ISSUE 3 2011


THE IT SECTION


FULL SCREEN VIEW - by Marcia MacLeod


MCC: another long innings?


The EU may postpone the Modernised Customs Code – but don’t be lulled into a false sense of security, warns Marcia MacLeod.


Postponement of the Modernised Customs Code has given people a false sense of relief: too many think that as it now is not likely to take effect before December 2014, they don’t have to worry about it. But any forwarder or shipper is in for a rude awakening if they wait even another year, let alone three, before addressing the issues it throws up.


The new tariff which will be introduced by Brussels for all imports and exports should be fairly straightforward, but some of the MCC’s new processes, especially those governing transit goods, certainly are not.


“The MCC will cover significant areas,” points out Ken Gower, head of the Association of Freight Software Suppliers. “These include centralised clearance, self-assessment, single transport contact for exports, temporary storage, valuation and customs debt and guarantees. For example, temporary storage will now be classified as a customs procedure, which it wasn’t before. Although HMRC does not envisage any major changes to the current system, it could eventually cover movements now made under national transit procedures.”


Of much more concern, though, is the provision for customs debt guarantees for transit goods. At the moment, the trader or its forwarder estimates the amount of cargo which will transit its home country within the next seven days. This estimate is then translated into VAT and duty which would be payable should the goods remain in the EU. The amount of the guarantee varies according to a number of factors, such as whether or not the trader is an Authorised Economic Operator.


The EC proposes that the guarantee covers movements in all of Europe, not just the


trader’s base country. It also wants guarantees to be based on each actual transaction, rather than on the estimate used today. Traders and forwarders will have to ensure they have the necessary funding in place to cover any guarantee, even if it is never needed.


These changes have a number of implications, discussed at a meeting between traders and the HMRC earlier this year. The guarantees


would become


extremely expensive - prohibitively so in the case of small and medium sized businesses and banks are becoming reluctant to issue the necessary guarantees in any case. The changes will also lead to a huge increase in IT costs and the need to divert human resources away from their normal work to comply with the MCC. Trade interfaces with the customs system are complex and expensive. Systems will need to be extremely robust: any downtime will literally put a halt to the movement of goods.


There is also a question of what the guarantee will need to cover. Duty liability at import depends on a number of factors. Does the EC expect the guarantee to cover the highest potential duty at stake? And will import VAT be included, too?


It was also pointed out that industries which keep low stock levels - including much of the retail trade - will suffer long supply chains if goods are held offshore to avoid the need for the guarantees. Other queries related to the time the guarantee is discharged; who will put up the guarantee when goods are stored temporarily at a port or airport or when goods are removed to an ERTS (Enhanced Remote Transit Shed)? How would guarantees be managed when goods move in a short time period with a high turnover?


TAP chooses Champ


TAP Portugal is one of 50 carriers which have chosen Champ, the cargo software solution owned by Sita and Cargolux, to comply with EU Import Control System (ICS) requirements. Ground handlers such as WFS have also signed up to Champ’s ICS software. Currently only 20 EU member states are implementing ICS, but the next phase will see the


How would data travel with the goods? And what happens to warehouse keepers that do not have guarantees?


Attendees suggested that


companies should be able to apply for comprehensive guarantees or waivers - and that AEOs, which are audited and controlled by customs anyway, should be granted a waiver on guarantees. But, they asked, could a forwarder who was an AEO be granted a waiver, or would these only be available to the importer? Finally, forwarders and shippers questioned the rationale behind the guarantee for transit goods stored in a major port or airport, all of which are linked to a Community System Portal and are therefore controlled electronically by a customs-approved organisation. One of the more publicised aspects of the MCC is centralised clearance


- but that will not


go ahead until everything else is sorted out. Some question whether centralised clearance is worth bothering about anyway. John


Argent, general manager


at Agency Sector Management, software supplier, claims none of its forwarder customers are at all interested in centralised clearance. “It may come,” he says, “but not before 2016 at the earliest. We have to sort out VAT, duty and excise issues first.”


