Growing E-Commerce Volumes not an 'Insignificant Challenge' to Customs

CANCUN, Mexico -- The nature of e-commerce includes several features -- high velocity, hyper high volume and low value -- that makes "a recipe for a lot of risks" from a customs perspective, said Rich DiNucci, executive director-Cargo and Conveyance Security at Customs and Border Protection, speaking May 12 at a World Customs Organization conference. E-commerce moves "at a rate that's going to demand changes to our processes," he said. The industry is also "highly competitive," which makes collaboration difficult now, he said. "Every time I think that I have a handle on e-commerce mentally, I realize that I don't," he said.

E-commerce companies are often very different from companies that CBP is used to dealing with, said DiNucci. "We went out and talked to one of these e-commerce companies and because of the nature of the business, and I understand it completely, they weren't too forthcoming with us in terms of the business model and what they were trying to accomplish," he said. "We laid out what we wanted to do but they are really hesitant right now because of the nature of the business and very thin margins in terms of profitability, with high volume, they're not necessarily trusting of what we're trying to accomplish," he said.

Trust will need to "develop and mature a lot sooner than later or we're going to have a lot of challenges that will be very, very difficult to deal with in e-commerce," he said. DiNucci also cited an e-commerce company's plan to begin its own logistics operations, likely a reference to Amazon (see 1601150033), as also potentially creating some new issues. "We're going to need to know A to Z exactly what's taking place," he said.

Hypothetically, an Amazon shipment could include 30,000-40,000 consignees inside, said DiNucci. Each consignee is responsible for filing customs information. While CBP has faced similar issues within the express consignment environment used by companies such as FedEx and UPS, "e-commerce is express consignment on steroids," he said. The volumes are growing so "it's going to be critical in terms of what customs does to contribute to global growth and to not get in the way of business, but this is not an insignificant challenge for us." A further complication is that CBP represents only one regulator of 47 involved in border clearance, said DiNucci. While CBP and the express industry are working on a pilot now with the Environmental Protection Agency and the Food and Drug Administration, many agencies have individual concerns with how to deal with the quickly growing influx of low value shipments, said DiNucci.

Meanwhile, the Global Express Association and UPS are in discussions with "about a dozen" countries to put together a pilot or "proof of concept" based on the “Accelerated Border Clearance” model, said UPS Vice President-Global Customs Policy and Public Affairs Norm Schenk on a different panel. The ABC model would create a special lane for shipments involving pre-certified companies that provide prior information and customs would predicate release decisions on the company’s account history, rather than the individual transaction. "Technology can be a little bit tricky for some customs administrations that aren't quite as developed," he said.

Any program CBP takes on to speed up trade needs to be two-way, providing benefits to CBP's operations and the industry, said DiNucci in reference to the ABC model. "A few things have changed" since CBP discussed the ABC more than a year ago, he said. "There's a big new push in the States on trade enforcement and that's going to have an impact, because we're under obligation to do a lot of reporting on that. So that may have an impact in terms how we do this." The biggest issue is the other government agencies, he said. "They do not necessarily take a risk management approach and that's a major challenge for this." Any potential changes will require a "high degree of assurance" that there's no added security or enforcement risks," he said. Still, "we're always open to trying something different."