As unpleasant as customs and tariffs may sound so too can be the rewards of master data management for your e-commerce business. We are going to tell you all about doing it right and how to avoid the far-reaching consequences of one’s carelessness in this matter.
Customs
Let’s start with customs – your business comes into contact with them as it starts growing and you have to deal with imports and/or exports of goods. Not only deliveries from and to third countries demand your expertise in this area, since even within the EU you need a Tariff code for your products to be allowed into the Single Market.
Customs are under the jurisdiction of the Federal Ministry of Finance, which administrates the collection of customs duties, tariffs, and fees. Ca. forty-eight thousand employees work for the German Customs Authority, with over 391 million customs declarations filed in 2022, representing the value of 715 billion Euros in goods. (Statistisches Bundesamt)
Master data management is your responsibility
As you file your customs declaration to those authorities, you are obligated to provide all kinds of information about your products. The declaration includes a description of your wares, e.g.: material, weight, and purpose of use. You also must deal with some numbers like the article number, the tariff code, and their declared value. Additionally, the customs authority collects the specifications of the country of origin, producer, and deliverer.
Unfortunately, many e-commerce shops rely blindly on the data they get from the manufacturers of their goods (many of whom put a lot of effort into the correctness of that data), because in many cases, just copy and paste given information and then use it for the customs declaration, constitutes a great risk for your company. We want to make you aware, that you are responsible for the correctness of the data that you declare. In case the declaration is wrong or incomplete, you and your company will be financially liable – it won’t be the manufacturer the wholesaler, or the supplier. It is you, who will have to deal with the consequences.
And, as tempting as it might be, it is not the responsibility of your IT department. Specialized programs such as IDEA developed by CaseWare, help immensely (at this point we feel like they are almost necessary). With these programs, you can save, examine, and manage whole sets of your data. Even the Customs Authorities use such tools. But you shouldn’t trust the A.I. completely, you should always recheck the declarations. In the end, it is the purchasing department that is responsible for the master data management. And why is that? Well, you don’t only need the data for the customs declaration, but for orders, organization of storage, transportation, packaging, and all financial calculations that are connected to them.
Proceedings around customs can be overwhelming since your main business may be, of course, just the selling of the products. Maybe you should ask yourself a question:
Should I outsource my logistics and deal with customs?
There are companies such as EMO-LOG, that specialize in support for businesses in navigating the customs laws, foreign trade, taxes, tariff classification, official preference documents, and certificates of origin. Working together with them guarantees you seamlessly secure, an international supply chain with fewer checks and controls, thanks to favorable risk assessments by customs authorities. At EMO LOG Customs Consulting are experts in the field and can substantially reduce your workload and costs in this area. If you represent a medium-sized company involved in foreign trade or if you are a start-up – you can benefit strongly from our services as customs representatives to protect your international interests. Years of experience and profound knowledge may help you to effectively expand your competencies in the field.
A few stories from our experience in ‘customs life’
As dealing with customs is one of the main specialties, can paint a pretty accurate picture of how careless master data management could result in severe consequences for any company.
Imagine you sell and deliver dishwasher tabs and all the data you have is correct. You declare the weight, ingredients, and so on, but as the name of the product you use DWT. The company can promise you that the customs authority won’t have a clue what DWT is. There will be many unnecessary questions, avoidable delays, and some extra effort you might not have calculated that will be required to straighten out such misunderstanding.
A second scenario: A seller of shirts used the correct data that he could copy from past deliveries. But there was a small problem, the yarn those shirts were made of changed so that their weight differed slightly from the ones he ordered in the past. What seems like a small difference becomes a huge one, when there are thousands of the product’s units in the trucks which, when controlled, end up a few hundred kilos too heavy. In those cases, you can expect the authorities to check your whole load for smuggled goods and if nothing is found, you can still be charged for attempted tax evasion and will have to pay fines for the wrongful declaration. In addition, you might get in trouble with the shipping company, who calculated your order with the wrong weight, too. Your delivery might be stuck at the border for a few days and won’t arrive on time. In the end, you can lose a customer who might, understandably, search for alternatives.
9 golden rules to improve your master data management
There are many potential mistakes you can make when it comes to master data management. That’s why in the following article, summarize a few bullet points that you can follow to avoid mistakes. Not all of them relate to all kinds of declaration data to the same degree.
1: Do not blindly copy and paste the declarations from the manufacturers or wholesalers.
You must always control them!
2: Use computer programs such as IDEA, but recheck the declarations, since the A.I. doesn’t always recognize the changes being made.
3: Forgo abbreviations, they may not be relatable for third parties such as Customs Authorities
4: Be consistent – using the same term for an object each time, makes them easy to find in your database
5: Be unambiguous. Words that don’t relate to one certain object may cause trouble through all processes hence they can be confused with other items in your shop.
6: Don’t use generic terms or too detailed and long-winded terms.
7: Be up to date. Changes should be maintained immediately in your database.
8: Be precise, all data must be correct.
9: Your data must be complete: All needed information should be declared, and unnecessary information should be left out.
Possible consequences for careless product declarations
Finally, let’s think about the consequences that come with carelessness in that matter.
1: You may be persecuted for tax evasion.
2: Delays of delivery lead to a bad reputation, you may look unreliable.
3: Wrongful customs declaration may lead to fines.
4: In many scenarios there will be an extra effort, costing you and your company financial and other resources.
5: Besides problems due to irregularities in customs, all processes related to logistics and calculations of costs, e.g. transportation and storage, may not be conducted with the full possible efficiency. You may also pay more customs duties than necessary.
Benefits from a well-organized and profound master of data management
Being reliable and well-organized with master data management may lead to:
1: Saving costs.
2: Trouble-free processes like completion and delivery.
3: Improvement of your reputation and loyal customers.
4: Avoidance of legal risks.
Summary
Following a few rules regarding master data management benefits you and your company in many ways – it not only minimizes the risks of fines and delays of delivery, but also allows you to avoid financial miscalculations regarding transportation, packaging, and warehouse logistics, resulting in lowering costs and improvement in reputation among the customers. Especially young, growing companies and start-ups should put effort into mastering data management. Remember the nine golden rules: do not blindly copy and paste, recheck declarations of A.I.s, forgo abbreviations, and be consistent, unambiguous, precise, and up to date, declarations should be complete, but not unnecessarily complex. If you feel overwhelmed with customs and logistics, look for help, and focus on your main business.
Sources
- https://www.zoll.de/SharedDocs/Broschueren/DE/Die
- Zollverwaltung/jahresstatistik_2022.html?nn=282530 (last access 21.12.2023)
- https://www.destatis.de/DE/Service/Online-Melden/online-meldung-aussenhandel.html (last access 21.12.2023)
- https://www.emolog.de (last access 21.12.2023)
- https://www.caseware.com/products/idea/ (last access 21.12.2023)
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