The borders of today, writes Lars Karlsson, serve purposes more complex to those of the past. The borders of tomorrow, including a post-Brexit UK-EU border, will need to be even smarter.
Today we know that trade is one of the main drivers for global development and prosperity. We live in the age of globalization and we are starting to see what it can do for us in the future. Globalization drives harmonization and the need for standards.
Over the past decade global supply chains and international value chains have changed dramatically. We are seeing more complicated and integrated global value chains where goods pass borders multiple times during a production process. This is a trend not only for complex industries but for all goods sectors.
Goods and services are blending, e-commerce is booming and, as a result of global business developments, the movement of people is more and more interlinked with the movement of goods. At the same time, international cross-border crime syndicates have refined their methods and informal partnerships acting at a global level are becoming a serious threat to all nations and people.
The changes described above pose enormous challenges to our international trading system, national borders and Customs. In addition, we see global challenges including migration crises, trade wars and protectionism.
The borders we see today were designed decades ago for other purposes and under different circumstances. Customs gathered information at the border to collect revenue, to protect society from unwanted products and to determine what controls were required to uphold legislation and regulations. Agencies didn’t have the information necessary to handle system-based controls, but instead conducted transaction-based controls and inspections at the border. This has changed.
Today we have more information than we need to make international supply chains move with speed and predictability. Sometimes we don’t have the information at the right time, but this is also about to change. This new paradigm is supported by international standards such as the World Customs Organization’s (WCO) SAFE Framework of Standards and the World Trade Organization’s (WTO) Trade Facilitation Agreement (TFA).
These standards and frameworks make it possible to use new techniques like blockchain to capture information across the supply chain and transform it into relevant data and then validate it using compliance management, systems-based controls and self-assessment. Our national borders used to be our first frontier, now they are our last.
We are designing, developing and implementing trusted trade lanes through Smart Borders using Mutual Recognition Agreements signed between countries that have Authorized Economic Operator (AEO) or Trusted Trader Programmes (TTP).
In this context, it is important to note that some countries have older legacy AEO/TTPs in place. These programmes that are ten years old or more are often designed primarily for security purposes and are not modern and mature in relation to compliance and non-tariff barriers. This means that there are often high thresholds for entry into a programme and insufficient benefits to make a real difference to the bottom line of a company.
In recent years, several countries have designed and implemented modern and holistic multi-tier Trusted Trader Programmes with new structures, more automation, more extensive benefit programmes and advanced performance indicators. All this is achieved while still meeting international standards. I have written about this new paradigm in the leading academic publication World Customs Journal (Vol 11, March 2017).
Older AEO programmes will be replaced by updated versions in the years to come. It has already been demonstrated that a modern compliance management programme can create a win-win for all stakeholders in managing international supply chains. By adding the advanced exchange of risk data and new non-intrusive inspection and surveillance technologies, we will see a different model for our borders in the future.
In fact, this is already happening as I write this article. At KGH we are involved in the design, development and implementation of Smart Borders and Trusted Trade Lanes across the world.
When designing new borders, it is extremely important that we use the new paradigm and not older versions. Where is KGH designing new border processing? The most recent example is Brexit.
The United Kingdom is leaving the world’s most advanced and integrated Customs Union. By leaving the Customs Union and customs territory, a customs border will be created. It will be a new border with no infrastructure and no legacy systems in place. This is the biggest Customs change in our lifetime, but it is impossible?
Nothing is impossible. Instead of trying to implement a traditional border set-up this is the moment to implement a Smart Border.
However, this would not be a Smart Border as we know it from other locations, such as the Sweden-Norway border or the USA-Canada border. No, in this case we need more. We need a Smart Border 2.0 or even 2.1.
So, what is a Smart Border?
Smart Borders operate using maximum facilitation through the optimal use of existing Customs techniques in combination with, and with support from, existing advanced technologies. But neither Customs techniques nor technology can do the job on their own.
Smart Borders can be created by using Trusted Trade Lanes based on the introduction of a new modern Trusted Trader Programme (registration), electronic information exchange, risk management cooperation between Customs administrations (and other agencies), self-assessment by Trusted Traders, controls and inspections at the company premises or on-route, and technology identification/surveillance at the border and on-route.
Identification at the border can be done using existing infrastructure such as GPS/GSM solutions – which could be a solution for the Northern Ireland-Republic of Ireland land border – or with new technology identification solutions (number plate readers, RFID, Bluetooth, etc.) on other more goods heavy borders (such as the Eurotunnel and the RO-RO traffic across the English Channel). The technology to do this exists today.
It is time to move from old borders to Smart Borders. I have written a report about Smart Borders 2.0, and I have made remarks on how the proposed solutions can be used in a more generic way in a text called Smart Borders 2.1. Both these texts are available in the public domain if you want to study them more in detail.
The fact is that we are moving quickly in to a new world where the movement of goods and people are interlinked. This demands another level of speed and predictability. All countries that want to be included in the international value chains of the future need to build Smart Borders as soon as possible.
The International Border Management and Technology association (IBMATA), where I am the Chairperson of the International Advisory Board, is progressing a number of initiatives to support the development of Smart Borders, so there is a lot of things happening right now.
We have only seen the start of a giant leap that will move border management forward to where it becomes the key to future prosperity. If we succeed in transforming our borders to Smart Borders, then the future is bright.
Lars Karlsson is Managing Director Global Consulting and Senior Executive of KGH Customs Services, a customs and border capacity building provider and consultancy. Lars is also chair the Advisory Board of the International Border Management and Technologies Association (IBMATA). He previously pursued a career with Swedish Customs, rising to the rank of Acting Deputy Director General, after which he served five years as Director of the World Customs Organisation. Lars was awarded an honorary doctorate from Charles Sturt University in 2016 for “significant contribution to the public good through his outstanding input and influence in the professional practice of customs education and capacity building.”