10 part 1: The Impact of AI Technology with Global e-Commerce Shipping

Voiceover: 00:00:00

Welcome to Outside the Box with Asendia USA, a podcast educating us based e tailers on international shipping topics and how they can expand their global e commerce footprint.

Nick Agnetti: 00:00:10

Hello, everybody. This is Nick Agnetti, host of Outside the Box podcast with Asendia USA with my co host, John Walsh.

John Walsh: 00:00:17

Thank you.

Nick Agnetti: 00:00:18

You're welcome. Special guest today, Jason Rowland, director, VP, maybe even president of compliance of Asendia USA and other subsidiaries. How are you?

Good, how are you doing well, thank you. Thank you.

John Walsh: 00:00:29

Is your official title risk and compliance officer?

Jason Rowland: 00:00:32

It would be. Wow.

Nick Agnetti: 00:00:33

You have many titles, though.

Jason Rowland: 00:00:34

I do. Director of compliance is one.

Nick Agnetti: 00:00:37

Okay, how many do you have?

John Walsh: 00:00:39

How many titles do you have?

Jason Rowland: 00:00:41

One here for the US, one for Europe. Yeah.

Nick Agnetti: 00:00:44

Don't you have one in Mexico, too, senor? Mexico compliance, senor.

Jason Rowland: 00:00:48

It's very country specific.

Nick Agnetti: 00:00:49

I believe so, yeah.

John Walsh: 00:00:51

Wow.

Nick Agnetti: 00:00:52

Gracias.

Okay, so we are going to move forward today to have a very interesting conversation concerning compliance and maybe even, I don't know if we're going to breach into legality, but we've got a lot of things to get after, and I think we should start with. What do you think, John? HS codes. Is that okay with you or you want to go somewhere else?

John Walsh: 00:01:13

Sure.

Nick Agnetti: 00:01:13

You want to walk down?

John Walsh: 00:01:14

We were just talking about. So go ahead.

Nick Agnetti: 00:01:16

We were.

Okay, so from the perspective of working with a shipper, right, an online brand, somebody that is shipping goods internationally, because a quick refresher for everybody, since I know that you all devoutly listen to our show and watch it and like it and subscribe and share it with your friends, your family and closest relatives, that we focus on helping online brands, making cross border shipping easier, cross border logistics easier.

Jason Rowland: 00:01:46

Right.

Nick Agnetti: 00:01:46

And so one thing that's very vitally important, though, is understanding the importance of HS codes.

So, Jason, can you talk to us a little bit about what they mean, what they represent, what the actual digits mean to different countries, different things.

Jason Rowland: 00:01:59

Yeah.

Nick Agnetti: 00:01:59

All things.

Jason Rowland: 00:02:01

Obviously, when you're moving things internationally, there's ways that countries do import and export regulation.

And one of the things that they have to do is make sure that the item that you're sending is properly coded, is properly taxed, is properly dutied, is safe to be transported on a plane, safe to be transported via ocean, or however the route is that you're looking to move it to make sure that the item that they're moving on your behalf is known. So one of the ways that they do that is they have this system called the HS code system. It's a harmonized tariff system globally.

John Walsh: 00:02:35

Right.

Jason Rowland: 00:02:35

Yeah. And the first six digits of that code are an HS code.

And that code is going to tell the inbound customs authority exactly what this item is that you're sending. Is it clothing? Is it a mahogany table? Is it a fridge? Whatever the item is is gonna have a code associated with it.

It's not too far removed from, like, a sku or a barcode that you would imagine would be necessary to do that kind of a transaction. It's an individually specific number for each type of item that they know. This is what we should expect to see in this box if we were to open it up.

Nick Agnetti: 00:03:10

It's an interesting perspective.

Jason Rowland: 00:03:12

Yes. Cause those first six digits are gonna be the item. Right. It's going to be generic, universal to every country, standardized.

They all use the same six digits. After that, you can get more specific. And then those are where we get into the up to eight digits or up to ten digits.

And those are for more country specific items where countries will have different interpretations of the types of items that they will and won't accept. Right. So some countries, I can send dog food from the United States into some countries, and I can't send it to others.

Nick Agnetti: 00:03:45

Like Canada.

Jason Rowland: 00:03:45

Like Canada specifically, yes. So if those six and eight digit extensions of an HS code are country specific and really let them get granular on. Yes.

This is a cotton t shirt, but it's a 50% synthetic blend as opposed to just a straight cotton t shirt.

