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Postal operators face “double whammy” of STOP Act and ICS2 on March 15

Postal operators face a “hugely challenging” eight weeks after being told that full enforcement of the US STOP Act will now take effect on the same day as the EU’s ICS2.

Both regulations require postal authorities to provide advance electronic data on mail parcels entering the US and EU respectively.

The US STOP Act had been due to come into full force on January 1, but Senator Rob Portman reluctantly granted an extension to March 15 after hearing that Customs and Border Protection needed more time to finalise regulations.

However, Senator Portman made it clear that no further delays would be acceptable, saying: “Congress cannot provide this type of extension on packages without identifying data entering the United States again.”

He also highlighted how other countries including France, Spain and Germany have started to require identifying data ahead of the implementation of ICS2 on March 15.

Portman said: “Packages entering those countries without identifying data will be delayed or considered inadmissible and returned to sender.  Further, starting

March 15, the European Union will require identifying data on a package before it is loaded onto a plane for shipment.”

Hurricane Commerce, a cross-border

eCommerce technology specialist, warned before Christmas that the STOP Act enforcement would result in several hundred million mail parcels destined for the US being rejected if they have incorrect or incomplete data. Refused parcels would be returned to their country of origin triggering extra costs for returns, warehousing and storage as well as huge customer dissatisfaction.

Martyn Noble, CEO of Hurricane Commerce, said: “On the one hand, Senator Portman’s extension to March 15 gives postal operators a little more time to get prepared.

“But with the full enforcement of the STOP Act now coinciding with the implementation of the EU’s ICS2 on the same day – March 15 – it is a real double whammy and presents posts with a hugely challenging eight weeks to ensure they are able to meet the higher threshold of advance electronic data.

“There is now the very real prospect of hundreds of millions of parcels being rejected into the US and EU from March 15.

“Those postal authorities which are fully prepared for the greater requirements around AED will not only be compliant but will also put themselves in the driving seat to capitalise on the continuing exponential growth in cross-border eCommerce trade.”

Martyn added: “This is not just about the postal authorities as the data starts with companies that are selling their goods internationally on their own websites or via marketplaces. Data needs to be complete and correct at the point of sale to ensure that the end customer receives the service they expect.”

Hurricane has developed a suite of APIs that meet the needs of postal operators, carriers, eCommerce merchants, marketplaces and platforms.

Hurricane’s Zephyr data enhancement API allows bulk clearance facilities to check the accuracy of data including product descriptions and HS6 codes, and receive additional pertinent or missing information all under a single quick check function.

Zephyr can process over 700 million requests a day and can, on an item by item API call base, provide for a real time feedback with response times of 100 milliseconds. The screening of a file consisting of a maximum of 10,000 items that is sent to Hurricane takes no more than 15 minutes.

Meanwhile, its Aura API covers three other critical cross-border functions – duty and tax calculation, prohibited and restricted goods screening and denied parties screening.

Early Brexit chaos just “tip of the iceberg” says cross-border trade specialist

Problems in the first few days since Brexit are the “tip of the iceberg”, according to cross-border eCommerce trade expert Hurricane Commerce.

Hurricane says that the issues caused by lack of complete and valid customs data and VAT now being payable on low value goods into the UK will cause severe challenges over the coming days and weeks.

Last week, DPD temporarily suspended parcel deliveries to the EU due to lack of data, stating that 20% of items had incorrect or incomplete information.

Several UK online retailers, including luxury food merchant Fortnum & Mason, have temporarily stopped taking orders from EU countries due to the extra customs paperwork now needed.

And some EU retailers have ceased taking UK orders following the January 1 change making overseas suppliers who send parcels containing goods valued at £135 or less to the UK responsible for paying any import VAT that is due.

Customer satisfaction has also been put under increased strain with consumers in the EU complaining about unexpected VAT charges and clearance fees, and UK consumers being asked to pay higher delivery charges to cover the extra work caused by Brexit.

Another major hurdle resulting from the Brexit trade deal concerns ‘rules of origin’ with the threat of tariffs due if goods do not meet the complex requirements or are not wholly made in either the UK or EU.

