Customs requires accurate, digital e-commerce data at the parcel level

Customs crackdowns in the US and Europe on Chinese e-commerce shipments won’t stop trade, but they will make it more transparent. Digitalization is the way forward as customs officials demand more data from shippers.

In an interesting turn of events, WorldACD reported in its special Monthly Air Cargo Trends report for June 2024 that growth in general cargo air freight tonnage outpaced growth in specialist cargo tonnage in 2024, reversing the trend seen in recent years in which demand for air freight requiring special handling and shipping generally outpaced demand for general cargo.

The report pointed out that one factor in the strong growth of general cargo since the beginning of last fall is cross-border e-commerce traffic. “E-commerce cargo often flies loose as general cargo, rather than as a special product category,” it said.

Additionally, Xeneta noted in its June 2024 announcement that the China-North America freight market continues to benefit from a resilient U.S. economy and strong e-commerce demand.

“At the end of 2023, we witnessed the dramatic impact of e-commerce giants from China on the air cargo market. Everyone is now eagerly awaiting what will happen in the upcoming peak season,” we read.

However, it also stressed that the most important question for the air cargo industry is what will happen after the United States introduces a crackdown on e-commerce shipments from China.

Despite the huge volume of e-commerce shipments being shipped from China to the U.S. and Europe, the air freight industry is concerned about one factor: changes in customs regulations in both markets.

For example, in May 2024, the U.S. Customs and Border Protection stepped up its crackdown on Chinese e-commerce shipments by suspending many customs agents from participating in the Entry Type 86 test. This is a voluntary U.S. Customs program that allows participants to electronically import small shipments worth up to $800 without paying duties and taxes.

“A customs officer in Belgium reads the customs code differently than a customs officer in Amsterdam. And then a customs officer in Germany, who is very strict, also reads it differently.”
Murat Odabas, CB Customs Broker

Europe is no different. Ecommerce Europe, the EU’s non-profit association representing businesses selling goods and services to consumers in Europe, has issued an open letter to law enforcement agencies, highlighting the urgent need to ensure a level playing field and effective enforcement of EU law for all e-commerce operators operating in the EU single market.

It reads: “Companies already established in the EU are subject to a multitude of regulations and compliance costs are usually high as the regulations are generally complex and often not fully harmonised at EU level. It has therefore become a challenge for EU-based players to compete on an equal footing with these new non-EU players targeting EU consumers. Most importantly, the trading practices of these players raise questions about their compliance with EU legislation, especially in the areas of consumer protection, product safety, counterfeiting, data protection, privacy, environmental and tax regulations.”

Even in the European Union, where the customs code is the same across the region, the treatment of e-commerce shipments varies, with Chinese shippers adjusting to customs rules and enforcement. Meanwhile, as e-commerce booms, airlines and airports are lining up to grab their share.

For example, Wake, general manager of the Shanghai branch of Guangzhou Hayonex Logistics (HYL Logistics), a Guangzhou-based logistics company offering freight forwarding, customs clearance and integrated solutions, said he ships his e-commerce shipments to Liège or Amsterdam, where the turnaround time is shorter compared to Germany.

“Even for e-commerce shipments destined for Germany and Frankfurt, we transport them via the Netherlands or Belgium, where customs clearance is quick, and then ship them to Germany.”

In fact, German cargo airline Lufthansa Cargo, along with its subsidiaries CB Customs Broker and heyworld, held a workshop in Shanghai during the recent China 2024 air show to convince Chinese e-commerce shippers to send their cargo to its hub at Frankfurt Airport.

Murat Odabas, managing director of CB Customs Broker, a customs agency and a wholly owned subsidiary of Lufthansa Cargo, admitted that the barrier at Frankfurt airport and in Germany is high.

“A customs officer in Belgium reads the customs code differently than a customs officer in Amsterdam. And then a customs officer in Germany, who is very strict, also reads it differently. It’s all the same code.”

Odabas noted that they had contacted customs officials in Germany and informed them of the advantages of Liège and Amsterdam.

