What are the ICS2 Release 3 EU Customs Requirements for Freight Forwarders

Annik  00:06

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Lalo  00:39

About a couple of weeks ago, we had a new segment with Anne where we announced or not announced, but just reported on something that was kicking in for December 4, for shippers into the EU more specifically of interest, of course, because we are first and foremost a US based podcast, but for us forwarders and shippers, etc, they’re going into the EU some reporting requirements that they need to they need to be aware of. So I reached out to Emily Corey, who’s been on our show before long, and not together with her mom, but her mom has also been on our show before. Maureen and both have been very great guests, and she reached out to me and said, Hey, y’all maybe want to report on this, and we did for the news with our very limited knowledge and resources and it can I barely skim through it. And Emily was really nice. And said it was pretty good. I know she was being nice, but, but anyway, so I invited her, and I said, Let’s make a full episode out of this. And I invited her, and she invited a partner over again, from from, from the EU, in this case, the UK, and we’re gonna dig deeper into this. Andy, so this program is called the ICS two, and so I don’t botch it up. I’ll just let Emily explain what ICS means, and then we’ll bring in her, the person she invited, Mr. Martin Palmer, so just as a brief or quick reminder, Emily is from the woodland group. She is, she again, she’s been part of our show before. She’s She’s the woodland group. Is a freight forwarder and logistics provider, etc. You can look her up from the show notes below, and then we’ll introduce Mr. Palmer here in a bit as well. Thank you, Emily, welcome.

Emily Cori  02:39

Thank you. Alo and handy? Yeah, I reached out because it came across my desk regarding ICS two release three, specifically, which is maritime related, and they already have had the release one and two. And release two actually did involve airway bills and everything like that. So this is the next step. And right now, what we’re seeing, at least as a freight forwarder that goes directly into the EU, UK and other areas, is that we’re looking at House Bill level data now. And currently, carriers have been doing this for a little while. They’ve been implementing it slowly over the past summer, requesting the information from us as a freight forwarder, requesting an eORI number, if it’s going into the EU. That eORI number is for the ultimate consignee in the EU, as well as their address and location. What’s interesting about this as well is the actual filing, the ens filing, it’s called this, will also be required for shipments that stop at the port, an EU port, but don’t necessarily get offloaded at these EU ports. So even if it’s going to, let’s say India, or somewhere else outside of the EU. You’re still required to give this data if it’s making a stop in the EU anywhere. So that was interesting from a freight forwarders perspective, especially because sometimes it’s difficult to get the information from your customers. And I thought it was a good idea to actually do this so other freight forwarders aren’t left in the dark when it fully comes through. I guess now, actually, for a lot of carriers that are requesting this information, most freight forwarders shouldn’t have too many issues from the carriers, because it is a requirement that the carriers get this information before it even is loaded onto their ships at the port of loading. So it’s very interesting to see this. It’s very similar, I’d say to you know, an ISF filing, and essentially the EU is looking to get more data on what’s coming in and out of their country. I. Only understand it from the US freight voter perspective. So I asked Martin Palmer to join me. He’s an expert on the EU, UK side of it, so he can definitely explain more of the all encompassing changes of ICs, too. From my perspective, there’s a lot to discuss and try to help others understand what this release three means and what the other releases also mean for a freight forwarder trying to be competitive in the EU market.

Andy  05:35

Well, and with that, I mean, there is a lot I’m looking forward to this discussion, because there’s a lot there. And the main thing that I was hearing it’s one thing to provide bill of lading data for the destined European or European destinations, but then there’s also anything transiting the US, excuse me, transiting Europe. They’re wanting this thing, but we’re asking for the same thing in the US. So it’s just a reciprocal type process here. So I get that so well, Martin, what about you? Is like and bringing in this kind of stuff, you and I have gone back a few years, as you just reminded me, and it’s, it’s good to see and talk with you again. But and folks, this guy, he’s going to forget more than I’m going to get to learn on some of this. So this is great. So Emily’s teed it up there, as far as the basics and providing information, what more do we need to know about this?

