transforming to global for prosperity, how should customs v3.4

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Transforming to global for

prosperity, how shouldCustoms?Don A. Quartiere

In an age of globalization, geographic and regulatory barriersfall, electronic distribution explodes, inventory becomesobsolete, and focused competitors ferociously attack.Companies have to restructure or succumb to others.

One ubiquitous government entity stands at the gates of

international trade, Customs. When Customs executesstrategically, it can stimulate and protect the economic interestof its trading regions; other scenarios exist. The Customsdrivers in play could overcome the agency, hamper itsmodernization, and even put its relevance at risk as the worldheads to, and reacts to the repercussions of, going global.



Transforming to global for prosperity, how should Customs? 2

Table of Contents

Table of Contents .............................................................................................................2

Realizing a relevant ‘e’ ....................................................................................................3

Globalization, e-business, and e-government .............................................................. 3An international trade value system .............................................................................4Prosperity in a global economy ....................................................................................4

Marketplaces converge, barriers contract and businesses transform ............................6

Global marketplaces .....................................................................................................6Corporations adapt ....................................................................................................... 6

Productivity drives the U.S. economy, international traders drive productivity ..... .......7

E-government and e-business alignment ..................................................................... 7International logistics services ..................................................................................... 8

International trade facilitation and national security .......................................................8

Embracing globalization: profits, capitalization, and competitive advantage .................9

Enabling success for all players ................................................................................... 9A nations competitive position matters ........................................................................9Competitive advantages enable prosperity ................................................................ 10

A Customs e-thinking scenario ......................................................................................10

Classification of goods for U.S. importation ............................................................. 11Reassembling the classification puzzle ......................................................................12Knowledge-empowerment for international traders ..................................................12

Realizing the benefits of e-Customs knowledge management .................................. 13Quantifying e-Customs advantages and benefits .......................................................13

Delivering e-Customs productivity ............................................................................... 15

Abbreviations and Acronyms ........................................................................................ 16

Don A. Quartiere January 2002 DRAFT v3.4




Realizing a relevant ‘e’

The U.S. is engaged in a new type of war against terrorism worldwide, demanding a newapproach to fighting the continuous battles on all fronts. The highest priority of the U.S.Customs Service now -- and since the monstrous attacks of September 11 against our country -- is counter-terrorism.i The U.S. Customs Service is one of the primaryenforcement agencies protecting the nation’s borders, deploying an extensive air, land,and marine interdiction force supported by an investigative division.

It is estimated that in 2002 more than $9 trillion in goods and services will crossinternational borders. Analysts believe that by 2025 as much as 80 percent of the world’sGDP will be generated from cross-border trade in goods and services. ii The U.S. CustomsService enforces trade and tariff laws (2001 tariff collections were $20 billion) and is a

pivotal component of every international trader’s supply chain.

As Customs reinvents itself, it faces a continuum of options. At one end of the spectrum,it puts existing government services on the Internet. At the other, it transforms itself intoan indispensable agent adding security and value to the economic interests of the nation itserves and earning a leadership position worldwide.

Whatever the ‘e’ is for Customs, it must first fulfill the mission of the agency and addressthe demands of the drivers acting upon it. By fulfilling the unarticulated demand of stakeholders in lieu of competitive substitutes, thereby obtaining competitive relevance iii, Customs ensures its position as the preeminent agency guarding the nations borders and

facilitating international trade. To obtain competitive relevance, Customs modernizationmust create a value proposition that is beyond compelling, it needs to be both unique andrelevant to the U.S. Customs advisory councils, periodicals, organizations all have put forwardrecommendations on how to ‘modernize Customs’. The commonality is they articulate asolution to well-documented pains of the Customs stakeholder community today, notnecessarily what the agency could mean to the nation tomorrow. Correcting these ills is avalid concern of good government, but does it require a transformation to e-Customs?

Globalization, e-business, and e-government

Businesses are leveraging what they learned and transforming to embrace theopportunities of a global marketplace. The increasing availability of global capital,coupled with advances in computing and communications technology, is serving toaccelerate the processes of globalization. The barriers to globalization are coming downeverywhere: not just in North America, Western Europe, and Japan, but also in theemerging giants of China, India, Brazil, and Russia.