Martin Palmer, Hurricane’s Chief Content and Compliance Officer, said: “Online merchants and marketplaces, postal operators and carriers are starting to see the reality of Brexit and the ending of VAT exemption on low value goods by the UK Government.

“With the EU also removing the low value VAT threshold in July, the compliance pressures on all parts of the cross-border supply chain are set to intensify even further with similar issues to be experienced in all EU countries to those current being experienced in the UK

“The first week and a half since Brexit is just the tip of the iceberg.”

Martin added: “We predicted for the last six months of 2020 that many businesses were going to face serious challenges post January 1, while others did their planning and put the best possible systems in place.

“There is simply no escape from the need for complete and valid customs clearance data including product descriptions, HS6 codes, shipper and consignee details and country of origin.

“Retailers which offer Delivered Duty Paid (DDP) give themselves the best chance of keeping their customers happy by avoiding the doorstep shock of unexpected fees for customs duties and import taxes.”

Hurricane Commerce has developed a series of API solutions to help ensure seamless cross-border eCommerce trade covering data enhancement, duty and tax calculation, prohibited and restricted goods screening and denied parties screening.

Its customers include some of the world’s leading postal operators, carriers, online merchant and marketplaces.

 

Hurricane in the news:

Tamebay – Early Brexit chaos just “tip of the iceberg”

Air Cargo Week – Hurricane: Early Brexit problems “tip of the iceberg”

Sky News Business – Brexit trade problems ‘just the tip of the iceberg’, e-commerce expert warns

Retail Times – Early Brexit chaos just “tip of the iceberg” says cross-border trade specialist

Eminetra – Brexit’s trade problem is “just the tip of the iceberg,” e-commerce experts warn 

Q Radio – Brexit trade problems ‘just the tip of the iceberg’, e-commerce expert warns

2021 – a year of huge change for cross-border eCommerce

If 2020 was the year of the Coronavirus pandemic, for those involved in cross-border eCommerce trade 2021 will be the year of sweeping regulatory change.

The changes come thick and fast, starting on January 1 with Brexit and the full enforcement of the US STOP Act.

Both make the provision of complete and valid customs clearance data absolutely essential.

Ten weeks later will see the implementation of Import Control System 2 (ICS2) requiring postal operators to provide entry summary declarations on goods into or through EU customs territory.

As if that was not enough to occupy the minds of everyone involved in cross-border trade, both the UK and EU are removing the exemption from VAT on low value items.

And there is also the launch of the EU’s Import One-Stop Shop (IOSS) for retail merchants and marketplaces to contend with.

Combined, this plethora of regulations – all impacting in the first half of 2021 – will test postal operators, carriers, merchants, marketplaces and platforms to the absolute limit.

We know from our work with customers across all of these different segments of cross-border trade that some have invested the time and resource to get prepared for January 1.

They have tackled head-on the knowledge that the compliance landscape will look very different in just a few days’ time to what they had been used to.

For postal operators, good planning and preparation in terms of data enhancement means avoiding the nightmare scenario of parcels being stuck at customs resulting in huge delays and additional costs including warehousing, storage and returns.

For merchants and marketplaces, meeting the higher threshold for parcel data will be essential if they want to ensure the frictionless passage of goods to their end customers. Failure to do so will inevitably result in lost customers and reputational damage.

The final quarter of 2020 has seen increased activity among those whose businesses depend on seamless cross-border trade as the realisation dawned that January 1 really was going to mean a different way of doing things.

And while events like Brexit grab many of the headlines, the reality is that some or all of the regulatory changes outlined above will impact the way different postal authorities, carriers, merchants and marketplaces – irrespective of geography – conduct their business in 2021 and beyond.

Below is a recap of the big changes coming in 2021 and their timescales:

January 1 – Brexit: complete and valid data (including HS6 codes, product descriptions and correct values) will be required from the UK into the EU and vice versa.

January 1 – UK Import VAT Threshold: New regulations will make an overseas supplier who sends parcels containing goods valued at £135 or less to the UK responsible for paying any import VAT that is due.

January 1 – US STOP Act: the USPS has made it plain that from this date parcels will be refused entry into the United States and returned to origin if they do not meet the higher threshold level for advance electronic data (AED).

