why choosing the right importer of …...why choosing the right importer of record is the key to...

WHY CHOOSING THE RIGHT IMPORTER OF RECORDIS THE KEY TO PREVENTING CUSTOMS CHAOS

Table of Contents

Why Choosing the Right Importer of Record is the Key to Preventing Customs Chaos

Abstract

Introduction

Globalization by the Numbers

The Role of Importer of Record

Addressing Supply Chain Complexity

IOR Case Study: Brazil

Dissecting Customs Chaos: Four Common Culprits

Top Tips for Preventing Customs Chaos

About Fisher Clinical Services

References

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Abstract

Since it began globalizing clinical trials some two decades ago, the biopharmaceu-tical industry has been reaping the benefits of speedier drug development and time to market by conducting studies in every corner of the world.

Benefits notwithstanding, all progress comes at a cost and globalization is no exception. While an enlarged clinical trial universe is quenching the industry’s thirst for speed at the recruitment level, it is also multiplying the operational and strategic complexities of supplying clinical trials.

The failure to circumvent these mounting complexities comes at the cost of “Cus-toms chaos,” an expression coined by supply chain professionals. Customs chaos occurs when avoidable errors result in Customs delays, preventing on-time delivery of clinical materials to investigator sites.

This paper examines the supply challenges that accompany the globalization of clinical trials, the role of the IOR in addressing them, and explains how to choose a knowledgeable and experienced IOR capable of preventing Customs chaos.

Since it began globalizing clinical trials some two decades ago, the biopharmaceu-tical industry has been reaping the benefits of speedier drug development and time to market by conducting studies in every corner of the world.

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Introduction

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Benefits notwithstanding, all progress comes at a cost and globalization is no exception. While an enlarged clinical trial universe is quenching the industry’s thirst for speed at the recruitment level, it is also multiplying the operational and strategic complexities of supplying clinical trials.

The failure to circumvent these mounting complexities comes at the cost of “Customs chaos,” an expression coined by supply chain professionals. Customs chaos oc-curs when avoidable errors result in Customs delays, preventing on-time delivery of clinical materials to investigator sites.

The inconvenience of delays is often the least of a sponsor’s worries. Considering the fact that temperature-controlled biological products are high-risk and high-cost – some valued at as much as $1,500 a vial – delays can bear an equally high price tag. The need to prevent such delays underscores the importance for sponsors of selecting the right Importer of Record (IOR). The IOR is responsible for the legal importation of clinical materials and for ensuring that the supply chain does not derail for reasons that are preventable. A knowledgeable and experienced IOR accomplishes this by bringing control, compliance and visibility to the supply chain through careful planning, time-tested processes and limited handoffs.

The result is reduced lead times and smooth passage through Customs, culmi-nating in faster, less costly drug development with better patient compliance – the benefits that drove globalization two decades ago and continue to do so today.

This paper examines the supply challenges that accompany the globalization of clinical trials, the role of the IOR in addressing them, and explains how to choose a knowledgeable and experienced IOR capable of preventing Customs chaos.


ImporterOfRecord

Introduction

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Considering the fact that temperature- controlled biological products are high-risk and high-cost – some valued at as much as $1,500 a vial – delays can bear an equally high price tag.



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While the price of globalizing clinical trials has been the operational and strategic complexity of supply clinical trials, it’s a price the biopharmaceutical industry is willing to pay for the competitive advantages of speed and savings in drug develop-ment.

Today, roughly two decades since the industry embraced globalization, more clinical trials are underway than ever before in the coun-tries of Asia, Africa, the Middle East, Eastern Europe and South America. While that is good news, the volume of trials taking place in an enlarged clinical trial universe is driving sup-ply chain complexity.

ClinicalTrials.gov, the registry of studies in the United States and around the world, docu-ments the mounting impact of globalization over time. In late 2016, the registry listed 221,467 trials taking place in 192 countries. In 2000, the year the online registry was estab-lished, ClinicalTrials.gov listed 5,633 studies.1

Aside from the sheer volume of trials, com-plexity results from varied import require-ments in many countries. Complex rules are more common in nations characterized as emerging and frontier markets, many of which are relative newcomers to hosting clinical trials.


