Automating Global Trade Management -- A Checklist
It has been said before that a typical international transaction requires 35 documents across 25 parties complying with more than 600 regulations and more than 500 trade agreements. (SC Digest, June 2008). If you stop and think about it, that is a lot of places for errors to occur, steps to overlook and savings opportunities to miss.
There was also a recent Journal of Commerce article that noted, "Customs' focus remains on preference claims, where a 45 percent rate of noncompliance isn't surprising." (Journal of Commerce, June 2010). Both of these issues should be, and are, driving many apparel and textile companies to consider implementing tools to assist with global trade management (GTM) and compliance.
Realizing you need to move your company past the manual processes of classifying products, qualifying for free trade agreements, completing customs forms, and screening for denied parties is a great first step. However, before you implement any type of automation tool, you need to make sure it has everything you need to not only automate these processes but also provide a single platform for compliance, content and connectivity.
In a recent white paper by the ARC Advisory Group, Adrian Gonzalez noted that, "software functionality is only one component of a complete GTM solution. Companies often overlook the importance of global trade content, particularly the role it plays in extending the value of GTM across the enterprise. The same is true for connectivity. Establishing and maintaining connectivity with a dynamic set of trading partners is an integral component of GTM, but one many companies fail to consider when evaluating software options."
You may hear this referred to as the three C's of Global Trade Management -- compliance, content and connectivity. The compliance aspect is probably the most well-known of the three C's as it is the focus of most software solutions. For instance, there are solutions to assist with filing your Importer Security Filing (aka 10+2) if you are a U.S. importer, qualifying Bills of Materials against multiple free trade agreements, and screening exports against denied party lists.
The second "C" - content - is one you've most likely heard about recently because many industry experts realize that real-time trade content is important. But what does that really mean? A good GTM solution provides trade data; a better solution provides the same trade data but continually updates it and provides those updates to you automatically. In that same Journal of Commerce article, it is pointed out that Customs points to validation of free trade agreement (FTA) claims made by apparel and textile companies as another area where huge non-compliance exists. With a robust tool in place to address content such as FTA rules of origin, apparel and textile companies can ensure compliance and possibly avoid the higher values that Customs is imposing due to dishonest importers and false or misleading FTA claims.
The third "C" - connectivity - is probably the one that most companies often overlook. A good GTM solution connects to government agencies so a company can file data electronically; a better solution facilitates a conversation - relaying data between the importer/exporter, government agencies, brokers, freight forwarders, supply chain partners, etc. With more and more government agencies requiring electronic data transmission, connectivity is a must for a GTM solution that will not only support your global trade initiatives but also grow with you as you expand to different markets.
With various solutions available that could provide one aspect such as compliance or all three (compliance, content and connectivity), how do you find the right solution for your company? Here are some questions that can help, separated into three areas: tools, software functionality and software implementation. All areas should be explored thoroughly before making a decision on what GTM tool is right for your company.
Tools:
1) Where is the highest risk of non-compliance?
2) Can a process be automated to increase compliance?
3) Do we need a tool that will focus on one area of non-compliance or should we be looking for a set of tools that addresses many areas?
4) Besides compliance, is our end goal to automate via software, improve processes or both?
5) What kind of reporting or metrics need to be in place to show increased compliance and ensure a smooth process flow?
Software Functionality:
1) Will the software support our existing business processes?
2) Is the software built on a platform that supports automating our import/export processes from end-to-end?
3) Is the software a standalone "point" solution or is it part of a broader trade compliance platform?
4) Does the software provide integrated trade content as part of its offering or do we need to work with a third party provider to have content integrated with the offering?
5) Will the software support our company's global operations?
Software Implementation:
1) Are we able to perform a cost/benefit analysis to justify the request to purchase software?
2) Can the software be implemented using a phased-in approach or does it have to be brought on-line using a "big bang" method?
3) What are the upfront cost of purchasing and implementing the software?
4) What are the long-term costs of managing and maintaining the software?
