The Future of Customs Clearance

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Ciara Gumsheimer & Philipp Werner
November 25, 2024

👋 Welcome

Welcome to this week’s edition of the Supply Chain Tech Newsletter and thanks to everyone who subscribed recently! Through this newsletter, our goal is to build an ecosystem of founders, operators, investors, and industry experts who share the same vision.

In this week’s edition, we dive deeper into the world of global trade, specifically, the customs clearance process, and how technology might play a role in improving it. With shifting tariff regulations, country-specific compliance challenges, and the prospect of a potential U.S. trade war, this topic is more relevant than ever. Read on to discover more…

The Future of Customs Clearance

Every year, more than €12 Trillion worth of goods are traded amongst the world’s nations. In 2023, German exports are projected to hit €1.56 trillion, with €500 billion destined for markets outside Europe. International trade is the backbone of countless businesses, and effective customs clearance is critical for maintaining time- and cost-efficient operations. However, the potential for heightened trade barriers under a new U.S. administration is creating urgency around optimizing customs processes—not just for compliance, but for ensuring resilient global supply chains.

The Customs Landscape: Complexity and Risks

Customs clearance involves coordinating a web of stakeholders, from freight forwarders and customs brokers, to importers and government agencies. Around 91.6% of UK customs declarations rely on third-party representation, highlighting the complexity of this process. Freight forwarders typically coordinate international freight logistics, while customs agents ensure that all necessary duties are paid and proper documentation is in place. Some freight forwarders have these agents in house, while others outsource to customs brokers. Moreover, the responsibility and liability of accurate customs declarations can depend on several factors in the shipment, such as the incoterms.

Errors in documentation, missed regulatory requirements, or delays in customs inspections can disrupt supply chains, increase costs, and result in steep fines for shippers. The absence of standardized systems across the EU only compounds these issues. Each country has its own tariff codes, regulations, and declaration requirements. This patchwork system creates inefficiencies and adds to the burden on companies trying to navigate a highly fragmented compliance landscape.

Adding to this challenge are specific pain points, such as 

  • Tariff classification errors: Misclassifying goods can lead to unexpected costs and fines.

  • Inconsistent intellectual property enforcement: This complicates the process for IP-sensitive goods.

  • Varied requirements for packaging and labeling: These vary not only by country but sometimes by industry or product category.

Currently, the market is dominated by large international shipping giants like DHL and FedEx, which provide manual full-service broker solutions. However, these processes are often entrenched in manual workflows, leading to complex and time-consuming customs flows. In this traditional setup, delays and additional fees are common, as incomplete or incorrect paperwork can result in increased shipping times and costs.

Customs Declarations: A Key Bottleneck

At the heart of the customs process is the declaration—the document that details the nature and value of goods being imported or exported. Yet, without a unified EU-wide IT system, declarations remain fragmented and error-prone, as the declarations must be made to the respective local authority. Mistakes here can lead to fines, shipment delays, and even revoked authorization for customs activities so that many companies build costly buffer times into their supply chains to mitigate these risks. Additionally, there’s a growing shortage of experienced customs agents. Many spend their time handling routine declarations rather than focusing on complex cases where their expertise is most needed.

This inefficiency represents a significant opportunity for innovation. The use of technology, particularly AI-driven solutions, is showing immense promise in automating and improving customs workflows. Additionally, the EU is taking steps to address these issues. The EU Single Window Environment for Customs, a regulation passed in December 2022, is set to roll out its first phase in 2025. This initiative aims to enhance intergovernmental exchanges at EU borders, paving the way for more harmonized and tech-driven customs solutions.

How Startups Are Driving Change

We are increasingly seeing startups building for customs and are excited by the potential of this space. These solutions are often leveraging LLMs and predictive analytics to structure the widely unstructured customs data, adapt to ever-changing regulations, automate repetitive tasks, and offer real-time compliance monitoring. By replacing manual, paper-heavy processes, startups are enabling faster, more accurate customs operations, unlocking significant savings and efficiencies. 