Martha Johnson, a spokesperson for the USPS, said: “Postal shipments containing goods not accompanied by AED will be considered inadmissible.”

March 15 – ICS2: Postal operators will no longer be exempt from having to make entry summary declarations into the Import Control System before moving goods into or through EU customs territory.

Under ICS2, shipments without the right data will no longer be allowed with the likelihood of severe delays in customs and increased costs.

July – EU VAT Exemption Removal: Abolition of exemption from VAT on low value items under €22. The changes mean that EU and non-EU sellers will charge VAT at the point of sale for consignments of €150 or below.

July – Import One-Stop Shop (IOSS): Modernising of VAT for cross-border eCommerce via the Import One Stop Shop (IOSS) making the retailer, web shop or marketplace liable for the declaration and payment of VAT to the country of destination.

Hurricane Commerce was founded in 2016 to provide customers with industry-leading solutions to changing and evolving regulations and laws impacting cross-border eCommerce trade.

From this starting point, we have created our lightning quick Zephyr API which enhances the quality of parcel data.

Zephyr can process over 700 million requests a day and can, on an item by item API call base, provide for a real time feedback with response times of 100 milliseconds. The screening of a file consisting of a maximum of 10,000 items that is sent to Hurricane takes no more than 15 minutes.

Meanwhile, our Aura API covers the three areas of duty and tax calculation, prohibited and restricted goods screening and denied parties screening.

An API call via Aura is super-fast with throughput tested at 640 transactions per second. One single call can perform these three critical cross-border functions, presenting the data back in real-time.

To find out more about Hurricane’s solutions, contact sales@hurricanecommerce.com.

 

Hurricane in the media:

CEP Research – 2021 will be a year of huge change for cross-border eCommerce

Tamebay – Regulatory change to test cross-border traders in 2021

 

Freightwaves highlights “speed and efficiency” of Hurricane technology

Freightwaves’ American Shipper has described how Hurricane’s technology “will foster speed and efficiency” and help postal operators meet the regulatory requirements for advanced electronic data (AED) from January 1, 2021.

The leading logistics media platform highlighted Hurricane’s game-changing Zephyr API solution in an article looking at the likely impact of the enforcement of the US STOP Act.

Freightwaves stated: “Effective Jan. 1, the U.S. government will refuse to clear international mail parcel shipments if electronic documentation allowing U.S. Customs officials to check for illegal opioids isn’t transmitted in advance of the shipment’s arrival. Despite having more than two years to prepare, the international postal supply chain will likely miss the deadline.”

According to the OIG, Posts in 135 countries and territories were still unable to send AED to the USPS as of March this year.

The USPS has made it clear that as of January 1, complete and valid customs clearance data will be mandatory – otherwise parcels will be refused and returned to origin.

Freightwaves went on: “Hurricane Commerce, an IT provider that specializes in cross-border e-commerce trade data and compliance technology, warned in a Nov. 16 communique that, unless the situation changes, hundreds of millions of parcels will be denied entry into the U.S. and may be returned to their origins. “This kind of volume will not only create immense logistical challenges but will also have a serious impact on air cargo capacity,” said Hurricane Commerce CEO Martyn Noble.

“Earlier this year, Hurricane Commerce launched a product called Zephyr, which it said allows bulk clearance facilities to check the accuracy of data and to receive additional pertinent or missing information all under one “quick-check” function. Zephyr can process over 700 million requests a day and can provide for real-time feedback with response times of 100 milliseconds, the company said.”

The article concluded: “There is cause for optimism. The UPU, U.S. and EU requirements will push international posts to accelerate AED compliance. USPS and other international posts are helping less-advanced nations by providing technical and financial support. New technology — such as that being offered by Hurricane Commerce — will foster speed and efficiency.”

Read the full article https://www.freightwaves.com/news/opioid-crackdown-deadline-for-international-mail-on-brink-of-miss

Hurricane co-founders talk Brexit, STOP Act and other regulatory challenges in Postal Hub podcast

Hurricane CEO Martyn Noble and fellow co-founder David Spottiswood have been interviewed for the latest episode of the Postal Hub Podcast.