Possibly, the greatest advantages of e-government is not what government will bring tothe constituents directly, but what the private sector will accomplish through the new





government infrastructure. Customs modernization, depending on the strategic choicesmade by the agency, is in a position to deliver a compelling infrastructure. The delivery by private sector intermediaries of new e-business practices, based on e-governmenttransformations, will spread efficiency gains to the economy as a whole in a manner not

achievable through government.

An international trade value system

The lessons of past globalization challenges have been internalized by the advancedeconomies of the world. It now takes only two to three years, for example, for the worldeconomy to produce the same amount of goods and services that it did during the entirenineteenth century.iv International logistics enables globalization to be financially viable.

International logistics activities are driven by a customer’s choice to buy a product in thecompetitive global marketplace. The financial rewards of global marketplaces requirecustomer satisfaction with international logistics services. ix 1 Customer satisfaction

demands continuous operational efficiency improvements. Operational improvementsrequire a nation to better its productivity.

All international logistics activities cross a nations’ border at some point and involve aCustoms agency. Systems involved in international trade standardize as they interface toCustoms making the agency the pivotal enabler, or barrier, to global trade productivitywithin the economic and Customs region. ix 2

The advanced economies of the world have only one choice as globalization movesforward - to determine what strategic focused role their economy will play and enable itsexecution in a competitive fashion. Economies, like Customs, have competition too. As a

byproduct of globalization, the customer always has an acceptable choice.

Prosperity in a global economy

A great threat to the economic interest of an advanced economy will come if localcompanies deny the existence of globalization and refuse to, or cannot, adapt. To do sowill put millions of jobs at risk in any advanced economy. Such companies will realizethat standing still is no answer in a global economy, in which other once equivalent players are racing ahead, potentially in a different Customs region. ix 3

1 A multi-billion dollar U.S. retailer, responding to the e-CP’s CBA Communication, distributing imports to a large numberof nationwide outlets summarized the ACE advantages as: “we would expect to see improved clearance times and

uniformity in all ports which would benefit our supply chain and reduce the number of days for replenishment in our stores;improved Customs confidence in our ability as an importer to maintain a high degree of compliance; improved historicaldata accessed via the internet for our account to assist both Customs and the importer in managing our business moreefficiently; and improved interfacing and exchanging of data with other government agencies.”

2 72% of the respondents to the e-CP’s CBA Communication to U.S. importers rated to a great extent in importance to theefficiency of their supply chains a U.S. government agency providing uniform treatment of goods at the ports of entry uponarrival of the means of conveyance, 11% gave Customs’ effectiveness in meeting that need today the same rating.

3 A multi-billion dollar supplier of high technology equipment to U.S. marketplace commented on the e-CP’s CBACommunication to U.S. importers “Customs regulations should reflect the changes in business and transportation modelscurrently in use, such as products being made to order vs. mass production of identical items.”.





Globalization and e-business are transforming the private sector; e-government needs totransform the public sector in order to obtain alignment with business and maintainefficiencies. ix 4 A Customs agency, through modernization into e-Customs, has anopportunity to enable a company’s supply chain’s transition to a value chain, act as a

neutral party delivering global trade parity to business, and promote the adoption of U.S.-anchored components in constantly evolving operating models driven to an ever-increasing level of operating efficiency. ix 5

Beyond the particulars of the e-Customs classification matrix scenario, a methodology is presented herein for ascertaining the ‘e’ worthiness of any Customs modernizationobjective against the aforementioned objectives. A scale for ascertaining if the scenarioadds to the competitive relevance of the Customs agency is also introduced.

If indeed international operational efficiency is acting on private industry as outlined inthis paper, the marketplace will support private industry intermediaries fulfilling the

needs gap. When trade intermediaries deliver international trade logistics solutionswithout the benefit of Customs leadership and an innovative infrastructure to fill theunmet need, the segment of the economy that gain access to the benefits is smaller than if Customs were engaged. Furthermore, the intermediaries will be hard pressed to establishthemselves beyond the immediate Customs region and truly reap the rewards of globalization their products and services assist others in achieving.

