Episode Transcript
[00:00:01] Speaker A: Hello, welcome to the Freight Buyers Club. I'm Mike King and coming up is an extended clip about European customs challenges and reform and what exactly a single source of truth in customs data means. This is taken from episode 52, a Future of Customs and Trade special released in the third week of September. Please do check it out on all podcast platforms on YouTube. In this clip, I'm speaking to Stephen Tracy, Joint General Manager for Europe at WiseTech Global.
I started by asking him how US tariff policy is impacting European shippers and forwarders and affecting trading costs.
[00:00:39] Speaker B: Even when Europe isn't a direct target of US tariffs, the ripple effects are very real. Okay. And we look at maybe European importers. The challenge is indirect exposure. So take German carmakers. An Irish farmer produces very significant above markets. Many of their inputs are sourced globally. If US tariffs disrupt Asian or Mexican supply chains, the cost and availability of components in Europe are impacted and they actually can change overnight.
As we know. Just even the verbiage and the talk of tariffs trigger suppliers to actually change their direction and reroute, raising prices lead times before an actual single policy takes effect. But for forwarders, it's about volatility. Tariff rhetoric shifts trade lanes. More cargo is expected to flow through Turkey, Mexico, Southeast Asia. As companies you know, as Singh mentioned earlier, seek to bypass US China routes. Forwards in Rotterdam and Antwerp suddenly see flows perhaps they hadn't completely planned for. And they have to manage the customs complexity of new origins and indeed working with new partners. But we then have a compliance angle too. So European forwarders are often filing U.S. import and export data on behalf of customers, are working with brokers.
When tariff schedules change, suddenly they're the ones have to ensure the right duties are applied. The customers aren't left with unexpected penalties, which it's not just penalties, but it's reputation and damage and everything that goes with that. So even though Brussels is not the primary target, Mike, forwarders and importers are feeling the consequence of higher cost shifting, trade matters and the need to adapt.
[00:02:23] Speaker C: You've described customs platforms as a pizza base with national toppings.
Where is fragmentation in Europe still most problematic? And will the EU's customs reform package with a single entry system and this proposed EU customs authority, will it fix this?
[00:02:42] Speaker B: Yeah.
[00:02:42] Speaker C: Is this the death of pizza?
[00:02:44] Speaker B: Yeah. The food analogy, I think, is a very European thing and I think it's quite accurate in relation. So the, the UCC unified customs code, UCC 6 is very much a pizza base. But as we've spoken earlier, as Greg earlier said earlier, there is unique implementation so it's two examples. So in Germany there's an 11 digit tariff code while the EU standard is 8. And that's an extra layer of complexity in one country. And ICS 2, the Import Control system too has, although it's designed as a single EU system, there are different nuances within that on a local basis and each member has added some specifications. So the EU customs reform package is very significant and far ranging in its ambition and it's very ambitious and it wants to move to a single system. One declaration valid across 27 countries through a single gateway. Now that is very challenging. It will be very challenging and it is a very far reaching ambition and it is very ambitious.
And then a new EU customs authority. So a single authority looking after all 27 member states.
So fragmentation currently is still a problem. Reform package is the best chance to solve it. But it does come down to political will and it's very uncertain political times in relation to what's happening on terms of time. The traders, I think traders start utilizing digital tools to capture correct data once and reuse it many times. I think that is going to be key. But this may take quite a number of years. 2028 is stated for one of the timelines, but depending on political will, Mike, this could take quite a number of years.
So we would still see that the importance of having, you know, a single platform that allows customers have an ability to trade locally, the last kilometer customs filing as we call it. And it's nearly, if I could use the expression, nearly a Rosetta stone for Customs and Cargowise and other platforms, but Cargowise in particular give that particular visibility and that local knowledge that customers require.
[00:04:58] Speaker C: Just on, on those digital tools. You told me that one of the biggest inefficient efficiencies in supply chains was re keying data. And I think IATA found that the average airway bill is reentered 10 times as it moves through the supply chain. You said the real breakthrough is a custom system that lets export data from one country be reused as import data in another within a single platform. Sort of what you touched on just now.
How transformative is that reuse of data for compliance and visibility? And why is the industry still struggling to get there?
[00:05:30] Speaker B: Sure, I think re king of data is one aspect and it is a very big aspect. The second was fragmentation of systems as well. But just if we focus on the re keying of data, you know, there are lots of statistics, but the UN Conference on Trade and Development unctad estimates an average Customs transaction involves 20 to 30 different parties. There are up to 40 documents, 200 data elements, 30 of which are repeated at least 30 times and retain 60, 70% of all data at least once. So if we think of just the overhead associated with that is significant and errors, that can happen.
So the breakthrough, as I've said and we've spoken about, is through data reuse. So an export data file in Singapore is becoming seamlessly the import data in Frankfurt. On that example, within the same platform, the same data space, dataset just enriched what each side needs and that would mean compliance that's faster and cleaner, no duplication, fewer errors, Real time visibility for all players on the supply chain, which is really important, including the customer's authority. So the same digital truth. I mean, we talk of cargowise as being the single source of truth for customer data and that data can be reused. There are efficiency gains and less paperwork, lower costs and quicker border crossings. But why aren't we there yet? Paper is still moving in the supply chain. Okay, There is fragmentation of systems. We've dealt with one particular customer who had quite a number of different brokerage systems and they're now trying to standardize that, and that's quite prevalent, whereby local management have the authority to actually go and source their own local customs. Last kilometers custom system. But that brings fragmentation. It's not a single platform. But data can be reused. There has to be handover and gateways, and building gateways and APIs can be complex. If you're not using the single source of truth for a platform, that becomes problematic. I also think that the, you know, the EU customs hub will also help in the future. But as I said, I have concerns just about the timeliness of when that will happen.