Ian Kerr interviewed Martyn and David to discuss the challenges and opportunities facing posts at the start of 2021.

They include the full enforcement of the US STOP Act, Brexit, ICS2 and the removal of the exemption from VAT on small parcels.

Martyn and David discuss at length not just the challenges posed by tightening regulations, but also the huge opportunities in cross-border eCommerce trade if the posts along with carriers, merchants and marketplaces get it right.

They also talk about the fine margins between great customer service and poor customer service.

Crucial to success is the provision of complete and valid customs clearance data which will help to ensure the smooth flow of goods around the globe.

You can listen to the podcast here – http://www.thepostalhub.com/podcasts/episode-219-brexit-stop-act-cross-border-ecommerce

US Customs and Border Protection document

Is this the end of De Minimis (Low Value) clearance in the USA?

In 2016, the United States increased its De Minimis threshold to US $800 – one of the highest levels in the world.

The De Minimis level is the financial threshold level at which Customs and Border Protection (CBP) do not collect import duty.

In addition to the benefit of no duty, the clearance process for the importer, transporter, and clearance agent, may be simplified.

The De Minimis exemption applies only to low-value shipments of not more than $800 on non-restricted goods. (Certain goods such as excise, licensable goods are excluded).

We understand that the US CBP is preparing a proposed rule to the Office of Management and Budget (OMB) requesting a change that would eliminate the $800 De Minimis exemption for imports subject to Section 301 tariffs (China). Details are yet to be published.

Section 321 of the Tariff Act of 1930 (19 USC § 1321) provides for an exemption from duties for certain shipments imported having an aggregate retail value in the country of shipment of not more than $800.

Exemption under Section 321 is most applied to eCommerce, low value transactions where the seller ships directly to the buyer from a foreign country.

The removal of the $800 De Minimis exemption would not only increase the delivered price of an item to the US customer, but would also likely increase the number of checks and holds due to poor data from the shipper, additional documentation and possibly a Power of Attorney from the importer.

It may also have implications on the door-to-door delivery time. Complete and valid data will therefore become more important than ever to properly calculate your landed cost.

China, which is likely to be severely impacted by any change in US De Minimis levels, has been identified as a key origin of poor and inaccurate data.

While this proposal is at a very early stage it does mirror actions already taken by countries such as Australia and New Zealand in recent years with the removal of the GST (Sales Tax) De Minimis in their countries and the action that is being taken by EU countries in 2021, with the removal of the VAT threshold for imports.

The Covid19 pandemic has seen an exponential growth in eCommerce with huge implications for the traditional methods of importation and duty collection.

Is this just a targeted proposal aimed at improving data accuracy from China? Is this another part of the ongoing trade wars between the USA and China? Or will we see the US move completely towards the removal of Section 321 De Minimis levels?

Hurricane’s Content and Compliance team will continue to monitor these important proposed changes and keep you full informed as to their consequences for cross-border eCommerce trade.

  • Blog by Martin Palmer, Hurricane’s Chief Content and Compliance Officer.
Maureen Cori, Hurricane Commerce

Hurricane Commerce Q&A with Maureen Cori, a senior member of our Content and Compliance team.

Hurricane has experts in compliance, customs, logistics, eCommerce and technology. Here, we catch up with Maureen Cori, Hurricane’s Chief Content and Compliance Officer Designate, to find out more about her world and the ever-increasing regulations and laws which are impacting businesses across the globe.

How did you get into customs and compliance? Was it something you always wanted to do, or did you just fall into it?

In this business, they say, “you either love it or hate it”. I absolutely fell into it – and fell in love with it – hard! While in college, I got an entry level job working on ocean freight clearances and was hooked on international trade.

My original passion was rooted in the arts, but I retargeted my focus on transport and international trade. After working in a Customs Broker on ocean freight clearances, I went on to work for DHL.

I started with typing and faxing manifests and classifying goods based on manifest descriptions – vastly different from today’s world.

After years of development my growing understanding and learning led me to monitoring compliance across the business from training development, supporting sales to assisting our customers in understanding what was required to export or import.