Regardless of the path a Customs agency chooses as it journey’s towards modernization,

one thing is certain – the businesses of advanced economies will prosper embracingglobalization. How private enterprise success transcribes itself onto the varying economicand Customs regions of the world will affect the prosperity of its nation states, in potentially dramatic ways.

4 69% of the respondents to the e-CP’s CBA Communication to U.S. importers rated to a great extent in importance to theefficiency of their supply chains paperless e-filing for U.S. importation data requirements, 31% gave Customs’effectiveness in meeting that need today the same rating.

5 48% of the respondents to the e-CP’s CBA Communication to U.S. importers placed expedited and reliable cargorelease for all modes of transportation with Customs pre-authorization of the importer, intermediaries, goods, shipper, androuting as one of the top five ACE advantages.





Marketplaces converge, barriers contract and businesses transform

Global marketplaces

Industry by industry, national and regional markets are aggregating into a set of marketsthat operate without regard to national boundaries, increasing the business opportunitiesand the market capitalization of successful global players. As a manifestation of international marketplaces, the subjects of logistics, supply chain, and e-business are atthe forefront of concern for business executives. However, most companies will facesignificant challenges in navigating the complex regulatory, financial, and logisticsenvironment created from international trade.v ix 6.

A recent study by AMR Research

provides some insight into whycompanies are actively pursuing business-to-business e-commerceactivities in the globalmarketplace. The potentialfinancial benefits range up to$465 billion annually. CSCConsulting predicts that the NorthAmerican automobile industryalone could reap an annual benefit

of up to $80 billion, on average, $5,000 per vehicle, if it masters collaborative product

development and transforms supply chains into value chains.vi 7

Corporations adapt

Successful companies have a corporate mission and viable strategy in order to realizetheir market penetration and profitability objectives. Many of the strategies in place todayfor companies accelerating towards global were built on the requirements of the past: in aworld of closed national economies, not open global markets.vii

Marketplace driven events that cause the worlds largest companies to adapt their corporate strategies affect the economic interest of advanced economies in significantways. New waves of corporate strategies will emerge, as the strategies of pre-global

markets grow stale reflecting a fresh focus. Globalization often allows growth that isconsistent with strategy, opening up larger markets for a focused strategy. Unlike

6 65% of the respondents to the e-CP’s CBA Communication to U.S. importers selected account-centric nationwidemanagement of an importer and its intermediary’s activities as one their top three ACE advantages.

7 The supply chain model focuses on activities that get raw materials and subassemblies into a manufacturing operation

smoothly and economically. Value-chain analysis looks at every step from raw materials to the eventual end-user, rightdown to disposing of the packaging after use. The goal is to deliver maximum value to the end user for the least possibletotal cost. That makes supply-chain management a subset of the value-chain analysis.


Figure 1

Source: Corporate Strategy in a Globalizing World, McKinsey Quarterly 1998



Transforming to global for prosperity, how should Customs?7

broadening domestically, expanding globally is likely to leverage and reinforce unique positions and identity.viii

Companies accelerated e-business plans in a globalized economy will have the greatest

impact on three key areas: supply chains’ transitioning to value chains; logistics systems becoming a key competitive advantage; and the transformation of operating modelsix 8.

Productivity drives the U.S. economy, international traders drive productivity

A component of the economic healthof a nation depends on what happensto the productivity growth rate, themain determinant of how fast theeconomy can grow. At issue is

whether the near doubling of US productivity growth rates during thelate 1990s, from 1.4 percent (1972– 95) to 2.5 percent (1995–2000), cancontinue.x

The primary sources of the productivity gains of 1995 to 1999

were managerial and technological innovations in only six highly competitive industries:wholesale trade, retail trade, securities, semiconductors, computer manufacturing, andtelecommunications. These six sectors accounted for virtually all of the net productivity

acceleration and 74 percent of all positive contributions. x Of these six productivity-leading sectors, all are leading U.S. international traders with the exception of securitiesand commodity brokerages.

