Changes in the logistic environment – consequences for the international supply chain, trade and customs

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Changes in the logistic environment – consequences for the international supply chain, trade and customs

A report on a session of the International Commerce and Distribution Committee at the IBA Digital Operations Conference in Hamburg 

Thursday, 14 November 2019

Session Co-Chairs

Judith Alison Lee  Gibson Dunn & Crutcher, Washington, DC; Newsletter Editor, IBA International Sales Committee

Guillermo Sanchez Chao  Chevez Ruiz Zamarripa y Cia, Mexico City; Senior Vice-Chair, IBA International Trade and Customs Committee

Speakers

Robert Ernest  Arent Fox, Boston, Massachusetts

Nashielly Escobedo  CEO, Confederacion Latinoamericana de Agentes Aduanles AC, Mexico City

Alan M Rhode  Taxmen Ltd, London

Digitisation of the supply chain

The ‘radical’ nature of change to the supply chain is somewhat overstated and is in large part due to what most people refer to as the ‘Amazon effect’. The perspective of well-established supply-chain companies is that the change is evolutionary, not revolutionary. Various business models for supply chain companies exist, for example, first-party logistics (1PL) to 5PL, but the view is that the primary model remains 3PL.

Big logistics players must be the ‘first movers’ on digitisation if they want to stay relevant in the market. The challenges that the traditional 3PLs face due to legacy systems and the amount and quality of data, both internally and from customers, were described during the session.

Finally, the purpose of digitisation from the perspective of both the customer and the supply chain operator is to reduce costs and improve customer service. Embracing digitisation will allow the supply chain operator to become so integrated with its customer that it creates ‘customer stickiness’ and makes it harder for the customer to separate from the supply chain operator.  

Tax

The conference also addressed the 2020 European Union value added tax (VAT) reform on e-commerce. The reform is based on three main pillars:

• first, a reform of distance selling rules according to which cross-border online consumer sales of goods will always be taxable at destination;

• second, the removal of the low value import VAT exemption with the repeal of the €22 threshold on imports;

• third, a reform of VAT rules on marketplace sales. At specific conditions, marketplaces will become liable for VAT reporting and collection on sales by non-EU merchants.

Customs digitalisation

New technologies tend to facilitate commercial flow and at the same time become an ally in customs administrations becoming more assertive in the detection of fraud, fighting smuggling or identifying any conduct that involves duty tax or law evasion.

Digital innovation is driving the development of new business and customs control models such as e-commerce, single windows and data interchange. Therefore, there are public and private-sector efforts to develop digital infrastructures and services.

International organisations such as the Organisation for Economic Co-operation and Development, World Trade Organisation, the World Customs Organisation and the United NationsCommission on International Trade Law (UNCITRAL) have issued and are still working on policies, guides and recommendations for international trade transformation due to the rise of digital technologies, for example, guidelines to help administrations implement the standards and recommended practices contained in the Revised Kyoto Convention, on information and communication technologies.

However, digital innovation is moving on while an unavoidable challenge needs to be attended to: adapting the legal framework on data protection, secure identity services, electronic evidence, electronic certification procedures, equity, double taxation, liability, jurisdiction and even the application of free trade agreements, to achieve standardisation, transparency and secure transactions.

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