AI is on everyone's lips, regardless of industry. Yet, it's the game-changer in cross-border trade and compliance, solving today's and tomorrow's challenges. For postal and logistics companies, AI isn't just a buzzword – it's the key to future-proofing their operations.

    Redefining Compliance Through Data

    As the volume of international package shipments surges in tandem with the growth of e-commerce, regulators have ramped up scrutiny to tackle fraud and tax evasion within cross-border trade. The outcome is a heightened complexity in compliance requirements. Notably, the year 2021 marked a turning point with the Universal Postal Union (UPU) mandating the use of advanced electronic data (AED) for designated operators to pre-report package information. This transformation represents a shift toward more accurate data capture and reporting, fundamentally reshaping how the industry operates.

    In the next three years, parcel data will be used for more than just calculating duties and taxes. It will be an intrinsic requirement for transport security, product safety, and sustainability reporting. The data sent ahead of a shipment will need to confirm a product’s raw materials, report every stage of its supply chain, and quantify its carbon footprint. Without data, there will be no shipment. As the volume of data surpasses human handling capacities, AI emerges as a vital player, ensuring data accuracy and managing the influx of information.

    Regulations Are Moving Beyond Human Capabilities

    Logistics and postal operators have had many challenges thrown at them over the last three years. As well as the obvious issues we’ve all been grappling with – a global pandemic, war in Europe, and an economic downturn – these industries have been hit hard by an onslaught of regulatory changes. Cross-border compliance is an increasingly diverse environment, and regulations such as the STOP ACT in the US, Canada’s CARM importing regime, the UK’s new Customs Declaration Service, and Europe’s ICS2 electronic advanced data regulatory changes are just a few of the changes any business routinely shipping goods across borders has had to contend with in the last year.

    The regulatory environment is now simply too complex for human teams to manage alone. Most senders are focused on keeping their heads above water; perfect compliance isn’t a possibility for many. Instead, their focus is on mitigating and limiting inevitable costly errors. But some will always meet adversity with innovation, and we’re starting to see a bigger change brewing. Operators like DPDgroup, Wish, and Joom Logistics are beginning to leverage data technologies like AI and ML to automate compliance and reporting.

    Consignee Demands Are on the Rise

    Consignees are seeking both transparency and fast package deliveries. Their awareness of the complexities of regulations is limited. Their primary desire is for a seamless and prompt delivery process. Amidst the diverse factors causing delays, regulatory compliance stands as a barrier against customs-related hold-ups. By employing AI to manage compliance and process extensive datasets, the benefits extend not only to logistics operations but also envelop the entire supply chain up to the consignee.

    Cart abandonment for international shoppers is a known issue, with over 40% of US shoppers saying they’ve abandoned their cart because duties and taxes were unclear or unrealistic. For senders already automating duties and tax calculations for compliance, extending this automation to the checkout is a very light lift, providing accurate, real-time calculations to shoppers directly. Similarly, parcel-level data can be leveraged to tackle last-mile delivery issues or reduce carbon output.

    Growing Pressure to Move Toward Green Logistics

    As the global focus on sustainability and environmental responsibility intensifies, the cross-border trade industry is grappling with the imperative to adopt more eco-friendly practices. According to a report by the United Nations Conference on Trade and Development (UNCTAD), the carbon footprint generated by international shipping has steadily risen over the past decade, contributing significantly to overall greenhouse gas emissions. This pressing concern has prompted governments, businesses, and organizations to reevaluate their supply chain strategies.

    In this context, AI assumes a pivotal role in the reduction of emissions and optimization of delivery routes, leading to more sustainable practices. Moreover, advanced electronic data holds the potential to introduce transparency into supply chains, enabling authorities to monitor carbon emissions and product safety, thus fostering a more sustainable trade ecosystem.

    So, Concretely, What Can AI Do?

    Digitalization sits at the center of everything. Improvements in digital technologies provided opportunities for authorities to refine data collection, and it is data technologies in turn that will provide senders with cost-effective tools to augment the capabilities of their human teams. Artificial intelligence is the ultimate data technology. This software analyzes massive data sets, identifying patterns and trends in near real-time, and predicting a set of likely outcomes based on those trends.

    In the context of cross-border trade, AI has a number of applications and a broad range of uses. For postal and logistics companies, AI can streamline reporting and reduce inaccuracies that lead to fines or seizures. For example, it can automate HS code assignment, using product descriptions and numerical values such as weight, volume, price, and quantity – as well as the unique requirements of the customs authority at the destination – to automatically assign accurate codes to hundreds of thousands of parcels in mere seconds. It can instantly screen for denied parties, or accurately calculate duties and taxes for consumers in any destination at point of sale.

    Paving the Future of Cross-Border Trade
    Digitalization has driven significant changes in the cross-border trade environment and will drive still more as improvements in data technologies increase the scope of the data available to both authorities and businesses.

    For postal and logistics companies, AI will soon be a necessary tool – they won’t be able to remain compliant without it. This gives us an exciting opportunity as a sector to not only apply these technologies to meet compliance requirements but to pioneer their use to optimize business processes and refine customer journeys.

    James Doyle is CEO of US and LATAM, Eurora.

    This article originally appeared in the 2023 Global/Cross-Border edition of PARCEL.