E-government and e-business alignment

To succeed in e-government, agencies will need to learn to see the citizen as their customer, which represents a radical cultural change for many organizations. Becoming acustomer-centric organization will require a change in resource allocation priorities and athorough review of business processes. ix 9 10

Governments are not chasing profits, yet they can deliver a competitive advantage to the businesses operating within their region that do. A byproduct of globalization is increased

competitive pressure between trading regions, as they drive to continuously improveoperational efficiency. The governments of trading regions have always played a role in

8 100% of the respondents to the e-CP’s CBA Communication to U.S. importers stated globalization affected theirbusiness practices, 83% to a great extent.

9 86% of the respondents to the e-CP’s CBA Communication to U.S. importers rated to a great extent in importance to theefficiency of their supply chains periodic payment capabilities, 7% stated Customs’ effectiveness in meeting that needtoday was at a great extent where 44% placed it at no extent.

10 66% of the respondents to the e-CP’s CBA Communication to U.S. importers rated periodic payment against a timedelineated grouping of entry summaries one of their top five ACE advantages.


Figure 2

Source: U.S. Bureau of Economic Analysis, McKinsey analysis




enabling the success of the private sector operating within its region, through thefacilitation of legitimate international trade and protection of borders. E-government isabout government/private sector synergy driving productivity and the regions economy.

Globalization, e-business, along with the tragic events of September 11th places the Customs agencies of the advancedeconomies at a crossroad. Customs agencies are choosingthe challenging path of transforming into an e-Government11

agency in order to better effectiveness and efficiency ix 12. Through modernization,Customs can play a key role in enabling the businesses operating in its region of controlto succeed in the global marketplace as it enhances how the nations borders are protected.

International logistics services

International traders have responded to the increased demand for logistics services thatarises from e-commerce by adopting a variety of methods including the development of

software applications in order to automate logistics. ix 13 It is estimated for that by 2000worldwide sales of software, hardware and services used in electronic logistics hadreached US$ 277 billion, and they are expected to reach US$ 1 trillion by 2005.xi Whilethese figures appear to be on the high side, they nevertheless provide a useful indicationof the importance being given to the issue of logistics in e-commerce.

Technology plays a critical role in providing systems that can enhance the ability of logistics service providers to satisfy customer demands in the global marketplace. Themain weakness of the efforts to develop applications for improving logistics is thegeneral lack of integration between the various applications used for different logisticsfunctions. ix 14 Another factor that impedes the effectiveness of e-logistics services is the

existence of a multitude of constraints brought about by inefficient trade facilitation.

International trade facilitation and national security

Since the attacks of September 11, government officials have put emergency measures in place to protect U.S. borders and seaports from terrorist threats. But several officials havesaid the levels of manpower deployed are unsustainable and that a new and permanentsecurity apparatus must be developed that somehow doesn’t impede the free flow of tradethat is so essential to the health of the nation’s economy.xii

11 Gartner defines e-government as: the continuous optimization of service delivery, constituency participation and

governance by transforming internal and external relationships through technology, the Internet and new media.

12 11% of the respondents to the e-CP’s CBA Communication to U.S. importers stated that to a great extent thecapabilities provided today by Customs through ACS are effective at enabling their company to maintain parity supplychain practices with competitors that manufacture outside the U.S. and export finished product into the U.S. marketplace.

13 31% of the respondents to the e-CP’s CBA Communication to U.S. importers placed doing business with Customsonline via the internet as opposed to in person as one the top five ACE advantages.

14 33% of the respondents to the e-CP’s CBA Communication to U.S. importers stated a capability to complete Customsand Participating Government Agency (PGA) requirements via an Internet based system interfaced to ACE as one the topfive ACE advantages.


Domestic trade is a subsetof international trade




The reach of the U.S. Customs Service will be extended beyond the borders of the U.S. asan outgrowth of the war on terrorism. In an attempt to prevent terrorists from usinginternational cargo as a vehicle to attack the U.S., a growing number of government

officials and business interests are trying to extend maritime security to the foreignloading docks and seaports where the cargo originates.xiii

E-Marketplaces enable sellers to trade with unknown buyers, but force exporters to manage frequentshipments to foreign destinations.xiv The CustomsModernization Act of 1999 places responsibility for Customs compliance with the shipper, greatly increasing corporate liability. The U.S.Customs Service could deliver security advantages that aid the firms conducting trade aswell as the national interests of the U.S.