Or it's made from other agricultural byproducts, like silk, or, you know, something that is either chemically made or something that is naturally occurring, like fur or silk or something like that.

So it allows you to get really granular on what your item is so that it can be taxed properly, so that it can be imported properly, and then everyone knows exactly what they're expecting, because there's obviously different thoughts on. On agriculture. Right. If it's an animal byproduct or something like that, they don't want it. Or they.

They do want it, or they want to charge more forwarders, that kind of thing.

Nick Agnetti: 00:04:41

I mean, what's the latest on the fur trades? I'm kidding.

John Walsh: 00:04:45

Yeah.

Jason Rowland: 00:04:46

You wouldn't think that it would be one of those things that would still be around or would still be necessary, but, yeah, it's. You can't. There are some countries where you can't just pick up and send them a fur coat.

Nick Agnetti: 00:04:55

No.

John Walsh: 00:04:56

So one thing that seems to be an issue with supplements, right?

Jason Rowland: 00:04:59

Sure. Yeah.

John Walsh: 00:05:00

That seems to be the main one. That seemed to be a lot of confusion, I guess. Is that the right word or.

Jason Rowland: 00:05:05

Well, it's one of the areas where there's more varied differentiation between different countries, where some countries will allow, hey, man, send us whatever you want, it doesn't matter, we're good. Like, we'll worry about the value of it and deal with the tax and we'll have it delivered.

But other countries say, no, we don't necessarily want our people having access to that kind of an item or that type of a supplement, or we'd rather them buy it domestically, so we won't allow import of that kind of a.

Nick Agnetti: 00:05:30

Little more nationalistic mentality. Yeah.

Jason Rowland: 00:05:33

So that's, that's kind of the driving force behind the HS codes and what they are and why they're used in the international shipping community.

John Walsh: 00:05:40

So when you talk about them, they're so popular, everybody's on some.

Jason Rowland: 00:05:45

Well, they're required. Right. So in order to get your material accepted by a customs authority, it's one of the line items in the data that has to be there. And before.

So internationally, we started with a regulation called ics two, and that's really where a lot of this stuff started to pop up and. And words like HS code became more common vernacular for the industry. Before, it didn't really matter.

Nobody was really looking to see what these items were to make sure that the item in the box was what was on the paperwork for the.

Nick Agnetti: 00:06:16

Really. So ics two was a pivot?

Jason Rowland: 00:06:18

Ics two was definitely a pivot point where now all of a sudden, customs authorities are looking at the data, they are rejecting items. If they do spot checks and they find out that the item in the box is not the one you said it was in the data. Great.

Now this item is going to be on hold and it's not going to get to its final destination until you rectify the issue with the data and change the code or resend it over again, depending on what it is.

Nick Agnetti: 00:06:45

Let's let every. Ics two. Do you want to just explain what it stands for?

Jason Rowland: 00:06:49

Yeah, it's a international customs regulation that deals with mainly material into the European Union, and it's their kind of attempt at getting hold of what was previously a real wild west type because the.

Nick Agnetti: 00:07:08

First version had to deal with more commercial material. The second version, which is the two import control system two, has to deal with individual direct to consumer goods. And that's where the control.

It's an extra added security measure to help keep EU citizens safe. I think it's very interesting because it was a huge. There was a huge lead up or build up to it.

And then all of a sudden it was like, well, nothing's really happening. And now we find out that, okay, now we're actually going to start policing this more, going into probably Q four, or has it even.

Has it started already?

Jason Rowland: 00:07:40

So, yeah, it's. It's officially up and running. The problem is that different inbound countries have been turning it on slowly.

Nick Agnetti: 00:07:49

Okay.

Jason Rowland: 00:07:50

Right.

Where they're actually doing these checks now, spot checks, inbound to the EU, inbound into the Eudez, a more robust check of these things that are going on, it could even reach up to 100% where if you're not having your HS code match your item description or physically what's in the box, they could start enforcing it at a level of 100% to say that nothing is going to come in to our country unless it has a valid and applicable HS code and that that code matches what we're physically seeing in the box.

Nick Agnetti: 00:08:19

Gosh, that's so significant.

Jason Rowland: 00:08:20

It's going to.

It's going to get more and more cumbersome, I guess, for companies in chiprester to deal with in terms of how they're going to move their things internationally.

It's definitely going to be a wake up call for a lot of companies if they're not ahead of their catalogs and making sure that they have proper HS codes and more importantly, good HS capable descriptions. That's the thing.