“We can now check in on the same day at Frankfurt Airport.”

“But the challenge we have in China is the trust pattern. Because for the last five to 10 years, e-commerce flows have been going through Amsterdam and Liege,” he added.

Odabas said the number of e-commerce parcels handled monthly at Frankfurt Airport increased from 10,000 in May 2023 to 2 million in May 2024.

To streamline the customs procedure, he encouraged Chinese e-commerce freight forwarders to integrate their APIs and provide accurate and precise data at the level of each shipment.

“Customs clearance for e-commerce happens at the parcel level, not the bulk shipment level,” he said.

“US Customs is not stopping e-commerce. They say the volume is so fast. They’re getting about 2 million packages a day.”
Alvin Tay, Atlas Air

One of the problems with e-commerce when it comes to physical inspection of shipments is that it requires much more time. The number of shipments is much larger compared to general cargo.

Speaking about these challenges, Michael Mottl, Head of Customs and Cargo Documentation at Vienna Airport, says: “The volume is the same, but you can have 20,000 individual shipments in one ULD or under the same waybill number, identified with different HS codes, which increases the screening time.”

“With general cargo, one shipment will have one company and an air waybill with two or three tariff numbers. If you have an e-commerce shipment, one shipment will have 40,000 companies and 40,000 products on one air waybill. You have to clear customs for all 40,000 items. That’s a problem.”

Speaking on regulatory issues, Mottl noted that some EU countries do not deal with e-commerce shipments, which currently makes it easier for airports in those countries to process e-commerce cargo.

“That will change very quickly. Because the European Union has the same law. The same rules should apply in other countries,” he said.

Speaking about Vienna Airport and Austria, he said: “Last year we started with a very strict rule. And now we are going down to make e-commerce easier and faster as well. And other countries that started at a low level have to improve.”

He also mentioned the importance of getting the data correct. “We work with airlines and carriers to make sure the data is correct and consistent. Customs conducts spot checks and compares them with the data. If the data is correct, we will have less scrutiny in the future. If the data is not correct during the checks, the scrutiny will increase because there is a higher risk,” he said.

Alvin Tay, vice president of sales and marketing for Asia Pacific at Atlas Air, also stressed the importance of accurate data when speaking about the transpacific air cargo trade at the Air Cargo China 2024 conference hosted by The STAT Trade Times in Shanghai.

“US Customs is not stopping e-commerce. They say the volume is so fast. They have about 2 million packages coming in every day. How do we manage the data? So they suspended the brokerage license of a few of these brokers for a few months. And the whole idea is just to get more useful and accurate data,” he said.

Another airport that is trying to capture a larger share of e-commerce volume is Glasgow Prestwick Airport in Scotland.

Prestwick Airport was selected by Royal Mail in June 2024 as its international e-commerce hub in the United Kingdom (UK). Prestwick was chosen due to the numerous benefits it offers over alternative UK airports, including offering up to half the cost of landing at some UK hubs.

Prestwick recently announced a £2.2 million investment in cargo handling equipment and took delivery of two ultra-wide loaders with lifting capacities of 20 and 35 tonnes respectively, a heavy-duty pushback tractor capable of handling any type of aircraft, 12 new dollies and a new Rapiscan X-ray machine with 7mm steel penetration.

Peter Barry, vice president of business development at Glasgow Prestwick Airport, said: “We are building a product that can support e-commerce with a dedicated warehouse. We will be using Royal Mail’s distribution centres, postcodes, last mile coverage, systems and technology.”

He also spoke of the airport’s geographic advantage in handling e-commerce shipments to the UK and Ireland. “The vast majority of e-commerce currently goes to London, Birmingham, Manchester and the East Midlands. However, the e-commerce distribution centres of the large e-commerce companies are in the Midlands.”

As e-commerce spreads far and wide, and more and more airports and airlines take their share of the pie, customs authorities in the Western world are pushing e-commerce to be more transparent, accurate and precise about the shipments they send through the air. And, as they put it, the way forward is digitalization.

This text was originally published in the July 2024 issue of The STAT Trade Times.