Progress inevitably comes at a cost and the globalization of clinical trials is no exception.

In addition, despite substantial progress toward global regulatory alignment, cus-toms requirements in many countries continue to evolve. In some cases, they differ

radically even amongst neighboring nations. Russia and Ukraine share a border, for example, but not importation requirements.

These operational and strategic complexities continue to multiply, thus adding to the challenges of the IOR. Finally, it is important to acknowledge that shipping clinical supplies is a complex process in itself, requiring exceptional care, attention and focus by all parties in the supply chain.

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IOR is a customs term that originated in the U.S. to describe an entity or individual who assumes the responsibility for ensuring that legal goods are imported in accordance with the law of a place or country.2 In other countries, the term used is simply that of Importer.

The description of an IOR’s responsibilities appears straight-forward, but in the clinical trial universe, the IOR does a great deal more than legally import goods. It is the IOR who ensures that the right clinical supplies reach the right investigator sites at the right time, instead of languishing in Customs. This makes the IOR an indispensable partner in every global trial.

Some small firms – often those mounting their first global clinical trial – fail to understand the value and impact of the IOR on global supply chain management. In re-ality, a knowledgeable and experi-enced IOR can spell the difference between materials reaching study patients on time or remaining in Customs for hours or days, or even being rejected and impounded.

“You’d be surprised at how many sponsors ship materials without an Importer of Record,” related a clin-ical supply chain professional who agreed to share his experiences and perspectives. “The materials get stuck in Customs and every-body is running around in circles.”

“You’d be surprised at how many sponsors ship materials without an Importer of Record. The materials get stuck in Customs and everybody is running around in circles.”



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IOR Responsibilities

The IOR is responsible for every facet of importing clinical supplies into a country. These responsibilities include:

• Ensuring that imported goods comply with local laws and regulations. Since local laws and regulations evolve continuously, the IOR must have a comprehensive and up-to-date knowledge of local laws and regulatory require-ments for clinical trials in both the originator and destination countries. This includes knowing about proposed or impending changes that could impact the supply chain. A savvy IOR supplements knowledge of laws and regulations with real-life experience and intelligence as a result of on-the-ground presence in many countries.

• Appointing a Customs broker to effect imports. A Customs brokers acts as a professional agent for the importer who employs him, preparing and submitting

all documents required for clearing goods through Customs. The selection of a Customs broker is a critical one, because it is the Customs broker who confirms the correct level of taxation for the value of clinical materials being imported. An experienced IOR has an established network of contacts with Customs brokers in many markets. Customs brokers must be licensed and have a broad range of knowledge, including customs law, classifica-tion and duty schedule, import and export regulations, shipping procedures and trade documentation.

• Filing completed duty entry and required supporting documents. Importing clinical supplies is a document-intense and demanding process that requires painstaking attention to detail. Incomplete, incorrect or missing documentation is the principal reason for Customs delays. The IOR works closely with the sponsor and the Broker to obtain the comprehensive information and wide vari-ety of documents required for every shipment of clinical materials Required supporting documents may include, but are not limited to: Minister or Health (MoH) approval of trial, pedigree, proforma or commercial invoices, certificates of analysis for every drug batch, certificates of release, certificates of compliance, good manufacturing processes (GMP) certificates, authorized person statements and origin certificates.



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Many documents must be presented in the local language, a challenge many U.S. companies would find impossible to meet without the assistance of the IOR and an on-the-ground team in those countries. Supporting documents can differ depending upon the originator and destination countries, the nature of the materials being shipped, and whether the materials were repackaged, rela-beled and/or manipulated.

• Paying the assessed import duties, taxes and fees on goods. It goes without saying that Customs will not release shipments of clinical materials until all payments are satisfied. Working closely with the Customs broker, the IOR usually pays these fees locally to expedite the importation process, a practice that is preferred in many countries.

