SEA Waits in the Wings

Once the trials are complete, Single European Authorisation could simplify Customs reporting for companies trading in more than one EU state. Chris Lewis (Trade International Digest) talks to Langdon Systems about their experience of this exciting development.

Fear and suspicion of HM Customs & Excise and of software companies are inhibiting UK companies from adopting systems to handle their international trade, say Mike Dixon and Dave Bradbury of Langdon Systems. As, respectively, Managing Director and Customs and International Trade specialist at the Wigan-based Customs software specialist, they spend a lot of time convincing customers of the potential benefits of their systems while at the same time trying to dispel HM Customs' “bogeyman” image. Customs' image in the UK has perhaps been tarnished by press reports of duty-free shoppers being harassed in Dover, but there is a genuine desire on the part of Customs to facilitate trade. At the same time, software can go a long way towards eliminating the drudgery of managing Customs data.

Langdon was in fact set up in 1984 by an ex-Customs man, Jim Carroll, who was previously a senior computer audit unit manager. By the early 1990s, the company had gained a reputation as one of the leading duty management systems specialists and it is currently active in many European countries. It claims to be one of the most prolific DMS implementers in the Netherlands, for instance.

With developments like Single European Authorisation waiting in the wings, it is not just individual companies that could miss out - the ultimate loser could be UK plc.

Single European Authorisation (SEA) was announced some time ago, and while almost inevitably it has failed to live up to some of the more extreme hype, Langdon is convinced that it is the future. Essentially, SEA allows companies that trade in more than one EU Member State to centralise their Customs reporting in a single country and Customs authority, instead of reporting to the authorities in every Member State where they do international business.

Inevitably, also, some Member States have been more SEA-minded than others. For single-country reporting to work, the Customs authorities in all the countries concerned must give their agreement and this has not always been forthcoming. This is one reason why SEA has not taken off as quickly as hoped, although it is now gradually gaining momentum in the UK, Benelux, Germany and Austria, to name a few countries. The first SEA scheme involving three countries is expected to start shortly.

In the UK, SEA has so far been limited to a shortlist of 12 companies. Frustratingly, not all of these have exercised their option, while other companies that are willing to start SEA operations have been stalled.

In fairness to the authorities, there are still some complex legal and fiscal issues to be sorted out. But it must be admitted that SEA has been slow to take off. So far, all the SEA schemes have involved only pairs of country rather than six, seven or more, and usually countries with close linguistic or business ties, eg Germany and Austria or the UK and the Netherlands. So far, it has to be said that SEA has not yet lived up to the EU's original “one stop shop” vision (it has only been possible to report Customs duty on an SEA basis while VAT and statistics must still be reported on a national basis) though that could ultimately change. However, adds Langdon's Dave Bradbury: "If you operate our software you can at least operate off one system."

Even in its current limited form, SEA offers major advantages to companies trading in more than one Member State, adds Mike Dixon. "It means direct importing into the actual country of destination (instead of having to route through a central European hub). Customs formalities need no longer impinge on your logistics."

It could avoid the need to operate a Customs warehouse, or a single IT infrastructure. Importantly, SEA could allow Customs activity to be consolidated into a single “centre of excellence". Arguably, it means having to cultivate a relationship with only one set of Customs officials; while the EU does have a single Customs code, its interpretation varies widely from one Member State to another.

Less tangibly, because SEA facilitates the use of simplified procedures, it should both speed up procedures and reduce the need for Customs specialists in every location. Because there is, potentially at least, only one point of Customs contact, it could reduce the time and effort needed to “map” the company's systems and processes with those of the Customs authorities.

More controversially, SEA could allow multi-national firms to choose their Customs authority, selecting a country where it is relatively easy to do business or where there is a greater willingness to, say, allow facilities like audit-based control. It could mean a flight of Customs activity and expertise to countries with better organised, more responsive Customs administrations.

Administrations in the EU tend to have their own approach to compliance audits, but if these can be performed centrally, it should be easier to anticipate the outcome and less administrative work will be required.

Automation of Customs processes, coupled with SEA, could also be an ideal opportunity to streamline management of many basic business processes. At its simplest, what Langdon does is take data from commercial systems and turns it into information that can be readily understood and used by Customs authorities. "We also do a lot of validation and checking of calculations, in order to reduce duty and VAT liability. Essentially, Langdon does all the donkey work for you," says Mike Dixon.

But Britain must beware. If the UK fails to grasp the opportunities, there is absolutely no guarantee that companies will choose to establish their “centres of excellence” there. "Business could go to the Netherlands, unless the UK wakes up," says Mike Dixon. "At the moment, the Dutch are far more switched on to the benefits. In the UK, we've tended to keep Customs at a distance - and it could be a tragedy."

Ironically, though, the UK was long considered to be the leader of the pack in many areas of Customs procedures, particularly IT systems. While other countries have found it hard to follow in the UK's footsteps, it is by no means impossible for them to catch up, or even leapfrog, the UK.

Inevitably, much of the SEA work is of interest to large multi-nationals. However, neither of the Langdon representatives believes that SEA is the sole preserve of the mega-corporation. In fact, some of the more lumbering and unwieldy multi-nationals may have trouble keeping up with younger businesses that are fleeter of foot.

Lately, Langdon has been developing products aimed more specifically at small and medium-sized enterprises (SMEs). Although it does not make a great deal of money in this area, hooking smaller firms at an early stage of their development could be a formula for long-term growth.

Langdon's e-CFSP was developed as a low-cost Customs reporting tool for SMEs, many of whom would have found full-blown CFSP well beyond their capabilities. "It was designed as a low-cost representative tool for SMEs, who were maybe using a third party," explains Mike Dixon." Internet-based (www.e-cfsp.co.uk) and hosted by Langdon, it is available for around £80-120 a month and can be used for SDI (supplementary declaration - imports) and SDW (supplementary declaration - warehousing), either through manual data capture or by uploading a spreadsheet, offline if desired. The data can then be uploaded to HM Customs. "It's the cheapest way of reporting Customs liability in the UK that we know of," says Dave Bradbury.

Recent development work by Langdon includes a system for the New Export System (NES). Very much an “added value” service for users of other Langdon products, it is being delivered to UK clients in 2002 and 2003. It was originally developed for Langdon clients who were using the Period Entry system, which is being switched off.

Also under development is the New Computerised Transit System (NCTS) for non-free-circulation goods moving within the EU or export goods on their way to ports or airports. However, the NCTS function will not be available in the UK until Customs implements it, expected in the first quarter of 2003. However, Langdon already has already built up experience in the Netherlands, where transit is a much more important issue. Again, it will be available to e-CFSP subscribers.

Langdon is also keeping "a watching brief" on G7 messaging, although interest from the trade is fairly lukewarm at the moment.

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