The EU introduced a new version of its Import Control System (ICS2) on March 1, 2023 and
it has significant impacts on companies shipping to the EU. While 12 EU countries have been granted a delayed implementation of ICS2 until June 30, 2023, all companies must become compliant to avoid problems.
Whether you’re a retailer, supplier or shipper, you need to understand the implications of these changes to ensure that your business isn’t negatively affected by issues including lost packages and delays and the added costs of incorrect HS codes and taxes.
What’s changing?
The primary goal of ICS2 is for customs authorities to identify high-risk consignments and step in at the most sensible point in the supply chain, adding a second measure of security.
Before a package arrives in or through the EU, carriers must provide data and information. Goods must have assigned six-digit HS codes because general terms such as ‘clothing’ will no longer work.
The lack of technology to assign HS codes could result in delays, interruptions, and missing packages. If retailers fail to assign HS codes to goods, carriers and logistics providers may do so, creating room for error. This is a potential issue for customers who could be wrongly charged and asked to pay additional taxes. To avoid this, having a correct HS code is crucial. AI-based solutions can accurately and efficiently assign HS codes and provide far better results than manual input, which many companies currently do.
ICS2’s global impact
ICS2 comes in the context of global pressure to enhance data quality on all parcels shipped. Governments are increasingly concerned about the security of global supply chains, and high-quality data on packages can help prevent the movement of illicit or dangerous goods and prevent fraud.
In 2020, the United States Customs and Border Protection (CBP) seized a shipment of footwear that was falsely labeled as “napkins” and “cotton towels” in an attempt to avoid detection. Upon inspection, CBP officers found that the shipment contained nearly 27,000 counterfeit Nike shoes. This type of fraud is a common tactic smugglers use to bypass border controls and evade detection. It highlights the importance of accurate and complete data on shipping parcels across borders to prevent the movement of illicit goods.
The US is also going towards ICS2-like requirements with Stop Act 2.0. The STOP Act of 2018 required foreign postal operators to provide 100% advance electronic data on shipments entering the US via mail. Many countries benefit from a waiver and do not have to follow STOP Act requirements. With Stop Act 2.0, country exemptions will be eliminated and criminal penalties for mail fraud involving misrepresentation of the country of origin, increased.
To conclude, failure to inform other systems ahead of time could result in significant challenges such as retrieving stuck packages, refunding customers, and financial losses. Given the global trend towards high-quality data and what we saw with ICS2 in the EU, businesses should not wait until it becomes mandatory to provide accurate data with their shipments.
This article was originally published in the March 2023 issue of Parcel and Postal Technology International
