MIC: Navigating the compliance maze

MIC: Navigating the compliance maze

MIC provides a global customs & trade compliance software platform operated in one single database via one single web-user interface and one single maintenance & support organization globally covering 6 continents. Rainer Roll, Executive Vice President, explains the importance of adhering to legal changes and technological developments in customs & trade compliance.

Within the current trade landscape, how significant is the role trade compliance plays?

Having a look at the current political and economic environment we see that customs & trade compliance play an even more important role than ever before. Just to name the ongoing Brexit negotiations, the ongoing re-negotiation of the North American Free Trade Agreement (NAFTA) under US president Trump and further protectionism announcements. Fact is, that trade agreements / customs unions have a long history and have proven to be a driver for economic growth. The result is that we have today 600+ Regional Trade Agreements (RTA) signed, more than 400 out of them are ratified and the EU has closed agreements with 40+ countries, just to name the free trade agreement between EU & Canada (CETA) being effective since a few weeks. To my personal opinion, this trend will continue due to the huge impacts free trade agreements have on the global economy, for example on sourcing decisions, on location decisions for production sites, on realization of duty savings and therefore increased competitiveness for multi-national companies with distributed supply chains – all resulting in a continued global economic growth. Further, continued legal changes in customs & trade compliance will accompany us over the coming years, just to name the implementation of the EUs Union Customs Code that is ongoing until 2020 and beyond.

All these aspects have a big influence on the customs and trade compliance processes that companies need to follow. Next to this, free trade agreements as well as special customs regimes (e.g. bonded warehouse, inward processing relief, free zones, foreign trade zone) are a driver for realizing duty savings and to keep or even increase your competitiveness in a world with complex global distributed supply chains. We know examples of large multinational companies where the customs & trade compliance departments have achieved millions of euros in annual savings through the optimization of such processes and are therefore on the way in turning from cost centers into profit centers.

In a world with complex global supply chains and constantly changing regulatory requirements such optimized customs & trade compliance processes can only be achieved with best-of-breed global trade management solutions highly integrated into the companies supply chain systems and automated processes to the greatest extent. This is exactly where MIC is specialized in since 30 years – Managing International Customs & Trade Compliance Processes in one single global software suite.

How easy is it to update the software to effect changes in compliance?

It is a challenge and a big responsibility to keep the customs and trade compliance software solution up-to-date with the latest changes. This is something we as a company, as a software provider, need to ensure for our customers. There are many aspects that need to be considered when looking at changes. We need to ensure on a regular and very often even daily basis that global trade content is updated in the system in order to keep compliant processes up and running for our customers. Further we need to ensure that the software solution works according to the latest national requirements. For example, in the UK our solution communicates electronically with the customs authority system called “CHIEF” for exchanging data on an electronic transactional basis with regards to import and export customs clearance processes of multinational traders. CHIEF underlies frequent changes, meaning that the software provider also needs to keep up with those changes so that the systems still continue to communicate. Whether it is in regards to Brexit, or continued replacement of outdated national customs authority systems with newer more state-of-the-art systems like we have right now for example in the UK with its new Customs Declaration System (CDS) replacing CHIEF in 2019 or free trade agreements, sanction lists or legal changes – a software provider like MIC needs to monitor those changes, implement such changes and deliver legal changes efficiently in time according the legal due dates.

Can it be a challenge to track those changes and requirements?

MIC serves around 50 countries on 6 continents exchanging electronic data with customs/trade authority systems, then for 150 plus countries we manage global trade content – you can imagine that this is quite a challenge, with quite lot of activities to monitor and implement, which means a big responsibility. This is something that we are offering at the start of our maintenance contract so our customers don’t need to take care of this. This is the responsibility of MIC. We ensure that legal changes are implemented in time; offering to our customers such a maintenance contract for such large number of countries is quite unique in the market.

What is the key benefit brought by your central classification system and your export control management software?

Customs tariff and exports control classification is at the heart of customs and export control related processes – if the classification is wrong, everything is wrong in customs. You have wrong duty rates applied, which leads to wrong duty calculations and payments as well as incorrect management of free trade agreements. The same applies in export control. If you assign the wrong export control classification then the wrong export control regulations apply and all this could result in financial risk and loss of reputation. What we do with our central classification system is that we provide support in assigning the right customs and export control classification for each country in a consistent way by offering smart functionality such as intelligent matching algorithm, select & matching rule as well as decision tree functionalities, cross classification and many more to mitigate the risks, to increase the level of automation and in the end to save costs and increase compliance.

