How are freight forwarders adapting to the ever-changing landscape of global trade regulations? What role does technology play in transforming compliance challenges into competitive advantages? These pressing questions took center stage in a recent Reuters Events webinar, where industry leaders from the Office of the U.S. Trade Representative, Kharon, and CargoWise came together to discuss the evolving dynamics of customs compliance.
In this blog, we’ll delve into the key takeaways from the session, exploring how forward-thinking approaches and digital solutions are redefining what it means to succeed in the high-stakes world of global compliance. Whether you’re a freight forwarder, trade professional, or business leader, this conversation offers actionable strategies for thriving in an increasingly regulated global economy.
The new reality of global customs
Global trade regulations are evolving at breakneck speed, with stricter enforcement and rising penalties for non-compliance. Businesses face mounting challenges – from complex tariff classifications to navigating sanctions lists – often across multiple jurisdictions.
“It has become ever-changing,” says Nachi Mendelow, Global Customs Domain Owner at CargoWise. “Shifting rules and regulations around what you can and can't do and what's acceptable. Technology is at the heart of this, it’s no longer possible to flip through pages of books.”
Traditional approaches can no longer keep up with the pace and complexity of regulatory changes. Attempting to manage compliance manually isn’t just inefficient – it’s a liability. One missed detail in tariff classifications, trade agreements, or sanctions lists can lead to significant penalties, supply chain disruptions, and reputational damage.
As Mendelow emphasizes, the stakes are higher than ever: “the penalties which are attached to these types of things are really large, even including prison sentences. It really becomes a place of high risk for the freight forwarder.”
The dual-use dilemma
Complicating matters further, dual-use goods present a unique challenge for compliance professionals. These are items that serve both civilian and military purposes, and they often fly under the radar of traditional compliance checks. As Freya Page, Director of Global Outreach at Kharon points out, freight forwarders play a critical role in facilitating the movement of goods across borders, but this reliance on intermediaries creates vulnerabilities to sanctions and export controls evasion.
“It's about the product,” Page explains, “but it's also about the red flags we’re seeing in this particular environment.”
With the increasing sophistication of sanctions evasion tactics, freight forwarders must go beyond surface-level compliance and adopt enhanced due diligence practices. The risks of missing red flags – whether falsified documents, abnormal shipping routes, or ship-to-ship transfers – are too high.
Understanding dual-use goods underscores this complexity. Consider a DSLR camera: a seemingly innocuous item for civilian use that can be adapted for military purposes. Mounted on a drone, it can capture high-definition footage of strategic locations. Its sensor could even guide precision missiles. Similarly, everyday products like washing machines contain components – motors, sensors, control units – that can be repurposed for military applications.
This layered complexity places a heavy burden on freight forwarders. Compliance no longer stops at knowing the customer; it extends to knowing the cargo and even knowing the country. Freight forwarders are now expected to understand the intricate details of what they are shipping, where it’s going, and how it might be misused.
As Freya notes, “Frustratingly, there are no silver bullets. There’s no one-size-fits-all compliance approach to pick out all these issues.”
This makes robust compliance programs essential, incorporating advanced tools and shared knowledge across the industry. Freight forwarders must stay vigilant, balancing regulatory demands with the imperative to keep legitimate trade flowing smoothly.
The role of technology in customs compliance
Emerging technologies are playing a pivotal role in addressing the complexities of global compliance. Digital tools are helping businesses automate repetitive tasks, improve accuracy, and ensure transparency in compliance processes.
Digitalization of documentation is one such benefit, with advanced platforms generating shipping declarations, invoices, and classification codes with minimal human input. These automated systems not only reduce the margin for error but also expedite processes that traditionally took hours or even days.
At the core of modern customs compliance technology lies a key fundamental need: interoperability. Leah Liston, Director of Customs and Trade Affairs at the Office of the U.S. Trade Representative, emphasized this point, stating, "at the end of the day, the goal needs to be interoperability, which is a word that's thrown around quite a bit, and nobody ever defines it."
In the context of global trade, interoperability ensures that different systems used by governments, businesses, and logistics providers can exchange data seamlessly. This reduces redundancies, minimizes delays, and fosters collaboration across the supply chain.
By enabling systems to speak the same language and leveraging data-driven insights, businesses and governments can create a streamlined global trade network. As technology continues to evolve, prioritizing interoperability and harnessing data will remain essential for achieving efficiency, accuracy, and compliance in international trade.
In addition, the growing reliance on technology aligns with a broader shift in how customs authorities enforce compliance. As Leah explained, "In this age of decentralized trade, customs is looking more and more at new techniques to enhance their enforcement capabilities, and that means data. It means watching trends. It means getting leads on what input data they need to focus on. It means getting data from traders who want to demonstrate compliance, and that all means technology."
Benefits of a technology-driven approach
A technology-first approach to customs compliance provides businesses with cost savings, improved efficiency, real-time monitoring, and enhanced collaboration.
Automation reduces manual interventions, cutting costs and minimizing penalties, while digital systems handle vast volumes of data with greater speed and accuracy.
In today’s trade environment, compliance demands a clear understanding of the who, what, and where of shipments. As Nachi explained, this means knowing the stakeholders (e.g., consignee and consignor), the goods being shipped, and the origin, destination, and transit points—all governed by evolving regulations.
“Ignorance of the law is not an excuse,” Nachi emphasized, highlighting the need for reliable solutions that ensure compliance at every step.
Page similarly highlighted the critical role of technology in navigating risks hidden within vast trade data, noting that finding issues can feel like “finding a needle in a haystack.” She emphasized the importance of systems where “data and technology really work hand in glove throughout every part of the process.” These systems, supported by human intelligence, allow businesses to interpret data, understand regional risks, and navigate complex trade regulations effectively.
Comprehensive platforms must integrate the who, what, and where into a single system, screening shipments against “a multitude of lists, regulations, and rules” in real time. These tools proactively flag issues, such as missing certificates or required checks, ensuring compliance and reducing delays.
Driving global trade forward
“The goal isn’t to stop the goods,” Nachi explained, “but to enable them to keep moving smoothly, no matter the challenges or disruptions.”
In a world where global trade faces ever-mounting complexities, this philosophy underscores the critical role of freight forwarders. They are no longer just facilitators of logistics; they are guardians of compliance, navigating a labyrinth of regulations that grow more intricate with every jurisdiction.
By embracing innovation and fostering collaboration, freight forwarders are rising to meet the demands of an increasingly regulated world. Their efforts ensure that goods don’t just move – they move with purpose and precision, driving global trade forward despite its complexities.
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