• Maintaining drug batch information details. This information is necessary for tracking and inventory control. Also, in the event of a recall, the IoR will have tracking details for the movement of goods into the country.

• Helping to avoid incorrect declarations of value and associated fines and inspections. Disagreements with Customs officials about the level of taxes and duty owed can lead to delays and strained business relationships. The IOR is prepared to demonstrate exactly how the estimated taxes and duty on the shipment were calculated. Experienced IORs frequently interact with Customs officials in many countries, allowing them to get to know Customs officials and establish a strong track record. The recognition by Customs officials of the IOR’s track record of accuracy, competence, professionalism and courtesy can go a long way toward minimizing inspections.

Who can be the IOR?

The rules with respect to the IOR – including who can assume the role and the qualifications for fulfilling it – vary from country to country. In some countries, the sponsor is the only entity that can serve as the IOR, while in others a third-party can be the IOR.

In countries that require the sponsor to be the IOR, a local office or affiliate of-ten fulfills the role. If the sponsor does not have a local office or affiliate, or if the local office or affiliate does not have a trading license, the sponsor must turn to a third-party.



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In such cases, the sponsor may request that the Contract Research Organization (CRO) conducting the clinical trial function as the IOR. Some CROs are willing to

assume this role, but many lack the necessary resources and expertise. In such cases, the CRO subcontracts the IOR responsibility to a

clinical supply chain management firm.

The sole business of a clinical supply chain management firm is supplying global

clinical trials. The firm should have extensive experience func-tioning as the IOR, including a dedicated import/export team with IOR expertise, commercial logistics special-ists, well-established process-es and a global footprint.

If a third-party is tapped to be the IOR, the sponsor must grant the organization power of attorney (POA) or provide a letter of delegation. This establishes that the third-party can conduct business on behalf of the sponsor.

Restrictions on IORs

In some countries, regulations determine who can serve as IOR, while in others, the IOR is not a formalized role. With rare exceptions, however, an IOR is always needed to import clinical materials.

In Argentina and Japan, for example, the IOR must be either the sponsor or a CRO. The IOR role in these countries is deter-mined not by who manufactures the clinical materials or the source of the materials, but by who owns the materials and how the trial is conducted. In Argentina, the IOR must run the trial, while in Japan, the IOR must be an internal caretaker company, usually the sponsor or CRO.

The United States and Peru each require an ownership transfer of the clinical materials to the IOR.

In South Africa, the role of IOR does not ex-ist, although this is under review. At present,

This brings us to a simple rule of thumb: The higher the value of the materials, the greater the need for the IOR.




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a sponsor merely ships clinical materials into South Africa, signs the appropriate documents and pays the required tax.

South Africa is an exception, however. Virtually every other country requires an importer of some type, whether the role is formal or informal, especially when high-value goods are being imported.

“Once you get above a value of $2,000 to $3,000, you’re going to need an IOR because Customs officials want to be sure you’re paying the right amount of duty and tax,” the supply chain manager said. “Obviously, the higher the value, the more focused they are on it.”

This brings us to a simple rule of thumb: The higher the value of the materials, the greater the need for the IOR.

Aside from value of materials, the need for an IOR is particularly acute in countries with complex import and customs rules. Such nations always pose special chal-lenges for supply chain professionals. In a 2014 survey of supply chain professionals, respondents named Brazil, China and Russia as the markets they perceived as “most challenging from a clinical trial supply perspective.”3 Today, an informal survey of supply chain professionals yields a few additional names, including Israel, Japan, Turkey and Ukraine.

Here are examples of why three of these countries – China, Israel and Ukraine – pose special supply chain challenges requiring the management of an IOR, fol-lowed by a case study about the impact of selecting the right IOR in Brazil.

• China: Complexity rules, ongoing change China’s dominance in the clinical trials arena began about two decades ago and continues today, thanks to its huge and aging popula-tion, economic development and improved infrastructure. Thousands of clinical trials are taking place in the world’s most populous country, something that is likely to continue in the decades ahead. Nonetheless, the country’s complex web of government policies and regulations and ongoing change are hurdles to supplying trials taking place in China.