Forwarders and software houses also point out that since each member state currently imposes different


interpretations on EU


legislation, the idea of centralised clearance is probably unrealistic, to say the least. “There needs to be processes in place to prevent one country gaining advantage over another,” says Matthew Marriott, commercial director of Hellmann Worldwide Logistics. Oh well. Plus ca change and all


that.


remaining seven member states, as well as Norway and Sweden, implementing the system. Although ICS is a Brussels initiative, each member state is responsible for implementing it in its own territory, which has led to 27 different sets of carrier requirements. Champ acts as a single interface with the various customs organisations, so a company in any member state can talk to customs in any of the other member states.


Global medical technology firm Becton, Dickinson (BD) is using AEB’s fully outsourced Freight Audit solution to optimise its freight costs. The company - which specialises in improving drug delivery, enhancing the quality and speed of diagnosis and cancers research and production of new drugs and vaccines - was finding it hard to control the operational and administrative costs of its logistics and freight forwarding services due to a lack of information on contract rate negotiations and general freight tariff overview and control. Managing freight invoices is often a tedious task due to the sheer mass of paper to be processed as well as the complex rate and tariff structures. It is very different from verifying invoices for ordinary purchases or services, which can be compared and balanced against the original purchase order. No purchasing


or procurement


department will issue a purchase order for every single freight service provided as this would lead to an explosion in administrative costs, so few organisations have systems that accurately and completely manage the data to verify freight invoices. In the absence of such a system,


BD’s Singapore logistics team manually calculated applicable freight


costs, consulting the


freight rate tables provided by the forwarders and service providers and running random checks on freight invoice items, line by line. They then manually allocated the applicable freight costs to each business unit, addressed discrepancies with the forwarders and initiated payment arrangements through the finance team. This process was highly labour-intensive and prone to error. So, in December 2009, BD commissioned AEB to design and


29 AEB gives medical assistance


Managing freight invoices is often a tedious task


implement its outsourced ASSIST4 Freight Audit solution. “The beginning wasn’t easy,” recalls AEB project manager Lewis Goh. “The shipment data was not detailed enough to perform freight cost calculation. Freight information was stored in various fields in SAP or on a spreadsheet.” Freight quotes from different forwarders were not standardised and could be misinterpreted, particularly for air and ocean shipments, while maintaining and verifying fluctuating


fuel


ad hoc shipping challenging.


surcharges and costs was also AEB used ASSIST4 to integrate


BD’s shipment information with freight rates to create a robust foundation


for freight cost


calculation and reallocation. After BD’s forwarders were integrated into the e-invoicing system, the freight invoice charges could be validated line by line and verified against shipments and calculated freight costs. Invoice discrepancy tolerance is well defined to ensure that the operations team does not waste time resolving negligible discrepancies but genuine ones are highlighted, giving the logistics team the details it needs in the discrepancy report to help


it resolve discrepancies with the forwarders.


At the operational level, validating and verifying freight invoices, calculating and reallocating freight costs, flagging invoice discrepancies and correcting invoices from forwarders are all now automated and the logistics team can instead focus on value-adding activities


such as discrepancy


negotiation and resolution with forwarders, while keeping a sharp eye on freight invoices without sacrificing quality control. Reports and payment interfaces generated by ASSIST4 provide BD with the details of the freight audit process and the results of the analysis and BD communicates with the forwarders based on the reports. Forwarders receive a formal confirmation from the AEB system that freight invoices were received, ensuring a closed communication loop among AEB, BD and the forwarders. Jimmy Khoo, BD’s director of chain


supply management in


Asia Pacific said that the ASSIST4 solution would help BD Singapore become a regional distribution hub, handling a threefold increase in shipping volume.


Security compliance, on-line


Air Cargo Systems is offering its Aegisplus compliance tool to help airline cargo divisions, handlers and forwarders meet security requirements. It is currently being used


by operations in Ireland and South Africa and plans are at an advanced stage to extend the service to a number of other commercial sites in Europe.


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