06:38

Well, it’s a, almost a work in progress. And you know, Emily refers to it as ICS two, wave three. But you can guess by that it’s like a blockbuster movie. There’s been previous films released, and it actually goes back to 2005 when the foundation was laid for the initial ICs, and it was really part of the European Union’s response to the 911 tax, 911 attacks, and the change of focus from revenue collection and, you know, tax and sales tax and import duties being collected more to a greater focus on the safety and security element of international trade. So for for the integrators, it was introduced as a pilot around about 2007 2008 which ran for some time, and then we saw that that sort of develop into a more general release to a wider audience, round about 2011 so we’ve seen various stages of release. We’ve also seen an improved sophistication of the systems that have been used to, number one, capture this data from non european origins, and, as importantly, an improvement in the risk assessment tools that that are available at the moment we’re talking about ICS three. We’ve already had two sections of wave three already this year. This is the second section, and the last section of development, which is aimed at railroad carriers and road carriers, will be introduced during late spring or mid spring 2025

Andy  08:46

so you have, as I’m hearing it, then probably air cargo and air Express. Then in this section is in more of the ocean side of things. Is that right, absolutely.

08:57

So this is the back end of the international supply supply chain, not because it’s the back end, but it’s probably the biggest one to tackle. And

Lalo  09:09

I guess the significance behind this, and the reason Emily brought it to my attention was because it, like you said, Martin, it’s been done in in several phases or waves, and recently, on December 4, was the biggest one, the most recent one, correct?

09:27

The most recent one? Absolutely, absolutely. Well, okay,

Andy  09:31

so I guess my question is, let’s, let’s take through a general scenario. Here is the expectation. So we’re going to be talking right now about the the ocean mode of transportation, but I know that I’ve always said this, Martin, is that if you in the in the window of time, in your preparing your shipments and all that, if you can meet in the window of time. For the air express mode of transportation, if you can meet all of the information requirements, you apply that same process to other modes. You shouldn’t have a problem in meeting these requirements, because the you can imagine air Express is going to be a very tight window. And secondarily, that air cargo in supplying the information. So then you know when you’re ready to tender shipment to ocean or rail or truck, and when it comes you should be right on top of it. So in looking at it again, is preparing the information, so that all of the required information. This is my approach, I guess is what I’m saying. All the information is on the paperwork before the origin, Courier, Cartage, agent, whomever that is, when they go to pick up that shipment off of the dock. It’s got everything that’s already there on that paperwork. If that’s the case, and I’m talking any special declarations, Harmonized Tariff numbers, you know, the entities to the transaction, the values, the weight, all that’s on there. When they pick it up, you should not see or you should minimize the number of exceptions. Well, the point is, is that if you’re preparing that information for the paperwork that go on the shipment hard copy, then that electronic information is in your system that you would then enable to transmit to other folks. But if we take that approach ideally, and we work from there, then you can, you know, any deficiencies, people can work on it. So let’s take that scenario, Martin, and let’s go through the I’ve got to ship it, and let’s say it’s going to be in a 20 or 40 foot container. Let’s say a 40 footer, and I’ve got that thing packed full of all kinds of goods, and I’m sending it to, let’s just say, for right now, I’ve got one that’s going to France, and I’ve got a 20 foot container that’s going to South Africa, but it’s going to transit a European port. Okay, so I got two scenarios going here, and I’m ready to go, and they’re going to depart on the same vessel out of the US. What do you take it from there? What we should be

12:28

doing? Yeah, I think you need to take a slight step backwards before you go to that level of data. You know, the concept of ICS was almost a parallel data flow to the traditional data that we used for import clearance in countries. So we’ve been used to, you know, in our past, cases the likes of Liege and Paris and other points being the places where the integrators, as an examples, aircraft would land in Europe. They would then be trans shipped, and they would go on to Madrid, or they go on to Budapest or somewhere. And it would when they got to those countries, they’d be doing the customs clearance and accounting for the duties and taxes with the ICS concept. It was about first point of entry into the European Union. So you send a ship into Hamburg. It’s got material for all over Europe, which may be trans, shipped by road into those countries, or the ship may go on and hop to you know, Rotterdam or zborga or some other European port. The concept with ICS is that the safety and security elements would need to be managed and controlled at that first point of entry. So when that ship hits Hamburg, everything on that ship destined for the European Union union or transiting through European Union waters would need to be controlled from a safety and security viewpoint. But your initial sort of explanation stead right? It’s about data, and you know, with it, with our history and our background. How many times have we had the conversation with colleagues that exports are easy, but imports are difficult? I still got to the point do it right the first time, get the data, set the documentation in place, complete, timely as well, which is often a problem. You know, sometimes companies get it right, but they’re a day late, which is no good. It’s like turn it up after the party is finished, as such. So to me, it’s about that concept that if you want hassle free international transport and in the. US, the Authorities are expecting exactly the same thing as other countries, then you need to make sure that you understand what it is that you need to complete, and make sure that you do that job, whether it’s physical, on paperwork or it’s digital in data formats,

