Technology Can Cure the Parcel Crisis at the Border
As e-commerce continues to increase globally, shippers have to streamline customs compliance to support their omnichannel strategy.
The growth of e-commerce has driven global parcel shipping volume to an all-time high. Consumers are more comfortable than ever buying from e-commerce vendors located overseas, while at the same time, retailers have adopted an omnichannel shipping strategy that has broadened the storage and shipment of inventory from centralized distribution centers to brick-and-mortar stores and manufacturers, wherever they may be.
This has resulted in a flood of inbound packages that has taxed the resources of U.S. Customs and Border Protection (CBP), which has traditionally processed larger containers.
Putting a Strain on Customs
Today, 66% of businesses that sell online are already selling cross-border. These sales account for close to 31% of those businesses’ revenue, according to the Visa Global Merchant E-commerce Study. Additionally, cross-border e-commerce is not about to slow down, with 66% of the businesses not currently selling internationally planning to do so soon.
This is bound to put a strain on the CBP, adding costs and time to international parcel deliveries, especially as more shipments are delivered from foreign manufacturers direct to consumers.
“You do ultimately have a lot more direct shipper-to-manufacturer relationships. And there’s a lot of middleman distribution that’s being compressed out of that supply chain component,” says Spencer Askew, CEO of multimodal TMS company Teknowlogi. “Today’s shippers will use drop ship-to-home from manufacturers in America or overseas, where the shippers historically would have to be responsible for some kind of a distribution or hire a 3PL to sit in the middle.”
To lessen the burden on CBP resources, the Trade Facilitation and Trade Enforcement Act of 2015 raised the de minimis value (the limit under which so-called “Section 321” shipments—aka parcels—are exempt from duties, taxes, and more detailed filing requirements) from $200 to $800. By raising the de minimis threshold, the impact has been anything but trivial and may have added momentum to the parcel volume surge.
The CBP is searching for a way to speed up the processes considering this growth of international parcels, and late last year, it took its first step toward that end.
Turning to Electronic Filing
Parcel customs clearance processes have been completely paper-based and manual to this point, except for a few global parcel carriers who can file electronically because they have customs brokerage service operations.
In Q4 2019, the CBP began testing an electronic filing process it believes will streamline clearance processes, while improving data collection, visibility, and border protection. When the piloting phase is complete, the process will enable global logistics companies to electronically file more detailed Section 321 information, eliminating manual and duplicate data entry and freeing up the flow of parcels through customs.
It is unclear what impact electronic filing will have on speed and costs for parcels having to clear customs daily. However, as e-commerce continues to increase globally, shippers will have to continue to navigate customs both in their home country and a growing number of others so their omnichannel strategy can deliver from the endless aisle. Having the right technology partner will be key in staying compliant and reducing costs.