CUSTOMS INDUSTRY: OVERVIEW

• The World Customs Organization (WCO) represents 183 customs administrations around the globe that collectively process approximately 98% of world trade. As the global center of customs expertise, the WCO is the voice of the international customs industry.
• Customs organizations are categorized into five main types:
• Ministry Departments : 37.2% 
• Revenue Authorities : 29.5% 
• Customs Agencies/Brokers : 31.7% 
• Border Protection Service: 1.6% 

• The key players in the customs industry include: "Echo Global Logistics, Sunteck TTS, Coyote Logistics, Schneider, Landstar System, BNSF Logistics, J.B. Hunt Integrated Capacity Solutions, C.H. Robinson Worldwide, JDC International, HOC Global Solutions, Total Quality Logistics, Hub Group, Worldwide Express, United Parcel Service of America, XPO Logistics Inc., FedEx, Wen-Parker Logistics, GlobalTranz Enterprises, and DHL International."
• The customs brokerage market is on track for steady growth of 8.5% per annum.
• According to a report from the World Customs Journal, the collection of tax revenue from customs by region is as follows:
• North America: 12.83% on average
• Oceania: 46.18% on average
• South America: 27.61% on average
• Europe: 31.71% on average
• Asia: 32.07% on average
• Central America: 36.20% on average
• Africa: 39.10% on average

CUSTOMS INDUSTRY: MARKET SIZE

• We were able to calculate the global market size of the customs industry in 2017-2021. Our calculations can be found below in our research strategy.
• The global market size of the customs industry was $3.965 trillion in 2017.
• In 2018, the global market size of the customs industry was $4.302 trillion.
• The 2019 global market size of the customs industry is $4.667 trillion.
• In 2020, the global market size of the customs industry is expected to reach $5.063 trillion.
• The global market size of the customs industry is expected to reach $5.493 trillion in 2021.

RESEARCH STRATEGY:

Overview

• A World Customs Journal study produced a number of global KPIs for customs officials at points of entry based on existing KPI around the globe.
• The information was the assimilation of various global custom approaches to managing a country’s point of entry.
• Information was gathered from the Logistics Performance Index (LPI), the World Customs Organization, and various processes from countries around the world such as the Southeast Europe Program (TTFSE).
• Please note the World Customs Journal does not provide information on how each key is measured to determine its individual success in detail.
• Each key mentioned below is already used successfully by individual countries with their own performance indicators to meet their definition of success.
• The study took these successful characteristics and metrics used by various programs around the world to provide a framework in which to create a global integrated customs program. The purpose of this integration is to develop a border management program that is meaningful for both business and government. 
• According to the study the integrated approach "improves effectiveness and efficiencies of international supply chains and border regulation."
• Each point below has a description of why the successful customs characteristic or metric is important to business and/or government as described by the surrounding paragraphs in the study.

Four Key Characteristics Or Metrics That Define Success In The Customs Industry

• The number of times a truck completes import clearance in less than 15 minutes is an important metric to ensure a smooth flow of traffic through border posts and for supply chain metrics.
• The time taken to process relevant documents, each inspection, and cargo clearance helps to ensure the success of supply chain management.
•  Accuracy of trade documentation and trade data is important for tracking purposes, supply chain management and accuracy of global trade data.
• The amount and accuracy of revenue collection is important for the viability of the customs department and revenues for the relevant government departments such as tax.

Additional Information

Time

• The total time taken for the trade transaction.
•  Average times for every procedure.

Cost

• Total revenue collected from all border staff.
• The total cost of import and export related procedures.

Simplification

• The number of required signatories.
• Electronic access for traders.

Risk

• The number of x-rayed volumes against total volume.
• The number of containers specifically inspected versus the total volume of containers.