Some examples include iCustoms, Declarium, and Nabu, who are using AI to speed up customs document processing and help customs agents work more efficiently and focus on the more complex cases. Others are starting out in a more specific problem area, such as Traide, who are building out a tailored AI for the trade classification of goods, ensuring compliance with tariff codes and lowering administrative burdens, or Digicust, who are building AI agents on top of existing customs tooling. Companies like Raft or AiDock are working to automate and simplify entire customs workflows for freight forwarders and brokers. Finally, some companies such as CustomsSupport are leveraging technology to become digital first brokers, essentially running a digitally enhanced service business. 

The future of customs will lie in system harmonization and the digital transformation of processes. AI-driven platforms are poised to redefine the industry, helping businesses adapt to evolving trade policies while reducing reliance on costly manual interventions.

If you’re building in customs, we’d love to hear from you!

Sources: 

  • Value of exports from Germany by country group in 2023 I Statista

  • Customs declarants and declaration volumes for international trade in 2023: commentary I UK Government

  • EU Customs Strategy I European Comission

💡 Interesting Reads

  • Making trade faster, safer and more resilient: Four decades of innovation I UN Trade Development

  • How Trump’s Election Win & Tariff Policies Could Impact Global Shipping & Supply Chains I FREIGHTOS

  • Trump's Win Is Already Scrambling Supply Chains I Business Insider 

  • When Tariffs disrupt Global Supply Chains I Harvard

  • Navigating the challenges of AI adoption in procurement I Supply Chain Dive 

  • Indian importers face freight rate hike shock out of Asia I The Loadstar

  • What does it take to strengthen supply chains today? I The Verge 

💸 Funding Rounds

  • Dublin-based Customs Window raises €800k to tackle the growing challenges in customs declarations I EU Startups 

  • Trace for Good raised €3.5 million in a seed funding round led by Hi Inov and Ankaa Ventures I Nordic9 

  • Paris-based Welii rebrands to Najar; bags €15M to help companies with procurement and financial operations I 10 Silicon Canals 

  • Bonx raises €1.1 million in a pre-seed round led by Dynamo Ventures, with participation from Lakestar and Prequel Ventures I 9Nordic

  • Düsseldorf-based Retraced secures €15 million Series A to make fashion supply chains more sustainable I EU Startups

  • Qualifyze raises $54m Series B funding I Tech Crunch

  • London-based Ferovinum a funding and supply chain platform for wine and spirits raises over €20.8 million I EU Startups 

  • VELA lands €40M to revolutionise maritime transport with wind-powered vessel Trimaran I Tech Funding News 

  • Senvo Raises €2.5M in Funding I Finsmes 

  • Dexory nabs $19M to bring visibility to warehouses through analytics and autonomous robots I Tech Crunch

  • Omnea raises $25M to tackle the painfully annoying procurement market I Tech Crunch 

👷 Jobs in the Industry

Interested in working in Supply Chain Tech? Here are some startup-ups and scale-ups hiring across a variety of roles:

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Supply Chain Tech Newsletter Team

Philipp Werner is an operator-turned investor and Partner at Project A. He specialises in investing in global supply chain technology and serves on the board of directors of related companies like Relay, Metycle and Enapi. Philipp also launched the Project A Studio, partnering with founders at the pre-idea stage, and previously worked hands-on with 25+ VC-backed startups including Sennder, Trade Republic, and Spryker. 

Ciara Gumsheimer is an Associate at Project A covering global supply chain technology and climate technology, with a particular interest in vertical and sustainable supply chains. Prior to joining Project A, Ciara worked at a FinTech startup in Berlin, after completing degrees at the University of Cambridge, UC Berkeley, and EDHEC Business School.

Project A Ventures is one of the leading early-stage tech investors in Europe with offices in Berlin and London and we are early backers of the logistics unicorn Sennder. We have invested in  some other notable companies in Global Supply Chains, such as Pactum, Metycle, and Relay. In addition to $1bn assets under management, we provide our portfolio companies with exclusive operational support by our team of 100+ in-house experts including all areas from Tech and Product Development to Talent Acquisition and Marketing. Other notable portfolio companies include companies such as Trade Republic, KRY, Spryker, Voi, Catawiki, and WorldRemit.