PICARD 2016, Manila. Customs management in multinational companies. Andrew Grainger

Transcription

1 PICARD 2016, Manila Andrew Grainger Assistant Professor, Logistics and Supply Chain Management Nottingham University Business School; University of Nottingham; UK Customs management in multinational companies Day 1; Tuesday, 27 September 2016; 14:00-15:30 Session on Customs Management: Transit and Trade Facilitation Andrew Grainger, 'Trade Facilitation: A Conceptual Review' (2011) Journal of World Trade, 45, 1, pp Page: 1

2 $ $ Context $ Seller Transport Port / Border International Transport Port / Border Transport Buyer Every supply chain is exposed to trade and customs procedures! Perceived to be an operational bottleneck and cost to business Trade facilitation WTO, WCO, OECD, WEF, UNCTAD, UN ESCAP, UNECE, UN CEFACT, World Bank, ADB, etc Strong economic case made for trade facilitation WTO TFA = % cost reduction for global business (OECD) Page: 2

3 But. : how are customs issues managed within companies? what is it that people in charge of meeting Customs expectations do? how do they go about it? Page: 3

4 Where to look for answers? (1) As experienced customs practitioners we might reflect on our knowledge of trade and customs procedures Defined by trade and customs law Import/Export taxes: duties, VAT, excise, ADD, etc Preferential procedures, simplified procedures Transit landlocked countries; hubs and terminals Prohibitions and restrictions; work with noncustoms agencies Overlap with port and border controls Terminal operations, inspection facilities, port community systems Page: 4

5 Get it wrong: go to jail! Page: 5

6 Where to look for answers? (2) The academic approach is to start with relevant literature: Page: 6

7 The Customs Literature Customs Law Text books Guidelines Information portals History Boston Tea Party (Andreas, 2013, The Smuggler Nation) Chinese Maritime Customs Service Ancient Rome Economics Building the economic case for trade facilitation from a macro perspective Performance measures Customs and Trade Policy World Customs Journal Journal of World Trade Implementation guides Logistics and SCM Supply Chain Security IT Risk management Page: 7

8 Where to look for answers? (3) Ask customs managers: What do they do and how do they go about it? Page: 8

9 Let s interview them.. Unit of analysis is the Customs Manager Senior Trade/Customs Managers from 11 multinational companies 6 responsible for 50+ countries Region/Country of Responsibility Industry Sector United Kingdom Food (1) Europe or EMEA Pharmaceutical (1); Technology (1); Express Carriage (2); Media (1); Automotive (1); Food (1) Global Retail (1) Page: 9

10 Affiliation They might: Dedicated trade and customs teams (e.g. Global Trade) Member of the logistics department Member of the tax and finance department Most interviewed work at the Corporate HQ level day-to-day interactions with customs are the responsibility of the logistics managers or contracted to a logistics company Team size 0-20 at HQ level (express carriers may have customs staff at country level) Experienced professionals Multiple careers consulting, government, logistics Professional qualifications law, tax, logistics Page: 10

11 The customs manager s function Logistics support Supply Chain Management Regulatory compliance Page: 11

12 Logistics Support Ensure goods clear ports and borders without disruption or delay at minimal costs Ensure correct information is provided Ensure correct duty is paid / reclaimed (VAT) Take advantage of simplified procedures (e.g. inland clearance) In practice: Usually work alongside logistics managers Requires a good rapport with the customs administration Step-in when issues arise at the ports and borders Page: 12

13 Supply chain management Advice about duty implications Network wide cost modelling and business analysis from a trade and customs duty perspective In practice: Support procurement staff especially when contracting suppliers; Incoterms Ensure that import/export licences have been secured before procurement (and sales) decisions are made Ensure that suppliers provide correct customs relevant information (origin, value, tariff) Page: 13

14 Regulatory Compliance Ensure that laws and procedures are followed Minimise risk of non-compliance, fines and custodial sentences Safeguard continued access to preferential customs treatment In practice: It is about accountability towards the board (and shareholders) Issues: corruption and bribes which exposes the company to EU/USA anti corruption laws Issues: some tax authorities, like the UK, require manages to confirm that the company has robust tax compliance systems in place (including for the payment of customs duties) Page: 14