Andy  15:17

Martin, you’re hitting on something that is very important to me is that, again, doing it right on the front end. And when do you have time to do it over if that’s the case? And so often import compliance folks will say, I don’t care what’s on the shipment. As far as paperwork, you use, what I give you, case, import, maybe, classification, whatever. And I always look at them and go, Well, why is it that you don’t trust the paperwork that goes on the shipment? And they’re going, Oh, we don’t trust our suppliers to have accurate information right there. I’m going, then there’s a breakdown in their own supply chain in that and goes to all the way to the purchasing department. So folks, if you’re listening to this and you’re trying to figure out, okay, there’s more requirements coming from Europe, but it all comes back to doing it right on the front end. Emily,

Lalo  16:11

how about you? Y’all are stateside, your freight forwarders, logistics, et cetera. You know, you’re also Customs Brokers coming into the US. But what are you all doing? For example, when you do have to prepare for going into the EU, if you have a client that that you that you’re shipping to, I mean shipping for, sorry, so what? What is it that as a US company, you’re trying to do to, you know, just make sure you’re complying with all of this. Yeah,

Emily Cori  16:41

so Andy brought up a good point in regards to data. You know, you always want to have good data in to get good data out. You want to make sure you’re getting all the accurate information from your customers, whoever you’re shipping on behalf of, and sometimes it can be difficult, as a freight forwarder, as many companies know to get that direct data, especially if you’re working with other agents. I think what is a part of it, or on top of that, is the fact of House Bill level data for release three. So it’s not only the master Bill data being put in to these into ICS two for ens filing. It’s it’s also the House bill level data. And what we’ve come across as a freight forwarder is what carriers will either support and do the house filings on your behalf, which would require you provide all the data that they need to do the house filing or as a freight forwarder, would you like to keep that data privatized and actually become a house filer yourself? You spoke about it a little bit in the news with onic, and it’s essentially what you as a freight forwarder can handle is it easier for you to allow the carrier to complete these on your behalf, or again, keeping your data closed off to the carrier for whatever privacy reasons you would prefer as a freight forwarder, whether you don’t want somebody swooping in and taking your customers, or If you want to ensure you know you’re keeping your customers information separate, and they appreciate that as well. So there’s a couple of different options for freight forwarders to handle these ens filings. A lot of the times it’s the carriers that are going to do it. But we’ve also noticed that some carriers are charging for these filings on top of the if they’re doing the house filings, I should say so there’s different types of filings. There is this straight bill of lading, there’s the house and the master level. And there can be multiple filers that go into ICs, two for these shipments that make it so, not just the carrier is required to do this. It can be the freight forwarder, if the freight forwarder sees that as their opportunity, or something that they can handle and something that they want to do. If a freight forwarder does decide to become a house filer, even though they’re in the US, let’s say they can actually get an eORI number with a local customs authority in the EU. Once that’s done, they also would then apply for what’s called the deployment window, and that would be when they are fully set up to actually do the house filings directly into ICS two. So that’s an option that some freight forwarders are looking into. I myself am looking into that for our US side, and it’s really up to the freight forwarder in that regard, but also checking what carriers will support with the house filing as well, because not all. Carriers at the moment are supporting with the house filings. So there’s a couple of different aspects of how it can be done. You’re not going to be left out in the cold and not able to ship anything to the EU because you can’t do a house filing. There’s definitely ways to go about it still, and there are carriers that will do it on your behalf, some are charging, some aren’t at the moment, but would not be surprised if they do in future or again, like I said, doing it on your own, and just making sure that you’re properly set up directly into ICS two, if you’re doing it on your own, that data is then stored in ICS two and captured in the system. So what would happen is, if you do the house filing, you let the carrier know you’ve completed it with your eORI number, and it can actually connect directly back to the carrier. You don’t have to actually provide them with the House bill information. That way it actually would be connected to that shipment once they do the master Bill level, Martin also correct me if I am wrong, but that was how I was informed of how it’s done and what I’ve seen so far of what the integration process would be if a US freight forwarder, or not even just US, any freight forwarder that is trying to shift through the EU, or just if they have to stop in the EU from the carrier.