John Walsh: 00:08:44

Not generic.

Jason Rowland: 00:08:45

Not generic. So you're not just going to be able to say merchandise or I car.

John Walsh: 00:08:49

Park or especially all these marketplaces.

Nick Agnetti: 00:08:52

What about gift? I'm kidding.

Jason Rowland: 00:08:56

That's. That's definitely one of the famous examples.

Nick Agnetti: 00:08:59

Of what we used to be able to get away with all the time.

Jason Rowland: 00:09:01

We're not gonna be able to do that anymore.

Nick Agnetti: 00:09:03

-: 2322

Jason Rowland: 00:09:16

Something like over here. Yeah.

Nick Agnetti: 00:09:17

So.

And then, you know, because we were coached to basically just be really diligent with our clients and make sure that we were doing catalog reviews and looking at if we were to pull batch tracking and look at it on a granular level, like you mentioned, to say, hey, you're not even giving us HS codes, so at least give us a six digit, you know what I mean? At least give us something.

So I think it's really important for the listeners and potentially viewers out there to know that, you know, I'm not just trying to be a pain in the butt. If you're one of my clients that I am trying to make it so that way, ultimately what it's going to come down to is this.

It's going to come down to either a good, a better, or a poor customer experience.

Jason Rowland: 00:09:57

Sure.

Nick Agnetti: 00:09:58

So it's going to be, you know, we haven't even gotten into, you know, I registrations and those impacts we're talking about just security measures right now in terms of what, you know, customs authorities are requiring for shipments going to the Eudez. EU is home to top, you know, number three largest e commerce market globally is the UK.

And then from there, Germany, I think is number five or number four, maybe number four or five, one of the two. And then, you know, a bunch of the EU countries are in there, too. Yes. So I mean, to make a long story longer. No, I'm just kidding.

I'm not going to use that one. But I did hear that one today and I thought it was great.

John Walsh: 00:10:35

You dropped there.

Nick Agnetti: 00:10:36

Hey, ten piece coming your way. Ten piece coming your way.

No, but it's so important if you're listening and if you're watching that, if you do not have your, you know, your catalog up to date with accurate HS codes, you got to get on that now, especially if you're shipping into the UK is probably a little different just because they're a Brexit, they're not really part of the EU. And the ics two is really more of an EU control.

But I'm positive if you're shipping internationally, you're shipping to France, Germany, Spain, Italy, those countries. Right. And you got to have it together for those types of things.

Jason Rowland: 00:11:13

Yeah.

It's going to be something where if you're not ahead of it now, just because the country that you're sending things to doesn't happen to be enforcing it yet, it's coming for sure. It's one of those things.

It's going to come in, you're going to start seeing things questioned and rejected at the border if they don't have these things in place. Now.

John Walsh: 00:11:31

Do you notice a lot of customers confuse Skus with HS codes?

Jason Rowland: 00:11:35

A little bit. A little bit.

But for the most part, everyone is starting to learn the difference between the two and they're starting to really because it's becoming more prevalent throughout the industry on. It's like a pain point now. Right.

So things are starting to get stopped, which means companies are starting to have delays and then they want to know why and they want to fix it.

So I think at this point they're starting to learn more of what this big scary thing in the corner is is these big hs codes that are starting to rear their head in terms of their logistics and it's starting to require solutions.

John Walsh: 00:12:06

I know we were going to have you on the podcast, talk about canon in that regard for a minute.

Jason Rowland: 00:12:12

Yeah. Canada specifically has more of the stringent requirements, right.

So they want to see not only six digits, but then sometimes they want to see eight or ten digit. Right. Of their specific code for an item so that they can move that item more, more fluidly through their network.

And it is one of those things where your companies are going to need a leg up. They're going to need a little help.

They're going to need the ability to take their catalog to somebody and say, hey, listen, I have a six digit, but I need accuracy of up to, you know, 90 plus percent for eight and ten, you know, additional, additional codes. Right.

So they want to see, you know, catalogs that are efficient and that they can send any item in that catalog up to Canada and have it cross a border and get delivered without, you know, delay or incurring additional costs from a customs broker or something like that that has to go in and do it manually or go in and adjust the data after the fact in order to, to help the clearance process out.

Nick Agnetti: 00:13:11

What do you.

So, okay, before we get too far, I think it's important to, I know I did like a very brief introduction, but maybe give the listeners and even viewers a little background on yourself just.

