantees compliance with current laws and avoids violations and fines.
- Transparency and security: Provided that effective cybersecurity and data protection are in place, digitization makes safe and efficient document and data management possible. Electronic archiving systems based on cloud computing and, potentially, blockchain technology protect documents from loss and allow access to relevant information regardless of location. This facilitates collaboration and information sharing between companies and public authorities.
B2C Challenges and Consumer Protection – How Digitization Helps Solve Problems
Companies, customs service providers, and customs authorities benefit from digitization and the EU customs reform. But there are also challenges, especially in the B2C sector. This is because online platforms for cross-border trade face specific problems. In B2C, the undervaluation of goods, where the actual value of goods is intentionally undervalued to avoid customs duties, is particularly problematic. In addition, the import of non-approved goods that may be hazardous to health or safety poses a risk.
Better data availability and control through the central data hub will help protect EU consumers, especially when it comes to the import of dangerous goods. EU member states will also benefit from the correct payment of value added tax (VAT). Automating and standardizing customs processes not only increases efficiency, but also protects consumers and ensures fair competition.
Competent Customs Service Providers Ease the Entry into the Digital Customs Age
Digitization is a particular challenge for small and medium-sized companies with limited IT expertise. And not just when it comes to customs. But they do not have to run the risk of losing touch with the digital world. Customs service providers and IT specialists are developing efficient customs management systems or providing their partners with their own customs platform.
One example is Gerlach, the leading neutral customs service provider in Europe. Gerlach has launched an innovative digital customs platform, initially in Germany, Poland, and the Netherlands (with other countries to follow).
When goods are exported from an EU member state or Switzerland to a third country, they must be declared to the competent customs authorities. The platform gives customers the opportunity to apply for these export declarations fully online and to complete the entire process digitally in many countries.
This digitization of customs documents not only speeds up processes and reduces costs, but also increases control and transparency of the entire customs process. Gerlach experts will be happy to explain the innovative digital customs platform in detail.
Do you need support with your customs processes?
Contact our colleagues at Gerlach Customs. Gerlach is the leading neutral provider of customs services in Europe and offers the full range of customs services.
Click here for more information!
With our digital customs platform, we are offering our customers an efficient solution to simplify customs-related processes in their day-to-day work. Initially, we have launched the customer portal for export declarations from Germany, Poland, and the Netherlands to third countries, but we will gradually roll it out to other EU countries as well.
Thomas Weins, VP Customs & CEO Gerlach Germany
Digitization in Customs Is Not a Trend. It Is a Necessity
The digitization of customs, in particular the use of AI and the implementation of the EU customs data platform, offers numerous opportunities to improve the accuracy and efficiency of customs procedures. Customs is becoming increasingly digital, and the availability and quality of data is critical to its successful digital future.
Digitization represents a strategic shift for companies in customs processing, ensuring compliance and competitiveness in a globalized market environment. For all those who do not want to fall behind in customs processing and want to be on the safe side from a legal point of view, the digitization of customs processes is a topic that should be dealt with intensively, especially in view of the developments in the European framework. We at DHL Freight and our colleagues at Gerlach are happy to support you.