21:32

And I think Emily raises some important points there. That is probably the biggest change with this release that we’re seeing now, the ability for house filers, either directly or indirectly, to take control of their own I was going to say destiny, but it’s privacy more than destiny, in many Ways, traditionally or Historically, it’s been the transporter that had the responsibility to make the submissions on behalf of their customers. So if you think of, for example, an American Airlines aircraft going into Europe with cargo on board, they will have cargo for 50, 6070, different customers, and they were actually responsible for making the submissions at the first point of entry. So now with this release, as Emily was saying, it opens up other opportunities for more direct control of your own data. I

Emily Cori  22:42

was just going to say, I think the overall theme of this is how much data you want to provide. What do you want to keep private? And yeah, every you know, as Martin mentioned, this ICS two was in relation to every other the global security filing that’s out there right now. So it’s a matter of your own data security and how much you want, want to provide and can provide, in regards to how you’re set up as a company as well, right?

23:12

And a lot, a lot of this information isn’t it’s not really new information, right? You know, with the exception of the eORI number, the registration number, which is a one time off process that you have to go through. Yeah, we’re talking about pretty standard stuff, you know, clear and precise descriptions of commodities in the shipments. We’re talking about the customs HS six code, the Harmonized System code, valuations, good quality name and address information, that type of information, so we’re not talking about information that you have to set up a whole new department to obtain. And I think the frustrating thing really is being a past carrier of cargo, is that this information is usually available with many customers. It’s just that it’s in a different box in the, you know, the supply chain process, and it’s opening that extra box and just plugging it all together to make it work. So it appears to be quite daunting on one side, but the reality is, it’s, it’s really the data we’re all already using. Yeah,

Lalo  24:28

and that’s what I was going to say. I was about to come in on about that, and I’m glad you said that, because me and and my IT background. I came from a background where we, I developed software solutions for international trade. I mean, we did cross border, invoicing and manifest everything, you know, just just software. Just call it GTM software. To me, it just sounds everything’s there anyway. It’s just a matter of putting it together in the either format or requirement that they need, and then just providing that so. That’s That is the good news. The other thing I was gonna say and ask Martin, before we started recording, I really found that really interesting, the way you explained about ICS being being around and like, the history behind it. This is not just something that that the EU came up on a whim last year and said, Let’s do this, you know, just to, just to make people, drive people crazy on like, yet another requirement, or whatever, it’s not something new. It’s not, technically, it’s not something new, I guess I should say, but you, you were explaining a little bit about the background and history of that. Can you? Can you explain a little bit more about that, just to get a little more perspective as to how this came along?

25:39

Yeah, of course. I mean, it really, I think I mentioned earlier on in the discussion, it really came about as the EU’s response to 911 attacks. And, you know, in the US, we had the introduction of CT Pat and acas, which really is a very, very similar process, and, you know, as with a cast the you know, the ambition is, through Advanced Data Processing, to actually even get to the degree where you can issue a do not load instruction so it doesn’t actually get on a ship. It doesn’t get on an aircraft. It doesn’t get on a truck from the from the origin station. But it evolved in as with a lot of these things, sometimes you have to create new laws and legislation to put these things into, into plan, into progress as such. And we saw all of that happening 2005 through to about 2008 and then it really came into its own in about 2000 the 11, with the initial focus, is on, on, on, more air control shipments, because, you know, as Andy was referring to earlier on, the lifespan of those shipments is far shorter. We’re talking about hours rather than days or weeks with a deep sea transaction taking place. So the initial focus went on those and we’ve seen, really, since about 2017 various waves or phases of ICS taken out to more people. There’s been a burst in the last few years where we’ve seen, literally, in the last couple of years, we’ve seen all air cargo, postal operators, people like that, being bought into the requirement for data capture. And literally, this year, it’s really gone out to deep sea freight forwarders. The focus has been on those and we’ve got to remember that there’s a lot of focus on air freight, but still, about 90% of the world’s cargos move by deep sea. So when we talk about volumes, they’ve covered the 10% quite well and now it’s the 90% that needs to play catch up on it, but it is quite defined. A lot of the problem is about the the accuracy of the data. You know, is it classified correctly? Are the way the goods described is that adequate for customs or security agencies processing of the material? So quite often it’s not whether Have you got it, but is it fit for purpose in that process? And like we touched on a few moments ago that the House filers is really the big development in this particular release, and then spring next year we see the last stage of it, which will be for for rail and road operators.