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One key to ensuring a hassle-free experience in China is choosing an IOR who understands the complex import process and timelines and ensures that documents contain all necessary details before shipping. Having valuation evidence on hand to defend the level for duty or tax payments is critical for clearing Customs in China, as is avoiding any suspicion of wrongdoing. Should Customs officials suspect that the declaration of import value is inaccurate, for example, a lengthy delay and investigation will ensue.

• Israel: New requirements to meet Although Israel is a small country geographically, it has become a clinical trial powerhouse. With its highly skilled workforce, adherence to Good Clinical Practice (GCP) and strong patient enrollment and retention rates, Israel is now the site of nearly 3 percent of global clinical trials. Israel also has some relatively new requirements governing the import and release of Investigational Medicinal Products (IMPs), specifically what is known as MoH Procedure EX-012 for the Manufacture and Import of Investigational Products in Israel. EX-012 applies to all clinical trials beginning in Israel after October 1, 2013. EX-012 identifies the documents required to obtain a MoH import license for shipping clinical trial drugs into Israel and to receive Qualified Person (QP) recertification of IMP. The QP recertification requirement was enacted by the Israeli MoH in order to align with EU guidelines (European Annex 13, GMP and GDP guidelines). The IOR must obtain various documents in order to meet the requirements. Assum-ing all requirements are met, it takes about six working days from receipt of import shipment to QP recertification of IMP at the depot level and release for distribution to Israeli investigator sites.

• Ukraine: Explain value determination Things have been looking up for sponsors who want to conduct clinical trials in Ukraine. In late 2014, Ukraine dropped requirements for an umbrella license before clinical supplies could be shipped into the country and an import permit



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for every shipment, thus reducing the paperwork burden on sponsors and IORs. Ukraine also went a step further by reducing import tax on shipments to 12 percent from 20 percent. However, as with China, Ukrainian Customs officials frequently demand detailed explanations about how the value of shipments were calculated. In one recent example, a sponsor shipped clinical materials valued at $40,000 into the country. A Customs official disagreed with the stated value, revalued the shipment at $750,000, and vowed to impound the ship-ment until the tax was paid on the higher valuation. Fortunately, the IOR, working quickly with the spon-sor, was able to explain to the official’s satisfaction how the $40,000 value was calculated and thus secure release of the shipment after minimal delay.


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IOR Case Study: Slashing Lead Times & Speeding Supply Deliveries in Brazil

Brazil is a country frequently cited as challenging from a supply chain perspective. This case study focuses on how the selection of an IOR succeeded in slashing lead times by nearly a third for a global drug developer.

The sponsor was a Top 10 Pharmaceutical company that customarily used its local office as IOR for studies being conducted in this sprawling country of 209 million people.4

As time went on and the number of trials the company was conducting in Brazil expanded, challenges arose that the local office proved incapable of overcoming. Frequent delays at Customs spawned late delivery of IMP to Brazilian investigator sites, preventing studies from beginning on time and creating supply shortfalls for ongoing trials. Meanwhile, an increasing number of hand-offs across the supply chain created a lack of supply visibility, thus exacerbating the situation.

The increasingly frustrated company turned to Fisher Clinical Services Brazil, which has had a dedicated import/export team with IOR expertise since 2012. Fisher Clinical Services Brazil agreed to take over the role of IOR in late 2015. Tangible benefits accrued immediately:

• The number of handoffs was radically reduced, resulting in end-to-end visibility of supplies and improved process efficiency.

• In late 2015, total lead-time was already re-duced by 8 days or 20.5 percent, from 39 days to 31 days.

• The reduction in lead-time continued in 2016 – by 11 days or 28%, from 39 to 28

days.

• Fisher Clinical Services Brazil quickly demonstrated that it could manage the Cus-

toms process and prepare the Nota Fiscal to re-lease the shipment of clinical materials faster than

the company’s local office. Every delivery of goods in Brazil must be accompanied by a Nota Fiscal, which is a

document containing tax and logistical information.

