Unified customs needed to ease China-EU rail pain points

The number of containers hauled to Europe from China set a new record last year.

Lehmacher said problems to be overcome were the slow speed with which goods traveled, the inconsistency of customs clearance, high costs for everything from labor to logistics delays, and the lack of visibility into the status of goods along the transcontinental route.

“When companies ship by air they only need to deal with the red tape of customs and inspections at the beginning and end of a journey,” he wrote in a recent blog. “Ground transportation is less expensive, but it stalls each time you cross a border. Products not only move slowly but are also subject to increased costs, including potentially moving from one truck or train to another. There are also tariffs, arbitrary delays, and possible system manipulation.”

China’s Belt and Road trade initiative, an all-encompassing effort to restore old trade routes and streamline the transport of goods from Asia to Europe, has already received more than $51 billion from China, and more than 100 countries have signed on to free trade agreements, collaboration of some sort, or other partnerships.

Most of the train services from China to cities in North Europe consist of block trains with one customer. The entire train is cleared by customs, and apart from changing trains en route because of gauge differences, the bonded cargo is not touched until destination.

The customs clearance process of less-than-container-load cargo is more complicated because of the many consignees within one container and this adds to the transit time. China-Europe rail freight can take 12 to 18 days, and although it is easily four times the cost of sending containers by ocean, the transit is two-thirds quicker than a container ship.

In 2016, a record 40,000 twenty-foot-equivalent units were carried by train between China and Europe and the number is expected to reach 100,000 TEUs by 2020. This is hardly a drop in the ocean container shipping volume bucket, but could become a direct threat to air cargo if customs procedures are streamlined.

Lehmacher said if the Belt and Road route operated with a single unified customs system with effective methods of tracking the products on board, shipments could move smoothly across boundaries, replicating the efficiency of air shipments with the low cost of land transport. The answer to overcoming the obstacles surrounding speed, inconsistency, costs, and visibility, he believes, lies in technology.

“By investing in the IT infrastructure needed to address these four pain points, companies and countries will generate basic data, which, as it matures and gets structured, becomes invaluable when accumulated as big data. These are complex data sets that can be collected and analysed for insights that serve as a starting point for improving everything, from operations to the development of services, even allowing companies to transform their business models for greater success.”

Lehmacher said a digital revolution would level the playing field for SMEs, enabling them, for example, to adapt production plans to product supply and demand dynamics or identify new markets. With the right IT in place, on-demand manufacturing and warehouse management platforms could connect makers with factories.

“The revived railway, combined with wise technology investments, creates exciting prospects,” he said. “Imagine how half-empty container cars travelling across a desert in Central Asia could advertise their available space in real time — and at a discount — connecting en route with potential shippers looking for a low-cost way to send their wares.”