Homeland security, as applied to commercial cargo today, is like a puzzle with piecesmissing. Reaching into the data flow that precedes the cargo, from its release to the pointof origin, is one of the missing puzzle pieces. Only by Customs encouraging earlier andcontinuous supply chain information communication, for the expedited realization of Customs benefits, and delivering leading practice supply chain advantages can theinternational trade community put the facilitation and security puzzle together.

Embracing globalization: profits, capitalization, and competitive advantage

Enabling success for all players

The subjects of logistics, supply chain, and e-business are at the forefront of concern for business executives. Consider that United Technologies, whose six divisions manufacture products as diverse as helicopters, elevators and air conditioners, established a goal in1997 of reducing its supply chain costs by $750 million over four years. The companyended up saving more than $1 billion through centralized procurement and inventoryreduction.xv Although some firms have made notable progress and are reaping rewards,others have not.

Customs modernization will have the greatest effect on those companies in the process of migrating towards being globalized; other companies, except those challenged by

denying globalization, will benefit from e-Customs to an every increasing scale as theyare motivated by the marketplace towards realizing globalization.

A nations competitive position matters

With relative unit labor costs on the rise in the U.S. since 1995, and export prices steadilydecreasing worldwide in the most competitive economic and Customs regions, everyeffort is being made by international traders to ensure their company’s competitiveness inthe global marketplace. U.S. international trading companies have shown a willingness tochange their operational procedures, including moving business outside the Customs


The U.S. Customs Service willextend beyond the nations borders



Transforming to global for prosperity, how should Customs?10

region, in order to remain competitive withforeign companies. Customs policy and practices are a component of an internationaltrader’s competitiveness. ix 15

Small and midsize players bear a heavy portion of a competitive disadvantage. Indeed,an annual survey by the National Associationof Manufacturers of its small and midsizemembers found that the proportion that exportat least 25% of their output peaked at 8.8% in1998 and has since plunged to 3.8%, less thanin 1993. The trade group finds the exportdecline especially worrisome because exportshelped drive the record-long U.S. expansion

that followed the recession of 1990-1991.xvi

Competitive advantages enable prosperity

Customs policies, procedures, and technologysupporting the continuously reliable flow of legitimate goods, on parity or exceeding theadvantages delivered by other Customsregions, allow companies to achieveoperational parity with foreign competitors. ix 12 16 In an age of globalization, Customsagencies have competition.

Industry is commonly segmented for varyingstatistical purposes (e.g., by sales, market size, profits, trade value/volume). The major playersin each industry ensure that their interests arerepresented at trade gatherings, spoken of andabout in publications, and segregated out bythe government agencies including Customsagencies. Thousands of other companies areaffected by the same business realities.

A Customs e-thinking scenario

The scenario put forth in this sectioncommunicates an e-Customs advantage. It is based on delivering advantages promoting

15 89% of respondents to the e-CP’s CBA Communication to U.S. importers would be willing to provide additional productand order information (e.g., manufacturer/product number/HTS, electronic order or release) to Customs to pre-qualifygoods, suppliers, and the trips routing for expedited border clearances.





prosperity through productivity gains involving open trade between countries, while providing an opportunity for Customs to fulfill its strategic goal of simulating and protecting a country’s economic interests.

Classification of goods for U.S. importationThe import and export classification of goods used by the U.S. are based on theHarmonized Tariff System (HTS) enacted by most countries around the world. Thestandardized portion of the HTS assigns 6-digit codes for general categories; the U.S.International Trade Commission (USITC) definescommodities at a finer level to 10 digits maintainingstandardization within the 6-digit framework, thiseffort then becomes the U.S. HTS enforced by theU.S. Customs Service for import classification.

