Logistics and the Supply Chain. In the last decade, we have witnessed the growing impact of globalization on how companies conduct their business across international borders. The increasing competition in the global marketplace has caused companies to continuously find ways to lower production costs and offer competitive prices for their consumers.
Many companies have thus overhauled their supply chain (from the acquisition of raw materials to the provision for sales and after-sales service) in order to promote efficiencies and create savings. As logistics cuts across the whole supply chain, companies likewise look at possible savings opportunities in the transport, insurance, customs clearance, inspection, storage, packing, handling and distribution of goods.
International Logistics. For companies engaged in international trade, logistics normally refer to the proper management of the supply of materials. In general terms, this involves securing the exact quantity of materials for delivery at the right time and location at a minimum cost. In international sale transactions, logistics may include inbound logistics (from supplier factory or farm to the buyer in another country) and outbound logistics (warehousing and distribution of the goods to the production lines or retail shops).
Logistics managers normally look at the costs and risks involved when moving goods across international borders. In a typical manufacturing entity, it is estimated that incoming logistics costs accounts for about 20-30% of the total purchase cost of an article. Obviously, logistics has direct and indirect impact on the operating profit of a company and on the price of the goods offered in the market place. To promote efficiency and create savings opportunities, many companies have adopted an integrated approach to logistics and distribution management.
Customs Brokerage as part of Integrated Logistics. The concept of integrated logistics is to provide an efficient and seamless flow of the goods starting from the suppliers to the customers of finished goods. In the Philippines and in most other countries, many companies offer integrated logistics services. Also known as third party logistics providers, these companies offer, among others, services such as: air and sea freight, multimodal transport, customs brokerage, and warehousing and distribution.
From an operational perspective, logistics services typically involve the following:
- adoption of international trading terms (INCOTERMS and documentary credits);
- use of transport providers, freight forwarders and shipping agents;
- availment of warehousing and distribution centers; and
- customs clearance, inspection, security and compliance.
For many multinational companies, integrated logistics solutions have become part of its business planning and strategy. With the advent of internet technology, the world of logistics operations now provide faster and more efficient transportation of products and more added services. Likewise, the demand of international traders for trade facilitation and just-in-time deliveries across international borders has given customs brokerage services a more important role in the company’s logistics approach.
The Future-Customs Management. While it is true that international trade rules have become more complex, international trade rules have, on the other hand, become more harmonized. Against this backdrop, trading companies demand more value-added logistics services and as a consequence, logistics companies now offer integrated logistics services to include customs management services and solutions. In addition to the traditional customs brokerage services, many logistics companies and customs brokerage firms now offer customs management services to include:
- customs bonded warehousing;
- specialist advice on international trading rules and government regulations;
- record keeping and customs audit support services;
- advice on tariff privileges and deferment; and
- duty and trade planning.
In the more developed countries, it is no longer enough that customs brokerage firms clear goods from customs in the most efficient and timely manner. As the cost of logistics (e.g. insurance and freight) directly impact on the amount of customs taxes and duties payable at the border, companies demand that customs brokers provide services not only to reduce logistics costs but also to provide legally permissible ways to reduce the taxes and duties payable.
Importer-Customs Broker Partnering. In the Philippines, the practice for most local companies is to secure the services of customs brokers just for clearing the goods from customs custody. Thus, most customs brokerage companies provide limited services such as customs documentation and clearance, and customs and tariff advice. Even as most customs brokers continue to provide traditional customs brokerage services, recent developments however demand that customs brokers provide more added services to address the new requirements of local companies engaged in international trade.
The present customs and trade rules in the Philippines not only provide certain compliance requirements for importers (e.g. record keeping and customs audit) but also provide legitimate opportunities for duty and tax savings on imported goods. The challenge therefore for a customs brokerage firm is to provide its clients with a comprehensive customs management service and thus, maintain its competitive advantage against competitors.
The author is an international trade, indirect tax (customs) and supply chain expert. He is the Editorial Board Chairman of Asia Customs & Trade, an online portal on customs and trade developments affecting global trade and customs compliance in Asia. He was also Bureau of Customs Deputy Commissioner for Assessment and Operations Coordinating Group (2013-2016). For questions, please email at email@example.com and firstname.lastname@example.org