• Most importantly, clinical supplies reached waiting investigators and patients at Brazilian sites more quickly and studies proceeded on schedule.


IOR Case Study: Brazil

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While the following scenario is fictional, it is a composite of actual events described by clinical supply chain professionals. It is included here as an illustration of what is meant by “Customs chaos,” an expression that captures the exasperation of having the supply chain derail, marooning supplies far from waiting investigators and patients:

A start-up biotechnology firm is mounting the first global clinical trial for its lead investigational drug, a biologic for the treatment of cancer. It ships clinical materials to a country where several prominent investigators are recruiting subjects to participate in the study.

Suddenly, there is an impasse: Customs officials refuse to clear the shipment, perhaps because of a missing document, a difference of opinion about the level of taxes and duty owed, or a mere miscommunication.

Meanwhile, at company headquarters thousands of miles away, the clinical team is unaware of the stalemate. The shipment is not being tracked. Since no one at headquarters is aware of a problem with the shipment, no one is working on a reso-lution. Meanwhile, the unrefrigerated materials are going nowhere – literally – and the clock is ticking. Only when an irritated investigator emails a few days later to ask where his clinical supplies are does anyone at the company realize the ship-ment never reached its destination.

Most such impasses are avoidable, according to supply chain professionals, who say they usually result from four common, but avoidable errors.


Dissecting Customs Chaos:Four Common Culprits

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1) Paperwork problems “Paperwork is almost always the reason why materials are held up in Customs,” according to the supply chain manager. That may be because so many things can go wrong with respect to documentation: • The wrong documents are produced.

• The right documents are incomplete, incor-

rect or go missing.

• Customs officials disagree with document translations.

• In some countries, Customs officials insist on paper documents and will not accept electronic versions.

• In others, officials require original paper documents, eschewing photocopies.

• Sometimes, a document is not where it needs to be.

“In some countries, such as India, you may have the import permit, but if your ma-terials land in Mumbai and your import permit is sitting in Hyderabad, the materials cannot enter the country,” the supply chain manager explained. “You have to get the license from Hyderabad to Mumbai so officials can see the original.”

2) Shipping errors Such errors occur when clinical materials are shipped to the wrong address, often that of an investigator site, which does not hold an import license. The site is then caught in a conundrum: It urgently needs the materials to start or continue the trial, but it can neither accept them nor pay the required fees. Meanwhile, the materials sit in Customs. Here is one example, as related by the supply chain manager: “Materials were shipped to an investigator site

in Thailand. Customs officials told the site it owed the equivalent of $30,000 for the shipment, but the site told Customs it had no idea what it was talking about.

“Paperwork is almost always the reason why materials are held up in Customs.”

Dissecting Customs Chaos:Four Common Culprits


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“After a week or two, someone realized that they put the wrong address on the air label; the materials were shipped to the site, but it was the CRO that held the import license. The Customs guy doesn’t care. If the fee isn’t paid, he’s not going to chase it.”

3) Financial snafus

Like paperwork problems, financial issues come in a variety of forms. Consider two real-world examples:

• Customs officials disagree on the stated valuation for a shipment of clinical supplies, and no one can explain how the value was determined. As a result, Customs officials revalue and impound the shipment until taxes are paid on the higher valuation.

• In an effort to be efficient and save time, duty is paid in advance of the arrival of clinical materials to an emerging market. When the materials reach the country, Customs officials demand that the fees be paid in country instead. “This happens in countries that are unaccustomed to international trade and concerned that they may not receive the fees through the banking system,” explained the supply chain manager.

4) “Shipping without a plan”

This is another expression coined to describe the practice of shipping clinical ma-terials minus a well-defined process, proper paperwork and an IOR. Unfortunately, this is a common practice among companies mounting their first global clinical trials.

“Shipping without a plan is the worst thing that you can do,” the supply chain man-ager declared.

According to him, here’s why:

• If the key processes with respect to importation are not managed correctly, the trial will never get off the ground.