Importers in the U.S. are held responsible by the U.S. Customs Service for mapping the

imported product, usually referenced by a product code, to the HTS of the U.S. The manymillions of business product codes in existence today uniquely identify a particular good by a recognized scheme at the level required for commerce (e.g., model ABC ½ HP power drill). The U.S. HTS classifies all imported goods to around 15,000 numbers for the purposes of administrating government programs and calculating the applicable duty,fees, and taxes (e.g., Machine tools including machines for nailing, stapling, gluing or otherwise assembling for working wood for drilling for woodworking that are used or rebuilt a.k.a. the power drill).

Once a product is classified against the U.S. HTS, the importer must concern themselveswith any and all Participating Government Agency (OGA) requirements and/or additional

classifications that might apply. For many products no such requirements would exist.When they do, it’s possible that several PGA classifications can be mapped to single U.S.HTS number and/or product (e.g. multiple controlled chemicals being a component of aimported product).

Not to oversimplify the import process, classification of goods for importation into theU.S. ranges from looking up the product description and assigning a single HTS torequiring a qualified team experienced with the product and applicable importing program to determine the most appropriate U.S. HTS classification. How U.S.international traders address the issue of classification varies significantly from companyto company, based on perceived need and exposure constrained by time and financial

resources. Some classify goods with internal teams of experts, others trust a tradeintermediary with experience in its product line, and a small segment of companiescontract out a full-time compliance team of professionals to handle the classification.

In accordance to the regulations of the U.S. Customs Service, an importer could request a binding ruling letter ensuring the goods are properly classified and removing a future

16 28% of the respondents to the e-CP’s CBA Communication to U.S. importers stated that to a great extent thecapabilities provided by ACE would increase their company’s ability to compete in the global marketplace.


In the age of globalization, Customsagencies have competition




challenge by the U.S. Customs Service over the classification. Many companies request binding rulings.

Exportation of goods from the U.S. requires a similar process, yet less challenged by

governmental regulations. The U.S. exporter must associate the product with one of about8,000 Schedule B numbers for the purpose of creating export statistics. The Schedule Bnumber is based on the same 6-digit HTS framework used to produce the U.S. HTS; onlythe U.S. Census Bureau, not the USITC, governs it. Beyond the 6-digit HTS framework adhered to by the USITC and the U.S. Census Bureau, there is no further relationship between the U.S. HTS used for importation and the Schedule B for exportation.

In 2001, U.S. Census Bureau international trade in goods and services statisticssummarize the millions of trade transactions in a dollar value in excess of 927 million for exports and 1.2 trillion for imports, over 2.1 trillion in international trade crossing the borders of the U.S. The World Trade Organization (WTO) declares the U.S. transacts

over 11% of the world’s exports and 19% of its imports. U.S. product classifications and binding rulings for international trade are private only to the trading party. There is noeffort made to aggregate the classifications and make it accessible to the global tradingcommunity.

Reassembling the classification puzzle

The U.S. Customs Service could establish a classification matrix for use as a referencetool by the international trade community. Via varying routes, an association could beestablished between a company’s product and numerous other codification schemes used

for its identification and country level classification.Governmental binding rulings and other relevant information

could then be linked to the product entry. No proprietary and/or sensitive data would exist within the classification matrix, justnormalized and aggregated classification cross-references and

statistics.

Due to the redundant effort involved in international trade product/HTS classifications,it’s likely many entries in the classification matrix would have multiple HTS numbers for the same product. After all, it’s a reference tool for aiding in the classification of goods inglobal trade and should reflect all classifications aiding the importer in making their finaldetermination. The responsibility for properly classifying goods remains with theinternational trader.

Knowledge-empowerment for international traders

Interfacing the classification matrix to the international trade community could berealized through a combination of electronic messages and an Internet portal interface.The tools would have the capability to search, review, and download results in commonlyavailable desktop office formats. The Customs agencies provide the process andtechnological platform empowering the marketplace to construct solutions. It isanticipated that international traders would welcome the advancement.


Customs could provide the

infrastructure empoweringworld-class intermediaries




Extending the classification matrix to partnering countries exponentially increases the benefits to international traders while increasing global trade security through productknowledge ennoblement.