15 Tools of the trade The go-to person The company s administrative system Contract out to 3rd parties freight forwarders, brokers, agents, etc Page: 15

16 Go to person Supports the whole lot with customs specific advice; Procurement, production, logistics, sales, HR, ICT Topics: duty labilities, customs clearance, training, tariff classification, valuation, origin, Incoterms and customs documents, commercial invoice, etc. Sometimes partner-up with other in-house experts (e.g. VAT); Irregularities in one area indicate that there may be some in customs, too. Page: 16

17 The company s administrative system Standard Operating Procedures (SOPs) Ensure that they include reference to relevant customs requirements and practices May help draft the SOPs or be asked to review SOPs Often independently certified and part of the company s wider commitment to quality (e.g. ISO 9000) Often SOPs are used in support of AEO applications Electronic Systems Enterprise Resource Planning systems (SAP, Oracle, etc) may include add-on customs functionality (declarations, warehousing, etc) Issue: if the data is shoddy, it won t work Page: 17

18 Contracting out Logistics Service Providers, brokers, agents Make declarations, clear goods at the port/border Require instructions Need to be managed and supervised Performance standards need to be agreed (KPIs) Consultants, brokers and other specialists may also serve as an extra set of hands assist in classification provide planning advice special customs procedures implement customs IT systems Page: 18

19 Significant diversity in practice Media and Express ability to clear without delay is a critical customer expectation May not take advantage of special procedures for fear of delay Rely on third parties One company avoids customs by buying supplies from local distributors Has no visibility of customs related costs, risks and opportunities Operations are complex for some Cost of making any changes to IT-systems for customs purposes can be prohibitively high (e.g. thousands of classifications) Senior manager may veto investments into customs capabilities Most have forgone advantageous customs procedures in order to keep things simple or minimise risks of non-compliance Page: 19

20 Significant diversity in practice Some worry about duties (especially the retailer); others do not Most rely on third parties Some have good relationships with partners Other feel their company has lost control ( not a good place to be ) Some spend as much as 80% on public affairs type work; others have no spare time at all! All outlined examples of where significant improvements in customs management could be made But failed to persuade senior management small cog ; overlooked Page: 20

21 So what? Page: 21

22 Recap Page: 22

23 Trade-offs: not enough time in the day Reducing costs for example, by taking advantage of duty saving opportunities, but also by ensuring that goods are not delayed at the border. Safeguarding compliance where the customs manager seeks to ensure that the company and senior individuals (including the customs manager) are not exposed to fines or custodial sentences. Developing Strategic Capabilities where the customs manager ensures that the company is ahead of its competition. Page: 23

24 Some key points for the Businesses Concerned May want to make informed decisions about trade-offs between: Safeguarding compliance Reducing costs, duties and delay at the border Developing strategic capabilties Re-examine how customs issues are managed Have risks and opportunities been identified? Is there further scope for gaining competitive advantage? Is the performance of 3 rd parties satisfactory? Should time be invested in reaching out to the authorities to help improve procedures? If so, what are the company s objectives? Page: 24

25 Some key points: for Customs Administrations Companies have capacity constraints! Customs is often seen as just a small cog in the scale of things Be mindful of how to best work with companies Examples: Consider looking at SOP when assessing the company s management practices AEO certificate to confirm that the customs manager is indeed managing the customs compliance risks well (to shareholders and the tax authority) It is not just about the impact on logistics and supply chain operations Companies are also mindful of non-compliance risks Don t like complexity; happy to forgo incentives if it adds to risk Senior management may be inclined to manage their non-compliance risk by outsourcing Paradoxically at the risk of losing control» (if poorly managed and without the involvement of the customs manager) Page: 25

26 Some key points for research and teaching The devil is in the detail Customs managers understand the detail They offer a bottom-up perspective to costs and their impact upon: A counter perspective to top-down Macro-level research Logistics operations Supply chain consideration Corporate governance and risks to the company Most who were interviewed learnt their craft from combining multiple careers in: Law and consulting Government Logistics Despite interdependencies in logistics and SCM the function of Customs is barely touched-upon in mainstream business schools Opportunity for PICARD and INCU Page: 26

27 Questions? Page: 27

28 28