Novozymes (NZ) is a biotechnology company with a global supply base. NZ currently has major trade relations with Denmark, China, and Brazil; to name few. Jack Haller, Logistics Manager, outsources the import process to logistic service providers (LSPs). In the past, NZ’s former global freight forwarder acted as customs broker for NZ’s LSPs. Changes in the global freight forwarder’s business model lead to difficulties in the import process, including delays and increased costs; therefore, NZ terminated the contract. Presently, NZ collaborates with three LSP’s and they are responsible for clearing their own freight through customs. This has prompted Jack Haller to request information on customs compliance and leading practices among various industries. Process Map First, we developed a standardized process map of the import process to increase visibility of import process. This was accomplished through interviews with the three LSP’s. Thereby, it became clear that this process includes several entities such as the shipper, freight forwarder, customs brokers and U.S. Customs and Border Protection (CBP). The process further implies complex interaction between these entities, which increases its vulnerability to risks – e.g. delays or penalty fees. Cost Drivers Second, we created a guide to cost drivers for the customs compliance process to enhance cost transparency. This was done through research and interviews with the LSPs. Thereby, it was found that the customs compliance process is driven by three main costs, which are charged by the U.S. CBP: (1) Harbor Maintenance Fee, (2) Merchandise Processing Fee, (3) Import Duty Rate. Leading Practices Third, we conducted interviews with SCRC companies to understand the leading practices of the customs compliance process. The main areas of focus were: • What resources do companies require to manage the customs compliance process, both internally and externally? • How do companies manage the customs compliance process? • What metrics do companies use to measure the customs compliance process? • How do companies stay knowledgeable about the customs compliance process? Findings • Externally, companies utilize an average of 3 outside customs brokers. These companies reported that they try to limit the number of customs brokers that they use in order to mitigate risk. • Internally, 100% of respondents have an average of 8 staff members that are solely dedicated to the customs process. In addition, respondents utilize an average of 2 in-house customs brokers. • Additionally, 85.7% of respondents have metrics in place; however, 50.0% of companies with metrics admit that they need more and are in the process of investigating. The remaining 50.0% have 26+ metrics that they use only for the customs process. • Companies stay knowledgeable through C-TPAT and ISA certifications. Also, through webinars, seminars, annual conferences and professional associations; just t

1. Novozymes:
Customs
Compliance
and
Leading
Prac9ces
2.
Cost
Drivers
3a.
Leading
Prac9ces
3b.
Areas
of
Opportuni9es
v Contacted
and
interviewed
SCRC
companies
v Analyzed
raw
data
Valida&on
&
Feedback
v Foreign
Trade
Zones
are
recommended
for
further
inves9ga9on
by
NZ
or
future
SCRC
projects
NZ
Sponsor:
Jack
Haller
NCSU
Faculty
Advisor:
Tracy
Freeman
NCSU
Student
Team:
AnneMe
Gustafson,
Katharina
Peter
Leading
Prac9ces
Customs
Compliance
Project
Par&cipants
v Hanesbrands
Inc.
v John
Deere
v Caterpillar
v Lenovo
v GlaxoSmithKline
v Bayer
CropScience
v NAACO
Educa&on
v C-­‐TPAT
and
ISA
Cer9fica9on
v Webinars,
seminars,
annual
conferences
and
professional
associa9ons
v Exper9se
from
in-­‐house
legal
department
and
customs
brokers
v Intensive
training
programs
v Hire
outside
consultants
Resources
v Internally,
par9cipants
employ
an
average
of
8
persons
that
are
solely
dedicated
to
the
customs
compliance
process
v Addi9onally,
71.4%
of
companies
employ
in-­‐house
customs
brokers
v Externally,
100%
of
respondents
u9lize
an
average
of
3
outside
customs
brokers
Metrics
Management
v 85.7%
of
have
metrics
in
place
v 50.0%
of
companies
with
metrics
admit
that
they
need
more
and
are
in
the
process
of
inves9ga9ng
v The
remaining
50.0%
have
26+
metrics
that
they
use
only
for
the
customs
process
v Examples:
v 85.7%
outsource
the
calcula9on
of
du9es
v 57.1%
outsource
the
payment
of
du9es
v 100%
classify
their
own
products;
however,
28.6%
of
companies
outsource
this
func9on
because
they
have
created
and
implemented
a
classifica9on
database
system
v A
combina9on
of
methods
is
used
to
monitor
the
process.
The
most
popular:
in-­‐house
legacy
system,
customs
broker
interface,
GT
Nexus,
and
manual
entry
v 100%
of
companies
reported
great
visibility
of
the
customs
process
v 100%
outsource
customs
filings
Area
of
Opportunity
Foreign
Trade
Zones
(FTZs)
were
a
consistent
topic
that
came
up
during
the
interviews.
71.4%
of
companies
operate
FTZs.
The
remaining
companies
reported
FTZs
as
a
poten9al
area
of
opportunity.
Foreign
Trade
Zones
are
recommended
for
further
inves9ga9on
by
NZ
or
future
SCRC
projects.
What
is
a
FTZ?
According
to
the
Na9onal
Associa9on
of
Foreign
Trade
Zones
(NAFTZ),
“A
FTZ
is
an
area
within
the
United
States,
in
or
near
a
U.S.
Customs
port
of
entry,
where
foreign
and
domes>c
merchandise
is
considered
to
be
outside
the
country,
or
at
least,
outside
of
U.S.