Realizing the benefits of e-Customs knowledge managementInternational trade stakeholders could realize benefits from the classification matrix, eachfrom a different perspective and with varying business consequences. Realizing theclassification matrix, along with similar styled e-Customs initiatives, could drive downthe interaction costs of international trade. Changes in interaction costs can cause entireindustries to reorganize and dramatically.xvii For the purposes of this paper we focus onthe benefits to the international traders as opposed to potential changes to theinternational trade intermediary’s in order to better serve the increased market size.

Quantifying e-Customs advantages and benefits

Using the classification matrix as an e-Customs example, advantages derived from the

business product cross-referenced to an HTS classification and other PGA classifications,than normalized and aggregated for the international trading community, include:

Easing the goods classification by international traders

New services by trade intermediaries utilizing the classification matrixinfrastructure at Customs

A Customs trade facilitation and classification mechanism aiding theimporting and exporting country, one capable of future implementation in anenvironment with international jurisdiction

The capacity to perform inter-company comparisons and verifications byCustoms of business product classification reducing miss-classifications prior toand/or after final entry filing by the trading partner

Pre-clearance Customs awareness of inbound business products enhancingnational security and supporting dynamic allocation of Customs resources basedon anticipated demand

Table 3 (upcoming landscape page) goes on to map the classification matrix advantageagainst the globalization factors brought forth inthis paper affecting the international tradecommunity. The table reflects the impact of theCustoms advantage against a globalizationdelineated international trade community, Customs drivers and the business strategicgoals.


E-government needs to transformto obtain alignment with business




Table 3: e-Customs advantage impact to varying perspectives of the international trade community

E-Customs

Advantage

Stakeholders Customs agency drivers

Businesses

primarily driving

U.S. productivity

Business objectives

Businesses

state of

globalization

International e-

logistics impedime

I n t e r n a t i o n a l t r a d e r s

S e r v i c e i n t e r m e d i a r i e s

F i n a n c i a l i n t e r m e d i a r i e s

T r a n s p o r t a t i o n i n t e r m e d i a r i e s

U . S . C u s t o m s S e r v i c e

P a r t i c i p a t i n g G o v e r n m e n t A g e n c i e s

C o m p e t i t i o n d r i v e n o p e r a t i o n a l e f f i c i e n c y

S t o p p i n g t e r r o r i s t s a n d p r e v e n t i n g t e r

r o r i s m

E n a c t i n g t h e C u s t o m s M o d e r n i z a t i o n A c t

E n f o r c e m e n t o f f e d e r a l P G A l a w s

E x p a n s i o n o f t r a d e v a l u e a n d v o l u

m e

A d o p t i o n o f e - C o m m e r c e

S t e a d i l y d e c l i n i n g d u t y r a t e s

W h o l e s a l e t r a d e

R e t a i l t r a d e

S e m i c o n d u c t o r s

T e l e c o m m u n i c a t i o n s

C o m p u t e r m a n u f a c t u r i n g

S t r a t e g i c m a t c h x v i i i

C o m p e t i t i v e a d v a n t a g e x v i i i

M a n a g e m e n t i n f o r m a t i o n x v i i i

B u s i n e s s r i s k o f n o t e x e c u t i n g x v

i i i

C u s t o m e r s a t i s f a c t i o n x v i i i

C o m p l e m e n t s s t r a t e g i c I T a r c h i t e c t u r e x v i i i

I n t e r n a t i o n a l S u p p l y C h a i n O p e r a t i o n a l e f f i c i e n c y

G l o b a l i z e d

A c c e l e r a t i n g g l o b a l i z a t i o n

E a r l y g l o b a l i z a t i o n

D e n y g l o b a l i z a t i o n

L a c k o f h a r m o n i z a t i o n o f t a r i f f c l a s s i f i c a t i o n s x i x

L i m i t e d u s e o f a u t o m a t i o n a n d t e c h n o l o g y x i x

D i s p a r a t e d o c u m e n t a t i o n r e q u i r e m e n

t s x i x

C u s t o m s v a l u a t i o n o f g o o d s c h a l l e n g

e s x i x

O

t d t d t

d

d

i

Classification

Matrix

None - Low - Medium –High





Delivering e-Customs productivity

Most of these traditional international trade intermediaries are themselves affected bytransformations driven by globalization, competitive pressures, the Net and InformationTechnology (IT). Intermediaries are making significant investments in customer relationship management, with the aim of providing excellent levels of customer serviceas a differentiator in the marketplace.

