TECHNOLOGY TOOLBOX

 

Global Trade Compliance Solutions

While complying with complex government regulations companies can streamline their
import and export business with Global Management Systems (GMS). Here’s an instructive
overview of the steps required to create or enhance your own corporate GTM system

Christopher D. Norek
Monica Isbell

As companies have taken advantage of both sourcing and selling in international markets, they have to go through a sometimes painful process of understanding import and export regulations in order to comply with U.S., Canadian and foreign government regulations. They need to know how to set up and then continually streamline their import and export processes. These processes can be very complex due to significant differences in regional and country-specific business requirements. The areas that are more complex than domestic trade range from basic issues such as different languages and currencies to more advanced issues like local content rules and supply chain security procedures.

Companies doing a portion or all of their business internationally have some help available in terms of software solutions that can streamline the import/export processes and keep them compliant with governmental regulations. They can either design a global trade management (GTM) system themselves (in-house), pay for a custom solution, or buy one from a software provider.

Mapping Import/Export
Supply Chain Processes

Regardless of an in-house or purchased solution, the first step in the process of evaluating and selecting or developing a GTM software package is to update or create flow charts for the customs compliance process. This important but tedious task should be done prior to the selection of any software solution as mentioned in previous Technology Toolbox columns. This documentation is just as important as or more important in relation to import/export processes than other supply chain or business processes due to complexity, potential legal exposure and supply chain risk.

Information Gathering
The second step in assessing whether developing or purchasing a GTM software package is the right thing for a company to do is to ask some tough questions. The following is a list of some things that executives should know and do in advance:

  • In which countries does your company currently conduct business and in which do you plan to do business in the near future?
  • What are the country-specific local content rules for these countries?
  • What certifications does your company need or want in order to improve import/export operations?
  • What are all the required customs documents and data for all countries in operation or under consideration?
  • What are the detailed and complete product contents, component origins and Harmonized Tariff System (HTS) classification of all your products?
  • Do any of your products require special licensing?
    –Example: Product dual-use designations
  • What are the existing and potential supply chain security requirements of the countries in which your company is doing business?
  • What existing and potential global logistics service providers and customs brokers does your company use and what are their certifications?
  • Is your company’s methodology of negotiating and managing logistics service provider contracts satisfactory or do you want to automate some of these functions?
  • Do you have adequate visibility of all shipments in the pipeline?
  • Can your staff easily compute the total landed cost of a shipment, not just the transportation costs?
  • Does your company want to change the method of conducting trade financing and financial settlement with foreign suppliers to reduce costs, improve documentation quality, or streamline processes?
  • Which information delivery method does your company prefer – licensed software or software as a service (SaaS)?

Functionality to Consider
The third step in assessing whether a GTM software package will deliver the desired return on investment is to evaluate the functionality of the various solution options. Some of the functionalities to consider should include:

  • Currency conversion
  • INCO Terms
  • Denied country and denied party screening
  • Licensing requirements
  • Product classification
  • Transportation procurement, contract negotiation and contract management
  • Supply chain visibility
  • Customs clearance
  • Total landed cost calculations
  • Trade financing and financial settlement

Benefits of Global
Trade Solutions

GTM software can provide international shippers with many benefits to enhance competitive positioning including:

  • Improved country-specific regulatory compliance to speed flow of goods and eliminate potential shipment delays and fines and penalties due to non-compliance
  • Streamlined methodology to negotiate and manage freight contracts to achieve the best service/value proposition for each shipment
  • Based on current and possible international events out of the company’s control, construction of a lower risk global network with systems in place to create and enable supply chain continuity plans if, and when, disruptions occur
  • Flexibility to shift business operations and/or transactions to different countries
    – Adaptability to changing fuel prices, labor rates, etc. which might call for movement of trade to a different country base
  • Central repository of global trade data inclusive of volumes, lanes, customers, and landed costs
    Risks of International

Non-compliance
International shippers must pay close attention to trade and supply chain security regulations in the U.S., Canada and foreign countries to avoid the risk of business interruption and added costs. A few potential consequences are listed below.

  • Significant in-transit delays
  • Loss of product
  • Loss of future sales
  • Fines and penalties
  • Revocation of the privilege to import or export

Due to possible customs and other international legal delays, understanding your company’s import/export processes is an absolute requirement. Often companies don’t understand many of their key business processes well enough, and yet they can still get by. But in the area of global trade, the exposure is too great to not have these critical trade processes documented and well-understood. Once the processes are mapped and optimized, a company can then look at potential GTM solutions as a way to reach the next level and achieve competitive advantage.