International trade has been growing steadily over the past two decades, propelled by diverse factors such as outsourcing of production, increasing prosperity levels, deepening trade relations between countries, and the emergence of AI-driven customs clearance.
This growth has been enabled by faster and more reliable transport connections between countries and regions, which has facilitated the creation of globally interconnected supply chains through which goods can flow smoothly.
As per UNCTAD estimates, global trade in goods and services hit a record of $32 trillion in 2022, an increase of 12% over the 2021 trade value of $28.5 trillion. Year-on-year growth rates for 2021 and 2020 were recorded at 25% and 13%, respectively, indicative of the pace at which global trade has expanded.
Goods and merchandise accounted for most of international trade, valued at $25 trillion in 2022, notching a year-on-year increase of 10%.
The healthy growth rates in the face of the Russia-Ukraine conflict and other geo-political tensions affecting relations amongst major economies illustrate the resilience of global trade.
In a counter-intuitive turn of events, trade in products saw higher demand during the pandemic, as economic stimulus packages announced by governments ensured that income levels did not erode, while Covid-induced lockdowns drove a shift in consumption patterns away from services and towards products.
As the aftereffects of the pandemic begin to wear off and travel restrictions are eased, we will likely see a reversal in household expenditure to the historical mix between goods and services. This will likely moderate the demand for goods and products. While this trend is expected to continue for most of 2023, demand in the long term is expected to increase.
Increasing Role and Scope of Customs
All cross-border movement of goods and products is subject to Customs checks and inspections in each country involved.
Customs inspections and procedures are intended to restrict the import of contraband or illegal goods and curtail inflows of restricted commodities. Further, the need to regulate incoming volumes of commodities that could threaten domestic producers by imposing anti-dumping duties or additional tariffs has increased the role of Customs officials.
As trade wars intensify and more and more commodities are subjected to sanctions, the Customs Department plays an increasingly important role in ensuring that the importing country’s commercial interests are protected.
Another driving factor has been the phenomenon of economic cooperation which has resulted in the signing of FTAs and bilateral agreements and the formation of regional trading blocs, which confer special benefits to member countries in the form of preferential tariffs, smoother and easier procedures, and priority access to export markets. To ensure that only eligible commodities, entities, and countries avail of the benefits, Customs has to thoroughly check the provenance of the cargo and the antecedents of the transacting parties.
The achievement of these objectives requires the exercise of considerable due diligence, as well as rigorous physical and documentary checks. This is done by establishing appropriate processes and comprehensive documentation requirements to verify the nature, composition, and origin of the commodities and confirm the applicability of the correct tariffs.
As a result, exporters, importers, and forwarders are obligated to keep abreast of the latest procedural and documentary requirements and ensure adherence and compliance. This involves considerable manual efforts and the need to expend significant effort and time, which adds to the complexity of the transport movement.
Challenges in the Customs Clearance and Documentation Process
Some of the common challenges in the customs clearance and documentation process are explained below:
1. Labor-intensive and time-consuming:
Given the number of documents required for customs clearance and the fact that the information is provided by various entities, the task of compiling all documents and verifying their accuracy and adherence to the appropriate format is extremely labor-intensive. Besides the manual labor involved, it also requires a lot of time.
2. Multiple formats, lack of standardization of contents, and diverse sources:
Documents are in different formats, ranging from Excel spreadsheets to Word documents to pdf files to plain emails. The information is neither standardized nor in the prescribed format. Given that the sources are multiple, there are added difficulties in obtaining documents on time.
3. Higher probability of errors:
Due to the variety of formats and disparate sources and formats, collating information and filing information is an arduous task, with a very high probability of error. Considering these requirements are statutory, any inadvertent errors can attract stiff penalties.
4. Delays in receiving documents
Having to wait for documents reduces the time that customs authoriries have to analyze and study documents for risk assesments. Getting information earlier allows for not only the better identification of risky shipments but also the correct duty and tax analytics.
Consequences of Non-compliance with Customs Requirements
Apart from the consequences arising from the violation of legal provisions, incomplete or inaccurate documentation or other mistakes in following processes can result in detention and demurrage charges should the cargo be inordinately delayed and exceed the free time permitted.
For the importers, there are also potential revenue losses and missed sales to contend with.
In the case of perishable commodities, delays in customs could impact the shelf life of the product, which in turn will affect its value.
How Generative AI Can Assist in the Customs Clearance Process
The application of generative AI tools is proving to be a game-changer when it comes to customs clearance. Entities whose business or work involves customs clearance have to expend considerable resources to ensure adherence to all mandatory requirements, failing which they are exposed to the risk of penalties.
With advances in AI and the introduction of sophisticated Logitech solutions, the customs clearance and documentation process is streamlined to a great extent.
Functionalities like data ingestion automate the process of collating information from disparate sources, files, and formats and thereafter compile the data in the stipulated format. This reduces the manual and laborious element of the customs documentation process and eliminates the possibility of human errors.
The more advanced Logitech solutions infuse AI and ML to vastly enhance the utility of their software. Besides using real-life data, they also generate synthetic data, so the software has more data points to process while performing analysis. This, in turn, helps the predictive modeling functionality by improving the quality of predictions made.
Functionalities and benefits of KlearNow’s AI-powered platform
In the past few years, KlearNow has emerged as one of the prominent players in this industry, with its technological solutions being adopted by an increasing number of companies.
KlearNow’s software offers functionalities addressing the most common problems faced by the industry, such as:
1. Automating the Customs documentation process workflows
2. Ensuring complete and accurate documentation is gathered within correct timeframes
3. Pre-alerts in case of upcoming transportation milestones, which assists in advance planning
4. Real-time visibility to ensure timely action in case of contingencies
5. Highlighting possible issues with the shipment and in customs clearance, which enables users to avoid commonly occurring mistakes
Conclusion
Customs clearance has always been one of the more challenging aspects of international transport, and regardless of the amount of caution exercised by companies, the intensely manual process means that the possibility of errors was never completely ruled out.
In recent years, however, using technological solutions such as the ones provided by KlearNow, importers and forwarders can automate the customs clearance process, pre-empt possible issues, and leverage predictive modeling techniques.
This will ease overall planning and make the customer’s supply chain more robust and reliable, thereby reducing costs and enabling goods to reach the market faster.
For more information on how KlearNow can help your business, please click here.