Governments should consider “partner sourcing” rather than Internet-enabling existingservices as a means of increasing service levels and achieving greater efficiency. The roleof partners will range from replacement government agencies completely (privatization),to competing with other intermediaries and government agencies themselves, to acting asan additional channel through which constituents can interact and transact with

governments.xx

Transforming Customs to e-Customs involves trade intermediaries. The Customs agencycould position itself in a manner that promotes change throughout the industry in a positive fashion for the economic interest of the nation, as the U.S. transformation frommanual to an automated Customs environment did through the Automated CommercialSystem (ACS) in the 1980’s. The transformation of Customs could heavily influence andfacilitate the direction taken by intermediaries by:

Increasing the capacity of intermediaries to bundle their services with e-Customs deliverables as part of a value proposition that would not be otherwise

possible Expanding the marketplace for intermediaries to service as the Customsagency reaches beyond the boundaries of the nation

Enable applications run by intermediaries to access governmentinfrastructure to interact with Web services provided by various departments andagencies

Provide the constituent base with new ways of interacting with thegovernment

ACS led a global transformation of Customs agencies by standardization andharmonization of the interests serving international traders; the U.S. Customs Servicedrove this competitively relevant undertaking, and could do so again.





Abbreviations and Acronyms

ACS Automated Commercial SystemAPEC Asian Pacific Economic Cooperation

B2B Business-to-Business

B2C Business-to-Customer

CBA Cost Benefit Analysis

e-CP e-Customs Partnership

G2B Government-to-Business

G2C Government-to-Constituent

G2G Government-to-Government

GATT General Agreement on Tariffs and Trade

GDP Gross Domestic Product

HTS Harmonized Tariff System

IT Information Technology

NAFTA North American Free Trade Agreement

PGA Participating Government AgencyPFI Primary Focus Industry

UPS United Parcel Service

U.S. United States

USITC United States International Trade Commission

WTO World Trade Organization




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2002, “CBA Communication to U.S. importers,” e-Customs Partnership, January (received qualitative responses from 29 importersrepresenting 8.09% all U.S. 2001 imports at $92.74B with distribution across 10 industry groups)x Josep Isern and Maria Isabel Rios, 2002, “What’s Right with the U.S. Economy,” The McKinsey Quarterly, Number 1xi M. Coleman, “Software gets its hands dirty,” Investors’ Business Daily, 5th of Januaryxii Bob Edmonson, 2001, “Cargo Security Puzzle,” Journal of Commerce, December 17-23xiii Daniel Machalaba, 2002, “U.S. Seeks to Extend Cargo-Security Efforts to Foreign Ports Where Shipments Originate,” The Wall StreetJournal, January 7xiv Stacie McCullough Kilgore, Laurie M. Orlov, Eroica Howard, Jonathan LaChance, and Taichi Nakashima, 2000, “Delivering The GlobalGoods,” Forrester, August 2000xv Bill Mongelluzzo, 2001, “The New Completion,” Journal of Commerce, December 17-23xvi Timothy Aeppel, 2002, “U.S. Dollar, strong despite the recession, Tests the Integrity of U.S. Manufacturers,” The Wall Street Journal,January 22, 2002xvii John Hagel III and Marc Singer, 2000, “Unbundling the Corporation,” The McKinsey Quarterly, Number 3xviii Marilyn Parker and Robert J. Benson, 1990, “Information Economics,” IBM Corporation and Washington Universityxix 2001, ”E-Commerce and Development Report 2001,” United Nations Conference on Trade and Developmentxx Andrea Di Maio, 2001, “E-Government Services: A Matter for Intermediaries,” GartnerGroup, 24 May 2001

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