Retail Race: Customs rushes to keep up with cross-border e-commerce

The lockdowns spurred by COVID-19 in most countries beginning around April 2020 had a drastic effect on passenger aviation and also prompted a change in how people shopped during the pandemic, accelerating both the growth of e-commerce and the subsequent airfreight capacity shortage in the lower holds of passenger aircraft. The resulting surge in e-commerce and express demand has been a boon to airports and airlines struggling to replace revenues lost from canceled vacations and business trips. But while e-commerce has taken off, major hurdles are now appearing in the form of regulatory changes that were already in the works prior to the pandemic. Among these hurdles are Brexit, the U.K.’s departure from the European Union , which included a hastily assembled customs deal in the final moments ahead of the exit, and the U.S. Synthetics Trafficking & Overdose Prevention (STOP) Act. The latter requires overseas shippers to utilize the U.S. Postal Service to provide Advance Electronic Data (AED) for shipments before parcels enter the U.S. Freight forwarders have hurried to update processes and prepare shippers for the new requirements, but e-commerce growth isn’t slowing down. E-commerce gets a head start Passenger traffic fell by 94.3% in April 2020, and remains down by more than 70% year over year as of February, according to the International Air Transport Association, but cargo demand has already recovered, despite a lack of belly capacity. Pandemic-related shipments of personal protective equipment (PPE) and similar cargo helped support cargo traffic initially, but e-commerce has continued to buoy traffic figures into 2021, and operators involved in e-commerce airfreight shipments do not expect the growth trend to reverse, even after other effects of the pandemic on aviation and global trade have faded. At Cincinnati/Northern Kentucky International Airport (CVG) , where DHL and Amazon Air have their American air hubs, cargo tonnage increased by 14.8% YOY in 2020 to more than 1.3 million tonnes. According to currently available data, the airport’s cargo handle is up by 38% year-to-date for January and February. “It’s just been booming here,” said CVG Chief Executive Candace McGraw in an interview with Air Cargo World . “Between 2020, with people buying all of their goods online and PPE [shipments], I think people have gotten used to having everything shipped to [them], plus with other, larger cargo supplies going global, it has been a banner few years, which was very much appreciated during the pandemic because, when our passenger traffic was down, I’m so appreciative of our cargo partners because they really kept the lights on here at the airport.” Freight forwarder Tigers, which is based in Hong Kong but has a large presence in the Americas and is growing its European footprint, has seen its cross-border e-commerce business grow “quite significantly” over the past four years, President for the Americas Sebastian Tschackert told Air Cargo World . Tigers operates daily out of three main U.S. gateways in Los Angeles (LAX), Chicago (ORD) and New York (JFK), with the vast majority of its outbound business in the Americas exporting from the U.S. primarily to Europe, the U.K., Russia and the Asia-Pacific region, Tschackert said. “In the early part of quarter two last year, it was pretty devastating as a lot of retailers stopped exporting to focus on the domestic market, and then obviously, the stop of the passenger flights impacted us quite badly,” Tschackert said. “We shifted into charter operation for a short while and then the volumes really dried up in the middle of quarter two, before it relaunched late quarter two, very early quarter three, and we had a massive end to the year last year.” Customs hurdles The end of the year also brought a multitude of trials for cross-border airfreight, however. One such trial was the typical demand increase going into the peak season, which was exacerbated by the unusual lack of scalable cargo capacity due to reduced passenger aviation. The increase in e-commerce would have likely challenged cross-border customs operations regardless of the mitigating factors from the pandemic, but major regulatory changes — and Brexit, in particular — left operators scrambling to clear hurdles that emerged mid-race. The U.K. and EU reached a trade agreement — the “Christmas Eve deal” — with barely one week to implement the new policies before they would go into effect on Jan. 1. Freight forwarders with European operations worked relentlessly through 2020 to prepare for the new policies, despite not knowing exactly what to expect in the final deal. The lack of preparation time with a clear framework has led to problems for importers and exporters in the U.K., forwarders told Air Cargo World . “With Brexit happening earlier than anticipated, and the airlines betting on the wrong routes to absorb the London cargo, the market got very congested and lacked space, particularly out of the Midwest from the middle part of January, and has been very difficult,” Tschackert explained. “The first quarter was probably more difficult than the peak in managing capacity on certain lanes.” Alongside Brexit, the U.S. has implemented its own recent changes affecting more specific segments of airfreight. The STOP Act, which also went into effect on Jan. 1, does not affect most cross-border trade, but for operations involving the USPS — much of which includes cross-border e-commerce — parcels are facing new levels of customs scrutiny. “I do expect the industry to struggle with [the new standards],” Tschackert said. “A very basic example is airfreight’s traditional weekly peak is toward Thursday, Friday and Saturday, when the main volumes are moving via airfreight. Now, with e-commerce, our peak days are actually Monday and Tuesday, because we’re all sitting at home on the weekends and placing orders. Now also, the way we declare and the way we have to screen consolidated e-commerce cargo still makes a lot of the traditional participants in the supply chain scratch their heads and struggle to accommodate this.” Express operators involved in parcel shipments have worked closely with U.S. Customs and Border Protection (CBP) to mitigate the impact of customs changes on cross-border e-commerce, CVG’s McGraw said. When challenges emerged in customs procedures at CVG, “we worked through them between DHL, CBP and ourselves, trying to figure out how to get additional staffing here, working within our partnerships in Washington to help facilitate that,” McGraw said. So far, she said there were few problems emerging at CVG under the new screening mandates. The race goes on Many of today’s capacity solutions are temporary measures to make up for the lack of passenger belly space, but changes in customs procedures and heightened reporting standards are here to stay. In some cases, the preparations made prior to the changes have at least eased what would otherwise be a marathon process of adjusting to the new customs requirements. Tigers, which has a physical presence in both continental Europe, and in the U.K., sought to help customers balance and manage their newly bifurcated inventories. Shortly before the Christmas Eve deal, in early December 2020, Tigers launched a linehaul solution to offer customers a “virtual warehouse,” physically splitting inventory between the U.K. and Europe while maintaining warehouse visibility virtually. The service covers B2B and B2C shipments between the U.K. and EU, and is intended to support shippers as they adapt their supply chains for post-Brexit trade, according to a statement from Tigers on the service. Tigers supports its freight forwarding customers on the service by, for example, preparing export declaration and transit documents for goods to be exported from the U.K. to its Rotterdam facility, where the 3PL will facilitate import clearance required to move goods into the EU. One key component in easing the adoption of increasingly complex customs requirements is the increase in digitalization. Tigers’ virtual warehouse is likely a precursor to increased utilization of virtual processes in customs processes. The steady ramp up of e-booking during the pandemic should allow for improved processes in the future, according to executives at e-booking platform WebCargo and 3PL JAS. JAS’ Mario Tenebruso, VP airfreight for the Americas, told Air Cargo World that its recent adoption of WebCargo’s platform for e-booking establishes a digital base and sets the freight forwarder up for more digitalization in the near future, including for customs brokerage. WebCargo’s CEO, Manel Galindo, expanded on the current difficulties in customs technology. “The problem with customs is that that’s something the many countries are working on and it’s completely different to work with American customs and European customs,” Galindo told Air Cargo World . “One of the problems to digitalize the whole chain is that there are a lot of different countries with different regulations and different ways to recycle information.” Galindo believes that the digital strides made toward e-booking are a step forward toward digital customs procedures, as digital booking establishes a standard of mapping bookings to commodities. “That later makes it easy to do the custom procedures,” Galindo said.

Retail Race: Customs rushes to keep up with cross-border e-commerce

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