Key Custom skills

•  Questioning and identifying people with prior offenses, etc.
•  Searching for smuggled goods.
• The arrest of smugglers.
• The seizure of smuggled goods.
•  Checking of documentation against the imported/exported goods.
•  Apprehension and prosecution of drug smugglers.
• Trade statistics data collection and supply.
• The writing of reports.
• Combating the problem of alcohol and tobacco smuggling.
• Combating global illegal trade of endangered species.
•  Managing imported goods revenue.

BORDER CUSTOMS INDUSTRY DISRUPTION AND FUTURE TRENDS

Rise of Protectionist and Other Sentiments

•  The rise of protectionist, nationalist, and anti-globalization sentiment, especially in advanced industrialized countries are disrupting the border customs industry globally by causing a continuous increase in the trade-restrictive measures on the borders.
• This trend is responsible for the decline in international trade via borders due to restrictions in customs processes.
• Rise of protectionist trade policies is expected to disrupt several major border custom e-commerce corridors by placing tariffs and new customs restrictions on goods moving between countries.

Concern Regarding Offenses

• Customs authorities are becoming more watchful of bribery, antitrust, competition issues, and other risks which brings about significant business disruptions including loss of contracts in the border custom industry.
• Due to the high-level checking by customs authorities, many administrations are now more concerned with offenses, such as the trafficking of illicit drugs and smuggling of endangered species and nuclear or hazardous goods. As such, customs authorities have expanded their role, hence this trend is likely to continue to disrupt the border custom industry.

Disrupting 3D Innovation

•  3D printing is disrupting the global trade supply chains on borders. This technology can create complex goods ranging from body parts (such as false teeth and hip replacements) and drugs to clothing and electronic devices, and hence is a major concern of security of the customs agencies on borders as well.
• 3D printing has experienced rapid growth in the last few years and is predicted to wipe out about 25% of all world trade by 2060 at the current rate.
• This technology is evolving continuously with time and hence will continue to disrupt the border customs industry globally in the future as well as posing significant challenges for customs agencies and border protection.

RESEARCH STRATEGY:

TREND #1: THE RISE OF CROSS-BORDER E-COMMERCE

• An increase in cross-border e-commerce is providing new opportunities for brands and retailers to expand their customer base into new markets.
• The World Customs Organization (WCO) Secretary General Kunio Mikuriya described the trend as a “tsunami of small packages” that customs officials are struggling to process.
• Cross border e-commerce is making it easier for smaller businesses with limited understanding of international regulations to sell to customers in new global markets.

• About 67% of global consumers are shopping for goods abroad because prices are lower outside of their own country.
• About 35% of consumers currently shop on sites based outside of their home country
• The estimated cross-border B2C market in 2018 was $676 billion with an estimated 715 million cross-border shoppers.

TREND #2: INCREASED DEMAND FOR ELECTRONIC DATA SHARING

• Globally, traders are required to share details of their shipments at any given time, such as pre-load, pre-departure, and pre-arrival.
• Electronic data sharing is creating new opportunities for business and has the potential to change the way cargo and traffic flows will be organized and managed in the future.

• In recent years, Electronic Data Interchange (EDI) has replaced paper-based business documents with electronic messages.
• Electronic sensors are enabling shippers to identify when and where issues occur, giving them the information they need to resolve any problem occurred in shipment.

TREND #3: MORE SHIPPERS ARE TURNING TO 3PLS AND LOGISTICS PARTNERS FOR GTM

• The indirect approach to global trade management is helping shippers reduce their own investments in technology, as well as reducing the associated maintenance and upgrades.
• It is also allowing shippers to outsource the complicated task of global trade compliance to third parties.

• Currently, more companies are looking to offload transactional processes to competent third parties.
• Global 3PL revenues in 2017 were $869.0 billion which saw an increase of 8.1% from 2016.

TREND #4: MORE GLOBALIZED GTM OPTIONS

• Since more companies are getting involved with global trade, the software solutions that support these activities are also becoming more globalized.
• This is because GTM is moving in the direction of being able to ship from anywhere to anywhere.