John Walsh: 00:13:23

To kind of, hey, you jumped right in. You need to give the guy a breath to talk. Bounce out.

Nick Agnetti: 00:13:27

Well, let me tell you, you are a whole heap of help. So let me start with that.

John Walsh: 00:13:31

I have it right here, what he does.

Nick Agnetti: 00:13:33

That's great. You didn't read it then while I jump right in. Okay. Do you mind sharing?

Jason Rowland: 00:13:37

Sure. Absolutely. Yeah. I came out of college and I started, right with the us government in doing transportation security with the TSA.

And I did eleven years with the agency, last couple of which I was a lead transportation security inspector out of JFK where we were responsible for making sure that air carriers and the airport itself, like the airport authority, port Authority here in the US in New York, we're following all the applicable federal rules and regulations that go along with owning and operating an airport.

Those rules trickle down to the air carriers themselves and passenger and cargo operations, and then also indirect air carriers like Asendia who are responsible for putting material on passenger planes. And there are a whole series of rules and regulations and handcuffs that go along with that kind of environment.

Yeah, there's a lot of things that you either can or can't do. Right. And it's one of the big ones, I guess people, you know, one of the buzzwords for, you know, the industry here is known shippers. Right.

That's a big one. Right. So that's another thing I think we'll probably get into a little bit here, but yeah, so I did.

John Walsh: 00:14:54

Have to ask.

Nick Agnetti: 00:14:54

Go ahead.

John Walsh: 00:14:55

Yeah.

Jason Rowland: 00:14:56

So after eleven years with, with the agency, I moved over to the private side and it's been great ever since. Yeah.

Nick Agnetti: 00:15:03

You never looked back?

Jason Rowland: 00:15:04

Never looked back, yeah.

Nick Agnetti: 00:15:06

Okay. So I guess since John already crossed it off the list, any chance you want to talk about known shippers?

Jason Rowland: 00:15:11

Yeah, I think it's one of the things that if people are getting into international shipping, need to be aware of. Right. Because that's one of the hurdles that you must cross in order to get your stuff out there.

It just codes while they are becoming one of those hurdles.

We're not quite there yet, but the known shipper is definitely, you know, bullet number one with what you have to accomplish in order to start moving yourself internationally, especially if you want to do it quickly. Meeting passenger airplanes, you could always do cargo planes and that kind of thing. They're a little slower, they're a little more expensive.

Passenger planes really are the way to go in terms of logistics.

John Walsh: 00:15:44

So you have to have physical address. You have to be there.

Jason Rowland: 00:15:47

Yeah, you have to have a physical address. It used to be different.

You used to have to have that address in, in the 50 states, but now they're starting to have the ability to vet addresses in Mexico and Canada with a little more access to. Yeah, yeah. It actually originated in, it's based on a program that was started in Canada.

The US kind of took it and ran with it and created it into the known shipper program that it's done.

Nick Agnetti: 00:16:12

That a few countries, haven't we?

Jason Rowland: 00:16:14

Yes, we tend to do that a lot, but yeah, it's a good program.

I think it has validity in terms of the security posture that it attempts to enforce on an industry and making sure that companies are owned and operated by legally, you know, law abiding good people.

Nick Agnetti: 00:16:33

That's a good thing. It's a good thing. How does, how does one, let's say I start a. Insert big commerce shopify, insert whatever brand. I start a brand. Okay.

And I'm utilizing one of these companies to operate my online store. How do I become a known shipper?

Jason Rowland: 00:16:49

There's a few different ways. Right. So basically you need to be sponsored by an indirect air carrier or an air carrier. Right. So there, those are the entryways into the system.

So someone at a air carrier or an indirect air carrier like Ascendi is going to put you into the system based on an address and phone number and name. And then that name is taken and vetted by the TSA.

And a known shipper identifying number is issued to the company that is specific to the relationship between the carrier and the customer.

So you could be known to 50 other indirect air carriers, but if you're not known to the one who's moving your stuff today, that's when you get into a problem. Right. So it's not a matter of just getting a number, getting vetted one time, and then you're good forever.

You have to have that number specific to each international movement relationship that you have. And that's on.

It's a requirement for the indirect air carrier to make sure that all their customers and everyone who's a source of material that gets sent internationally can be traced back to a known, you know, unknown shipper.

Nick Agnetti: 00:18:00

Okay.

John Walsh: 00:18:01

So when I was eight, when I worked at UPS, UPS is obviously their mobile carrier.