Customs
territory.
Certain
types
of
merchandise
can
be
imported
into
a
Zone
without
going
through
formal
Customs
entry
procedures
or
paying
import
du>es.
Customs
du>es
and
excise
taxes
are
due
only
at
the
>me
of
transfer
from
the
FTZ
for
U.S.
consump>on.
If
the
merchandise
never
enters
the
U.S.
commerce,
then
no
du>es
or
taxes
are
paid
on
those
items.”
Ac&vi&es
permiEed
in
FTZ
Assembled
Tested
Sampled
Relabeled
Manufactured*
Stored
Salvaged
Processed
Repackaged
Destroyed
Mixed
Manipulated
*must
get
special
permission
from
FTZ
board
for
manufacturing
Benefits
of
FTZs
v Deferral,
reduc9on
and
possible
elimina9on
of
du9es
v Tighter
inventory
control
that
may
virtually
eliminate
year-­‐end
inventory
loss
adjustments
v Poten9al
direct
delivery
benefit
reduces
long
hold
9mes
at
crowded
ports
of
entry
Background
Novozymes
(NZ)
is
a
biotechnology
company
with
a
global
supply
base.
NZ
currently
has
major
trade
rela9ons
with
Denmark,
China,
and
Brazil;
to
name
few.
Jack
Haller,
Logis9cs
Manager,
outsources
the
import
process
to
logis9c
service
providers
(LSPs).
Past:
NZ’s
former
global
freight
forwarder
acted
as
customs
broker
for
NZ’s
LSPs.
Changes
in
the
global
freight
forwarder’s
business
model
lead
to
difficul9es
in
the
import
process,
including
delays
and
increased
costs;
therefore,
NZ
terminated
the
contract.
Present:
NZ
collaborates
with
three
LSP’s,
which
are
responsible
for
clearing
their
own
freight
through
customs.
This
has
prompted
Jack
Haller
to
request
informa9on
on
customs
compliance
and
leading
prac9ces
among
various
industries.
Costs
in
the
Customs
Compliance
Process
Charged
by
the
U.S.
Customs
and
Border
Protec&on
(CBP)
Type
of
Cost
Defini&on
of
Cost
Freight
Cost
Base
Cost
Calcula&on
Harbor
Maintenance
Fee
(HMF)
Commercial
cargo
from
a
commercial
vessel
is
charged
a
port
use
fee
when
shipped
through
iden9fied
port
Ocean
freight
According
to
value,
without
maximum
fee
-­‐
0.125%
of
the
entered
value
Merchandise
Processing
Fee
(MPF)
Fee
charged
to
process
merchandise
entering
and
ensure
compliance
with
customs
and
trade
regula9ons
Ocean
&
Air
freight
According
to
value,
with
maximum
fee
-­‐
0.3464%
of
the
entered
value
Import
Duty
Rate
Taxes
collected
on
imported
goods
Ocean
&
Air
freight
According
to
value,
without
maximum
fee
-­‐ Percentage
of
the
entered
value
based
on
duty
rates
as
classified
in
the
Harmonized
Tariff
System
(HTS)
-­‐ Most
of
NZ’s
products
fall
under
Chapter
35
of
HTS
(Albuminoidal
substances;
modified
starches;
glues;
enzymes),
which
are
free
of
charge
Payment
Procedures
The
customs
broker
pays
all
the
fees
and
du9es
on
behalf
on
NZ.
The
fees
need
to
be
paid
within
a
10-­‐day
9meframe
upon
the
entry
of
the
goods.
If
the
10-­‐day
statement
is
exceeded,
customs
will
charge
penal9es
ranging
from
$100
-­‐
$200.
1.
Process
Map
2.
Cost
Drivers
3.
Leading
Prac9ces
4.
Area
of
Opportunity
v Interviewed
v External
research
v Interviewed
v LSP
1
v LSP
2
v LSP
3
v LSP
1
v LSP
2
v LSP
3
Objec&ves
1.
Develop
a
standardized
process
map
to
increase
visibility
of
import
process
2.
Create
a
guide
to
cost
drivers
to
enhance
cost
transparency
3.
Conduct
interviews
with
SCRC
companies
to
understand
current
leading
prac;ces
4.
Provide
areas
of
opportuni;es
to
improve
current
customs
compliance
process
Process
Map
for
Air
Freight:
Mapping
Symbols
Step
or
ac9vity
Input
or
output
Transporta9on
ac9vity
Decision
point:
“yes”
or
“no”
Inspec9on/Examina9on
Outcome
for
faster
path
Outcome
for
slower
path
Manual
flow
Electronic
flow
Risks
&
Delays
Red
Required
documents
Purple
Leading
Prac&ces
Report
Our
team
was
tasked
with
inves9ga9ng
the
leading
prac9ces
of
customs
compliance
among
several
SCRC
companies.
The
main
areas
of
focus
were
v Accurate
data
sent
to
customs
v Pre-­‐clearance
of
cargo
v Post-­‐entry
audits
v Entry
volumes
v ISF
performance
v Track
entry
by
filer
Methodology
of
the
Process
Findings
v What
resources
do
companies
require
to
manage
the
customs
compliance
process,
both
internally
and
externally?
v How
do
companies
manage
the
customs
compliance
process?
v What
metrics
do
companies
use
to
measure
the
customs
compliance
process?
v How
do
companies
stay
knowledgeable
about
the
customs
compliance
process?