In terms of the process for incorporating your software into a modern business model, how long does it take?

This depends on the size of the project: which countries and how many countries are requested by the customer to be rolled out, what processes the customer wants to have in place – is it sanction list screening or is it import and export clearance? Is it free trade agreement management, is it the classification of goods or the full global roll-out of MICs Global Trade Management platform? Such a project can take a few weeks up to a few months depending on the size of the customer and depending on how tight the solutions need to be integrated with the customer’s business processes and IT systems such as ERP and logistics systems.

How does the delivery of your service change depending on whether it is a small/large business?

Smaller companies tend to go more with an MIC standard solution, which means the implementation timeline is much shorter. MIC offers next to On-Premises solutions also Software-as-a-Service solutions (SaaS / Cloud) that further shortens the timeline from project start till go-live. In addition to standard processes, larger multinational companies usually request customizations and integration with a larger number of ERP and logistics systems. In order to fulfill the standards and requirements of larger multinational companies we have dedicated project & support departments taking care about our customers around the clock and around the world. So from that perspective we have a very professional setup to support large multinational companies according international standards as well as smaller ones.

So your software is critical to the efficiency of business operations?

Yes, to ship goods, companies need to have approval from customs authorities for each shipment. Only when green light from customs authorities is received the trucks can leave the plant. Imagine, we have customers each of them having hundred thousands of export declaration lines to declare each month, so every few minutes a truck is leaving the plant at each of our customers. This means that our global customs & trade compliance software solution needs to get all of the required data from the various customers ERP & logistics systems loaded, merged and validated. Further our solution needs to transmit the data to the local customs authority system (e.g. CHIEF in the UK) for approval, needs to receive and process the electronic response messages from the customs authority system and needs to send back status and many other information to the ERP & logistics systems of our customers to ensure that the related shipment does not get blocked. This process must be done transaction-based and is not allowed to take longer than a few minutes in total. If customs blocks a shipment or something else goes wrong in that process our customers have an issue in their complete supply chain because this has an impact on delivery times.

Please explain how your solutions can be considered country specific…

In each country there are different customs authority reporting systems, so when you lodge an import or export declaration you need to communicate with the electronic customs system in the related country and those systems are unique from country to country. This means that MIC needs to be in the position to exchange data with the customs authority system in each specific country where we have a solution available, which is quite a large number. The systems in the various countries usually differ in the number of message types, message layouts as well as transmission protocols to be used for data exchange. Further in each country permanent legal changes have an impact on the national customs authority systems and therefore also regularly impact the maintenance of the MIC solutions to be in sync with those changes as part of our maintenance contract.

In what regions are you seeing the biggest growth?

The biggest growth with regards to the global trade management market we are expecting in Asia. For example, ten years ago I was visiting European headquartered companies manufacturing in Europe, who did not feel they needed GTM solutions due to lower volumes and less complicated supply chains. Today when I talk to those companies, they are following an internationalization strategy and have more complex distributed supply chains in place – to alleviate cost pressure and being closer to the end-customers production facilities are moved to Asia, Mexico and South America for example. But if you are following such strategies you also need to follow the customs and trade compliance regulations in all those countries and need to manage the various free trade agreements to ensure the right sourcing decisions, achieve cost savings and stay or even increase your competitiveness. By considering the forecasted volume growth this is simple not possible anymore without having the right IT tools and automated processes in place.

How are you looking to develop your software over the next few years?

We continue keeping our software suite up to date with the latest technology. This includes use-cases for predictive analytics as well as artificial intelligence. In addition, we continue in expanding our solutions to further countries, improving existing functionality and enhancing our existing solutions with additional features as well as even extending our current solution portfolio.

What do you consider has been MIC’s most exciting development in recent years?

In general, it is exciting that we can achieve a two-digit organic growth per year since quite a while. Further we opened an office in Thailand, Bangkok in 2016 to increase the support level for our Asian customers. We are already providing our solutions for India since 20+ years and since that our customer base in Asia is constantly increasing. Another milestone will be the new office in Mexico beginning 2018. Further we are still growing in the automotive industry being the leading Global Trade Management provider with a market share of 29% according to an independent market research institute. On top, we could recently substantially increase our client base within the textile, machinery, retail and chemical industry as well.