Lalo  28:57

Amazing. Okay, great. I guess, did we exhaust about? Oh, I did have a question actually. Let me, let me ask you. In reading and researching this, of course, I know very little about the EU process or anything like that, but here in the US, we have a program called ACE, which you’re probably familiar with. Is this compare anything to that? Or is it a component of that like to the EU’s version of ACE, or is it a step towards that? Or how is that going to like work into the whole well

29:29

that? The thing is, you know, it’s, you know, we in the UK, obviously left the EU a few years back with the infamous Brexit. Now, what we have in Europe is, although there was a union of 27 countries, it has been 27 different clearance systems and and data systems, which, over the years, are coming together or being pulled together to make sure that you’ve got some. Them into connectivity of the different data systems now the EU customs reform, which is scheduled for 2028 scheduled to start in 2028 through about 2035 that brings in the ambition to achieve a single data platform for all the data to be processed. And it’s multifaceted in the sense that it’ll be not only for security purposes, but it’ll be customs clearance purposes, duty and tax collection, a whole variety of different activities. And then when we get to that stage, you could arguably say it’s equivalent to something similar to the ACE requirements. At the moment, we’ve got 27 different ace setups, which can be a tad confusing.

Lalo  30:56

Okay, well, that makes sense. Then, yeah, again, I wasn’t aware of how that might have been either phased in or worked out. And I mean and so that that totally makes sense, Emily, anything else that you might want to add before we close up,

Emily Cori  31:12

just talking about data again and the accuracy like Martin mentioned with HS, codes, addresses and so forth. This release also will have potential holds if the information isn’t good, similar to a customs hold, where they’re actually going to request more information. So what’s called an RFI, they’re calling it, and there are potential changes that will say to the carrier, do not load, and that can cause a lot of issues for anybody who doesn’t have the right data being put into the system, whether you’re having the carrier dude on your behalf or not, just as a update that they are checking what you’re putting into those documents. And there can be holds before it even leads support or even gets to the port after the information is put in earlier. So for that, just to add in there. But predictions for 2025, I think, as it is every year, it’ll be interesting,

Lalo  32:15

especially with a new administration, I guess so, right? Yeah,

Emily Cori  32:18

I think it’ll be interesting, and we’re just going to have to see what happens, sure,

Lalo  32:23

exactly.

32:24

But I think there’s an important point to bring out of what Emily just said about the holds as well, that the whole industry is works on a many to one basis. And what I mean by that is in an aircraft container, you have many shipments going into one container that belong to different people. In deep sea, you have a 44 to 24 which could be full of shipments from one to 300 different companies. Now, if they are transit in Europe for whatever reason. And there’s a problem with a particular shipment that didn’t get stopped at origin before it was shipped. Then that whole igloo, that whole container, is going to be impacted. You know, it may, it may be released, but the point, the point being made here, is that you’re going to disrupt the normal flow of that container for one incomplete, inaccurate transaction that is not conforming to the new requirements. So it’s we’re not just talking about tough luck. You know, this is one shipment that’s going to be impacted. We’re talking about that one wrong, incorrect, inaccurate, late transaction impacting potentially a 40 foot container of 1000s of shipments. So this is it’s pretty serious. If you get your act together with your data and your paperwork at the start of the process, it should be less scary, and the prediction for 2025 is more enforcement.

Lalo  34:13

Oh, yeah, without a doubt, yes. I agree with that one. Yeah.

Emily Cori  34:19

Awesome.

Lalo  34:20

Okay, Emily and Martin. Thank you so much. And just as a reminder to everybody in the audience here is that we will have Emily and Martin’s contact information. It will be on the show notes. And then, of course, if you’re watching this on YouTube, you’ll see it underneath their their name, I’m sorry, their their screen when they first came up, you know their name and and you know their company name, etc. So I mean, other than that, I thank you all for tuning in and listening in. Emily, thanks for pulling this off very quickly. I really, really appreciate it now. But Martin, also thank you so much for. Joining us. I know it’s way past high tea for you. I’m sorry we kept you past if it’s any consolation, I am drinking tea so hot tea, in fact. But thank you very much. Thank you all for joining us, and hope to have you all back in on our show here in the future.

35:23

It’s been great. Thank you. Thank you all. Thank you very

Lalo  35:27

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