Jason Rowland: 00:18:06

Right.

John Walsh: 00:18:07

But we mi, we had to get known shipper status because we use commercial.

Jason Rowland: 00:18:11

Air, but we didn't.

John Walsh: 00:18:12

For UPS.

Jason Rowland: 00:18:13

No, it's only, it's a, it's a requirement specifically for passenger air.

Nick Agnetti: 00:18:16

It should be the same for, because FedEx, UPs are their own airlines. Really?

John Walsh: 00:18:20

Correct.

Jason Rowland: 00:18:21

Yeah. Passenger.

John Walsh: 00:18:22

I'm only mentioned because customers never understood what you're. UPS, you can't.

Jason Rowland: 00:18:26

Right.

John Walsh: 00:18:26

We're like, no, we don't use Ups.

Nick Agnetti: 00:18:28

I mean, that's kind of a valid thought, right?

John Walsh: 00:18:30

Yeah.

Nick Agnetti: 00:18:30

You're not in this industry, you would think, right? Yeah, I could understand that. Yeah.

Jason Rowland: 00:18:36

Cargo planes are their own, their own set of rules and that kind of thing. But the known shipper program applies only specifically for, for passenger airplanes.

John Walsh: 00:18:45

I had a question before we go off of Canada real quick. So I've learned I have a large three Pl, yeah. So we have to put the merchant name in. So they've shipped for other companies. It has to be in there.

Jason Rowland: 00:18:58

Why is it, it's one, it's one of the specific, again, it's one of those regulations where the canadian customs enforcements right now are choosing to enforce rules that have always been on the books.

Nick Agnetti: 00:19:11

Really?

Jason Rowland: 00:19:11

They're choosing to enforce them now. Right. Whereas before they were a little more lenient on what they would allow.

Now, I think is a time where everyone says, hey, we have this ics two thing coming. Companies are getting more used to the idea of being regulated more stringently on what they're doing for international import and export.

So let's just use this opportunity while it's in everyone's mind and get all these other things that we want to see done more effectively and efficiently. Let's start enforcing them so that we can kind of raise the rising tide of compliance across the board.

John Walsh: 00:19:44

Is that done so they can audit who the actual person shipped?

Jason Rowland: 00:19:47

In the end, it's all about getting down to who the actual shipper of record is and who they should be, instead of being able to get away with as a three Pl. Oh, I'm the shipper. It's my box that's getting internationally moved.

It's really their way of getting down to a more granular level and saying, no, no, where did this package originate? Is this something that a company purchased and that was sending?

Is this something that they created with their own ip and then are shipping and selling internationally? But who is the actual source of the material? Because in the end, that's the person that you want to regulate.

That's the person that you want to make sure is compliant with any applicable rules or laws.

John Walsh: 00:20:25

How do the marketplaces get around at Amazon, eBay?

Jason Rowland: 00:20:28

How do they do that? Yeah, there are a lot of tricky workarounds and things like that.

Where it comes to the regulatory environment is really starting to shift a little bit as e commerce becomes more of the norm that there's going to have to be a way eventually where companies that are marketplaces can't vet 5 million sellers from across the country in order to say, hey, our material could come from any one of these 5 million different locations, especially if it's, if it's one of the larger marketplace sellers.

So companies like Asendia and other logistics carriers have definitely devised ways to, to make all that material eligible for transport on a passenger aircraft. And there's definitely conversations that we can have about how Asendia does that and that kind of thing.

But, you know, for the most part, I think it's one of those areas where if it's a business that you're in and a business that you want to see and grow into and explore your international shipment, you know, conversations like that are ones we have every day and we're happy to entertain them anytime they come up.

Nick Agnetti: 00:21:30

Yeah, if you look, John, at like, not that I happen to receive Amazon boxes at my house every day or so, but if you look at the ones that are FBA they all say Amazon fulfillment Center. If you look at FBM boxes, they'll say the seller's name, but it'll be the same address.

So it's really interesting and leading just into exactly what you're saying is it has to have the seller information on there. Thanks for joining us today on Outside the Box podcast with Asendia USA. Check back for part two of this conversation on October 30.

If you want to support our podcast, the number one thing you can do is share it on your social media and tag Asendia.

John Walsh: 00:22:09

That helps us get the word out, and we really appreciate it.

Voiceover: 00:22:12

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If you want to learn more about today's topic, email us at ecommerce dot usandia.com and check back frequently for new discussions on e commerce shipping to Canada and worldwide.