Need resource relief for trade and customs? Consider tax managed services.

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Tax Managed Services | KPMG

KPMG Tax Managed Services offer scalable, technology-driven solutions to meet the intensifying demands of your tax function.

The growing complexity of cross-border transactions, compounded by the current tariff environment, makes the trade and customs function particularly well-suited to a managed services model. New tariffs introduce novel concepts such as the valuation of steel and aluminum components and U.S. content exemptions, requiring significant transactional and data management. Managed services can help navigate these complexities by providing scalable resources, specialized talent, and automated solutions—all tailored to meet your needs, when and where you need them.

Dealing with the cross-border data deluge: New approaches needed

Massive complexity is straining the trade and customs teams of companies with a transnational footprint beyond their limits, requiring new skills and better technology. As a result, tax leaders are increasingly searching for new ways to operate the function.

There are numerous complicating factors making life difficult for internal customs professionals: constantly changing regulations across multiple jurisdictions, shifts in supply chains, trade wars, pricing policy changes, employee turnover, and mergers and acquisitions, to name a few.

But one factor is an especially powerful driver of burden and inefficiency across customs operations: managing the sheer volume of required customs data.

Underlying the physical movements of products across borders, trade involves an often-unseen dimension of compliance that supports those transactions. All countries require import declarations prior to products entering, while some also require export documentation. The required information and analysis for every single import declaration is highly complex, technical, and labor-intensive, spanning three pillars:

Tariff classifications: Like a mini tax return filed on every transaction, these need to include taxpayer reference ID numbers and harmonized tariff classifications. While the first six digits are standardized globally, additional digits vary by country, requiring careful attention to local classifications.
Value: Calculating and reporting the value of the product is straightforward when importing from a third party. However, when you’re importing from a related party, the price—generally your transfer price—needs to be acceptable to the customs authorities, which use different tests for different products.
Origin: Determining product origin is more complex than identifying where a product is shipped from. There are volumes of regulations that determine country of origin for the purpose of specific free trade agreements, tariffs, anti-dumping duties, labor laws, carbon rules, and so on, often with complex traceability provisions. Customs authorities, responsible for collecting this data at the time of import, often act as the frontline enforcers of geopolitical policies.

A US industrial manufacturing company with factories in Mexico faced increased volume and complexity in its cross-border transactions as it expanded its operations. The company began to fall behind in creating the free trade certificates of origin in time for the actual crossing of their goods across the border. As a result, it was paying duties on products that qualified for the USMCA and losing customers frustrated by the company's inability to collect the necessary certificates and provide duty-free benefits.

When KPMG stepped in to help, the company had 12 different ERP systems fragmented into 37 input feeds. While company leaders understood the need to automate and centralize this process, the IT team lacked capacity to manage a project of this scale. We identified the required data, helped extract it from their various ERP systems across all formats, consolidated it, and normalized it so that we could apply the global trade management technology to automate the entire process.

In the first year, the new process designed by KPMG led to approximately 75 percent savings in duties previously paid by the company. Over time, these savings increased, and the company now only pays duties on nonqualifying products—less than 2 percent of what it imports. Our specialized trade team also identified additional opportunities, such as a drawback program to secure refunds for raw materials used in finished products.

What customs processes are companies most eager to redistribute?

Managed services excel when dealing with data that is complex and repetitive, and that is exactly the type of strain that the customs function is under.

Harmonized tariff classification

The top headache that companies contract out is the tariff classification of products. This tends to be an extraordinarily labor-intensive exercise that requires understanding each product and the hierarchy of regulations that are used to classify it.

Free trade agreements

Contrary to popular belief, provenance from a country like Mexico or Canada does not guarantee qualification under an FTA. Determining eligibility for an FTA requires a detailed analysis of the product and specific rules around it. This process, while time-intensive, yields a high ROI.

Specific technical skills

A provider can bring in specific skills that may be unavailable in-house, such as duty drawbacks, foreign trade zones, post-entry or import declaration audits, denied-party screenings, valuation and related-party pricing, and more.

Why use a managed services provider?

A managed services provider can bring in the people, processes, and technology to do your daily customs firefighting more efficiently than you could do in-house, so you can focus on driving real business value.

Technical skill: A provider can manage your customs complexity by harnessing a deep bench of professionals with a broad range of technical skills across jurisdictions. It is impractical for even the largest companies to maintain such comprehensive technical knowledge internally—especially if they have a global presence.

Consistency: Different locations within one company often develop different approaches to customs processes. A managed services partner offers centralization, consistency, and an optimized approach while providing the necessary resources and expertise across all jurisdictions.

Strategy: Shifting to a managed services model not only generates efficiencies but also frees internal resources to focus on high-value, strategic business initiatives. This shift can drive long-term growth and innovation for the company in addition to the financial benefits.

Flexibility: A provider will adapt resources to match fluctuations in transaction volumes, ramping up during peak periods and scaling back during slower times. This flexibility ensures optimal support without the cost of year-round staffing.

Technology of course: One of the key advantages of managed services is the access it provides to advanced, purpose-built technologies. While many companies have AI initiatives, few invest in AI tailored specifically to trade and customs. At KPMG LLP (KPMG), we dedicate significant resources to developing business cases for AI, including product classification for customs.

When should companies consider managed services?

Trade professionals are facing mounting pressures as trade issues become more visible within organizations. These challenges can be classified into seven key areas that together will inform your timing.

Trade complexity: As the complexity of trade regulations around the world increases, companies often struggle to keep up in-house.
Large transaction flows: Significant fluctuations in volume create a challenge for companies that have a set level of dedicated resources.
Personnel turnover: Trade is a specialized field, and the loss of an in-house expert can create a substantial gap that may need to be filled by a partner with the right expertise.
Increased enforcement: Along with acting as an enforcer of trade rules, customs authorities also oversee tax collections and audits. These processes can be burdensome and benefit from the expertise of a specialized partner.
Technology needs: Trade can be difficult to manage in a way that’s efficient and compliant without modern systems. These systems can be expensive and complex to implement, especially across multiple countries. A managed services provider can offer global trade management technology, saving time and cost compared to implementing your own system.
Competing business priorities: IT teams often have multiple business responsibilities and may not be able to dedicate sufficient time and resources to implementing a new system without compromising other parts of the business.
Varying expertise levels: With rapidly changing regulations across multiple jurisdictions, it’s difficult for clients to maintain the necessary technical expertise.

As these various pressures grow, it may be time to consider the benefits of a partner with a bench that is deep enough to manage them for you across your needs and jurisdictions.