• The market is driven by the growing e-commerce market.
• Global e-commerce has grown exponentially and could make up 20% of global trade by value by 2020.
The trend is also driven by omnichannel and other modern-day distribution approaches.

HELPFUL FINDINGS

• Customs operations have seen an upward trend between 2016 and 2017.
• The following information was drawn from a Spanish-language report on Mexican imports: the value of imports from Mexico amounted to 3.80 trillion pesos, 7% more in real terms than in 2016 and the value of exports totaled 3.74 trillion pesos, 10% more than the previous year.

• A new program was launched in 2017 at the Otay Mesa Port of Entry. This program involves joint inspections of trucks conducted by both US and Mexican officers.
• According to Transport Topics, "qualifying shippers—many carrying products from Tijuana’s large maquiladora industry—can expect significantly reduced wait times as U.S. and Mexican inspectors conduct joint inspections."
• Otay Mesa is the "second busiest commercial port of entry" on the US-Mexico border.
• A representative from the Border Trade Alliance sees "sees joint inspections as a trend that will continue, and could even at some point be extended to passenger vehicles."
•  Inspection efficiency faced significant hurdles because of limitations in funding that would support the expansion of existing entry points or the addition of new entry points, making the joint inspection efforts at Otay Mesa a means of grappling with existing funding limitations.

RESEARCH STRATEGY:

What information was not available?

• Information to support at least three key trends in the border customs industry in Mexico was not available.

Why was the information not available?

• It is likely that information is unavailable because the Mexican government and the relevant customs agencies have not cited any major changes that have impacted them. Also, it appears that the data on Mexican border customs and the Mexican customs industry overall is limited and may be confidential.

Methodology:

KEY FINDINGS

#1: UPS

• UPS has chosen customs brokerage as one of the primary applications of blockchain.
• As the world's largest customs brokers, UPS' key objective is integrating blockchain in its brokerage strategy by digitizing transactions, improving transaction accuracy, replacing "paper-heavy, manual processes," and improving the "security and efficiency for shippers going through customs brokerage."

• Some of UPS's relevant services include electronic and routine customs clearance, handling the complexities and assuring the rating of duties and taxes are accurate, and monitoring the shipment with its advanced online tracking application.

• UPS has been considered as a key player as it provides its services, such as freight forwarding and customs brokerage, across 200 countries.

#2: JSI Logistics

• In terms of innovation, JSI Logistics integrates Green Technology solutions across all of its services which includes "Global Customs brokerage and trade compliance assistance" under the service portfolio of "Global Transportation & Trade Compliance Solutions".
• Starting from the consolidation and movement of raw materials to the "production through custom pack out" JSI provides all the services required for the Green Technology industry.
• The company's Green Technology logistics program aims to make every part of the client's supply chain efficient from providing "complete global transportation solutions to customized warehousing and distribution programs."

• JSI provides full customs clearance services.
• JSI provides cross border clearance services.
• The company provides assistance in applying for customs bonds and other services.

• The company has been considered a key player as it provides services in 188 countries throughout the world.

#3: Flexport

• Flexport is a global freight forwarder and customs broker that makes use of cloud software and an analytics platform. It uses technology, especially software, to optimize speed, reliability, and cost for its customers, which include Sonos, Georgia-Pacific, and Klean Kanteen.
• The company also provides "data that helps customers analyze costs, container utilization, and emissions and keep track of their supply chain."
• A factor that also stands out is the company's nonprofit division, which subsidizes logistics support meant for humanitarian relief.

• Flexport provides cloud storage for all the customer's trade transaction documents, real-time collaborations, and updates.
• Flexport helps with customs filings.
• The company helps the customer with "good classification" such as the Harmonized System (HS) Code to calculate related duties, tariffs, and other taxes.

• The company has been considered as a key player as it provides services to 110 countries.

RESEARCH STRATEGY