Customs clearance requires businesses to provide accurate and complete documentation, including commercial invoices, bills of lading, and certificates of origin. This involves staying updated on the latest customs regulations, maintaining accurate records, and working closely with customs brokers, freight forwarders, and customs authorities to ensure all paperwork is in order and customs duties are properly accounted for.
The lynchpin to a seamless customs clearance process is document visibility, which enables stakeholders to access the information they need, when they need it. Building on our previous discussions on document visibility and its role in documentation management, this article will examine the challenges that can arise from insufficient document visibility.
Document visibility ensures that each stakeholder has access to the documents and data relevant to their role, enabling them to effectively fulfill their responsibilities in the import process.
While adequate document visibility supports optimal supply chain planning, its absence can create obstacles that disrupt the smooth flow of goods. Poor document visibility may result in various fees associated with customs procedures, such as processing and inspection expenses.
Challenges Caused by Insufficient Document Visibility
Insufficient document visibility can create significant obstacles in customs clearance and supply chain management. From delays and increased costs to compliance risks, the lack of proper visibility disrupts workflows and affects overall efficiency. Below, we outline the key challenges businesses may face.
1) Increased Coordination Efforts
If documents are not readily available, more effort will be required to coordinate and follow up on information. This will increase administrative workload and necessitate the allocation of additional manpower and resources. Understanding the regulations specific to the destination country is crucial for effective coordination and avoiding additional administrative work.
2) Slower Transportation Processes
Without the necessary information, the shipper, importer, or customs broker will not be able to perform their functions effectively. This will slow down the transport process while the information is sought and obtained.
3) Delays in Customs Clearance
If the information needed for customs clearance is not available on demand, customs submissions will be delayed, causing a corresponding delay in customs clearance.
4) Rising Operational Costs
Delays in customs clearance can add significant costs, in the form of detention, demurrage, and storage.
5) Weak Collaboration and Slow Issue Resolution
Without document visibility, collaboration between the parties involved in the shipment will be poor. This will also increase the time needed to resolve issues and add redundancies to the process.
6) Misclassification of Goods and Incorrect Duty Calculations
Lack of document visibility can cause goods to be misclassified. The value of goods directly affects the calculation of duties and taxes, leading to potential customs violations if misclassified. Duties will also be calculated incorrectly, resulting in customs violations and under-declaration.
7) Risk of Penalties for Customs Violations
With the greater probability of customs violations, importers and customs brokers will be exposed to the risk of monetary fines and other penalties.
Impact of Information Silos on Importer Operations
Information silos in supply chains can lead to fragmented communication, delays, and increased costs, affecting overall efficiency and profitability. Below, we examine the key ways in which these silos disrupt importer operations and supply chain performance.
1) Rising Total Cost of Ownership (TCO)
The combination of higher costs all along the supply chain, in the form of detention, demurrage, storage, administrative expenses, fines, and higher inventory carrying costs, will increase the Total Cost of Ownership (or landed cost of goods), far more than was estimated. Since prices for exported goods are quoted taking into account the TCO, an unexpected increase in TCO will erode the profit margins of both the exporters and the importers.
2) Cascading Delays Across the Supply Chain
Delays at various stages in the supply chain may cascade and impact delivery times. The impact of delays across the transport process will be magnified down the chain, with the total delay exceeding the sum of individual delays.
For example, if a container misses the cut-off date at the origin port by one day and isn’t loaded on the scheduled vessel, the effective delay will be one week (as container shipping services are weekly, and the next vessel on the service will arrive after a week). This, too, assumes that the next vessel is not full and can accept the container; otherwise, the delay will be greater.
3) Compromised Supply Chain Integrity and Reliability
The net result of these issues is that supply chain integrity and reliability are compromised, as delays and the stage they occur in cannot be predicted. Due to this, the shipper and importer will have to add some buffer in their supply chains, in the form of additional time, spare capacity, and surplus inventory. The bullwhip effect comes into play across all aspects of supply chain planning, as each party adds buffer time and resources to account for potential disruptions — often resulting in a cumulative slack that far exceeds the actual delays.
4) Damage to Brand Reputation and Business Relationships
The absence of document visibility can undermine trust between business partners. Inadvertent errors arising from inadequate information can result in business losses, sowing the seeds of legal disputes. Besides, the importer’s brand reputation can suffer if they regularly delay deliveries to customers or often do not have stock in hand to ensure continued production and a steady supply of finished goods to the market. Addressing the most common questions related to customs clearance can help mitigate misunderstandings and maintain strong business relationships.
Enabling Document Visibility with KlearNow.AI
With extensive experience in the logtech sector, KlearNow.AI combines industry expertise and technical innovation to develop solutions that effectively address gaps in the transport process.
KlearNow.AI’s document visibility platform incorporates AI and ML technologies to digitize information, process unstructured data, and automate information flows, enhancing efficiency, compliance, and data security. With products like KlearCustoms, KlearEngine, and KlearHub, KlearNow.AI is designed to improve document visibility and streamline the entire customs clearance process.
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