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• Shipping without a plan fails to consider that there are two environments that cannot be controlled, those of the aircraft and Customs. No one can alter the environment of the aircraft and “you can ask the Customs guys to refrigerate the shipment, but you don’t know whether that will happen.”

• To ensure that supplies arrive when and where they’re needed, sponsors need a highly experienced partner as IOR.

“Shipping without a plan is the worst thing that you can do.”



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1) Select the right IOR. Enlisting a knowledgeable and experienced IOR is the single best way to ensure that the supply chain does not unravel. In choosing the IOR, look for the following characteristics:

• Assurance: The IOR should be fully vetted and compliant with regional and country-specific laws.

• Global coverage: IOR services should be available in many of the countries that are hosting clinical trials. Look for a highly trained and dedicated import/export team fluent in the native language who know local laws and regulations and are on the ground 24/7 to address supply chain issues.

• Local expertise and a track record of excellence. An IOR should be prepared to provide performance metrics that reflect a sterling reputation, minimal inspec-tions and a favorable working re-lationship with Customs and other officials in many countries.

• Minimal and seamless handoffs between IOR, the courier and brokers: In a typical international shipment, there are 20 different organizations involved. Chances are that something is going to go wrong – and it usually does. Fewer handoffs reduce the likelihood of problems.


In a typical international shipment, there are 20 different organizations involved. Chances are that something is going to go wrong – and it usually does.


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2) Get an early start. Begin working with the IOR at least 60 and preferably 90 days in advance to provide for sufficient time to complete key upfront supply chain planning. The work required to ensure trouble-free importation of materials must take place in advance of shipping, not when a shipment is en route. Seeking the help of an IOR “when a shipment is in the air is a big no-no,” the supply chain manager warned.

3) Follow the rules. Once you hire an IOR, put your trust in the organization’s knowledge, experience and processes with respect to requirements for importing supplies. That is why you hired the firm. 4) Perfect the paperwork. In recognition of the fact that paper-work problems are the most common reason why shipments are delayed in Customs, always provide the IOR with all requested information and docu-ments. While the information requested may seem like overkill and require a great deal of work to assemble, weigh these demands with the potential delay of a shipment if Customs officials find documents wanting.

5) Know the numbers. Arm the IOR with a detailed explanation about how valuations were reached should Customs officials push back. Failure to do so could result in costly revaluations and delays in many markets.



About Fisher Clinical Services

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Fisher Clinical Services is a part of the BioPharma Services Division of Thermo Fisher Scientific, the world leader in serving science, enabling our customers to make the world healthier, cleaner & safer. With annual revenues of $17 billion, we have more than 50,000 employees & serve more than 350,000 customers within pharmaceutical & biotech companies, hospitals & clinical diagnostic labs, univer-sities, research institutions & government agencies, as well as environmental & industrial process control settings.

Thermo Fisher Scientific Inc. (NYSE: TMO) is the world leader in serving science, with revenues of $17 billion and 50,000 employees in 50 countries. Our mission is to enable our customers to make the world healthier, cleaner and safer. We help our customers accelerate life sciences research, solve complex analytical challeng-es, improve patient diagnostics and increase laboratory productivity.

Through our five premier brands–Thermo Scientific, Life Technologies, Invitrogen, Fisher Scientific and Unity Lab Services–we offer an unmatched combination of innovative technologies, purchasing convenience and comprehensive support.

For more information, please visit www.fisherclinicalservices.com.


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1. ClinicalTrials.gov. U.S. National Institutes of Health. Accessed Aug. 1, 2016. https://clinicaltrials.gov/

2. “Importer of Record Law & Legal Definition.” US Legal website. US Legal Inc. http://definitions.uslegal.com/i/importer-of-record/

3. Survey: The Future of Clinical Trial Supply – Trends and Challenges 2015 Report, conducted by Pharma iQ and presented at Clinical Trial Supply Europe, 2015.

4. “Brazil population.” Worldometers website. Accessed Aug. 14, 2016. http://www.worldometers.info/world-population/brazil-population/

References


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