I decided to sit for the US Customs Brokers License exam after months of courses, and I was lucky enough to be part of the 1% that passed the examination to be licensed.  Obtaining my license allowed me to manage any type of Customs Brokerage operation in the US and gave me the opportunity to be the Corporate license holder for a business.

 

How has the need for compliancy changed since you started in this industry and why has it become so important in recent years?

Compliance has always been a focus when I first started in transport and international trade, but the game and the players were quite different. It was a smaller world, and there was le

ss accessibility to all involved in the supply chain.

The World Customs Organization (WCO) created the first-ever Harmonised Tariff System, effective in 1988 – also known as Harmonized System (HS). This was the start of a major shift in compliance with some structure and clear regulated rules around product classification and duties and taxes.

The role of Customs at that time was to collect duties and taxes at the point of entry. The focus was on late filing of entry summary and duties and taxes and fines.

Everything changed post-9/11. New laws and regulations came into play, and if they had already been in place, they were now enforced. Compliance was the focus. The cost of non-conformity to these old and new laws was high, and ignorance was no longer an acceptable defence.

Understanding your customers, who do you do business with, what are red flags, became critical to business. Government agencies created partnerships with trade through voluntary programmes like Customs Trade Partnership Against Terrorism (CTPAT) and Authorised Economic Operator (AEO) for example.

 

How have advancements in technology allowed improvements in compliance to occur so smoothly?

Technology was not even part of the process – manual intervention is what you relied on, and human error was always a factor. The internet was a new concept and regulators were just learning how to navigate the rules and laws around it.

Advance data is a game-changer for all, and improvements in technology have meant there is no room for error.

Regulatory authorities around the world are demanding accurate data and in many cases at wheels up or 4 hours prior to arrival at the destination. This was a culture shock for all industries and a very heavy financial burden on the private sector. Bad data creates fines, penalties, detentions, and more.

Compliance is a critical business requirement that is also a benefit. Compliance should not be considered a cost centre, but rather a selling proposition. In today’s world, businesses want transparency, accuracy, and compliance to be reputable and successful.

 

How has the Trump Presidency impacted international trade and particularly compliance?

Trump’s Presidency has seen a big shift in the US’s approach to International Trade. One such example is the introduction of the STOP ACT, which is aimed at targeting postal opioids shipped via overseas postal operators.

Advanced Data requirements are mandated to postal operators to support the STOP ACT among other things. Compliance measures will be in place to support the STOP ACT with heavy fines associated with non-compliance.

Other changes during this administration have included the China Trade Wars, additional tariffs, the new Universal Postal Union (UPU) Terminal Fees agreement and the removal of North America Free Trade Agreement (NAFTA) to form the United States Mexico Canada agreement (USMC). These are all game changes in the world of compliance, Intellectual Property Rights (IPR) and international trade.

 

With the US election coming up later this year, how big an impact will it have on upcoming regulatory changes and the chances for more to be introduced?

I do not have a crystal ball, but I can say this is a critical election year for the United States. Regardless of the outcome, if President Trump is re-elected or if Vice President Biden is elected there will be changes ahead.

Trade relations will be something to watch closely. If it is sanctions lifted or tightened, or if we see more prohibitions or restrictions, tariff rates, or more trade wars, new regulatory changes will happen.

 

What initial steps can a business take to improve their compliance procedures?

Compliance should be the foundation for every organization and falls into two main categories: Compliance with laws and regulations and Compliance with internal policies and procedures.

Compliance, both legal and internal, is a tone that needs to come from the top of all companies as non-compliance has implications company wide. Once established, a company’s compliance programme should be regularly internal audits, and gaps identified and addressed.

Having a designated Compliance Officer within a company providing guidance to the business is critical, and in recent years has become a Board level position.

Many new businesses or current businesses that expand into international transactions do not always understand the cross functional connections to a single process and the impact it may have. Understanding your compliance requirements is the start of a Global Trade Compliance Programme.

A designated Compliance Officer within a company providing guidance to the business is essential. Mapping out processes and potential risk or remediations is recommended. Know your customers and always screen all your parties in your supply chain to ensure you are working with good people.

By having a programme in place your business can swiftly adapt and update processes and procedures when new laws or regulations come into place and be compliant.