Automating your global trade management and compliance programs is key to maintaining a competitive edge in any industry. To make sure your company finds the right solution for your GTM needs, remember to find a solution that not only provides automation tools but also has a firm grasp on the three 3 C's of global trade - compliance, content and connectivity. With Customs focusing more and more on importers of textiles and wearing apparel, trade automation is one way to make sure your company doesn't get "stuck in the middle" between Customs and a dishonest importer - which ultimately leads to higher values on imports.
Liz Connell is Client Services Manager of Integration Point Inc.
There was also a recent Journal of Commerce article that noted, "Customs' focus remains on preference claims, where a 45 percent rate of noncompliance isn't surprising." (Journal of Commerce, June 2010). Both of these issues should be, and are, driving many apparel and textile companies to consider implementing tools to assist with global trade management (GTM) and compliance.
Realizing you need to move your company past the manual processes of classifying products, qualifying for free trade agreements, completing customs forms, and screening for denied parties is a great first step. However, before you implement any type of automation tool, you need to make sure it has everything you need to not only automate these processes but also provide a single platform for compliance, content and connectivity.
In a recent white paper by the ARC Advisory Group, Adrian Gonzalez noted that, "software functionality is only one component of a complete GTM solution. Companies often overlook the importance of global trade content, particularly the role it plays in extending the value of GTM across the enterprise. The same is true for connectivity. Establishing and maintaining connectivity with a dynamic set of trading partners is an integral component of GTM, but one many companies fail to consider when evaluating software options."
You may hear this referred to as the three C's of Global Trade Management -- compliance, content and connectivity. The compliance aspect is probably the most well-known of the three C's as it is the focus of most software solutions. For instance, there are solutions to assist with filing your Importer Security Filing (aka 10+2) if you are a U.S. importer, qualifying Bills of Materials against multiple free trade agreements, and screening exports against denied party lists.
The second "C" - content - is one you've most likely heard about recently because many industry experts realize that real-time trade content is important. But what does that really mean? A good GTM solution provides trade data; a better solution provides the same trade data but continually updates it and provides those updates to you automatically. In that same Journal of Commerce article, it is pointed out that Customs points to validation of free trade agreement (FTA) claims made by apparel and textile companies as another area where huge non-compliance exists. With a robust tool in place to address content such as FTA rules of origin, apparel and textile companies can ensure compliance and possibly avoid the higher values that Customs is imposing due to dishonest importers and false or misleading FTA claims.
The third "C" - connectivity - is probably the one that most companies often overlook. A good GTM solution connects to government agencies so a company can file data electronically; a better solution facilitates a conversation - relaying data between the importer/exporter, government agencies, brokers, freight forwarders, supply chain partners, etc. With more and more government agencies requiring electronic data transmission, connectivity is a must for a GTM solution that will not only support your global trade initiatives but also grow with you as you expand to different markets.
With various solutions available that could provide one aspect such as compliance or all three (compliance, content and connectivity), how do you find the right solution for your company? Here are some questions that can help, separated into three areas: tools, software functionality and software implementation. All areas should be explored thoroughly before making a decision on what GTM tool is right for your company.
Tools:
1) Where is the highest risk of non-compliance?
2) Can a process be automated to increase compliance?
3) Do we need a tool that will focus on one area of non-compliance or should we be looking for a set of tools that addresses many areas?
4) Besides compliance, is our end goal to automate via software, improve processes or both?
5) What kind of reporting or metrics need to be in place to show increased compliance and ensure a smooth process flow?
Software Functionality:
1) Will the software support our existing business processes?
2) Is the software built on a platform that supports automating our import/export processes from end-to-end?
3) Is the software a standalone "point" solution or is it part of a broader trade compliance platform?
4) Does the software provide integrated trade content as part of its offering or do we need to work with a third party provider to have content integrated with the offering?
5) Will the software support our company's global operations?
Software Implementation:
1) Are we able to perform a cost/benefit analysis to justify the request to purchase software?
2) Can the software be implemented using a phased-in approach or does it have to be brought on-line using a "big bang" method?
3) What are the upfront cost of purchasing and implementing the software?
4) What are the long-term costs of managing and maintaining the software?
Automating your global trade management and compliance programs is key to maintaining a competitive edge in any industry. To make sure your company finds the right solution for your GTM needs, remember to find a solution that not only provides automation tools but also has a firm grasp on the three 3 C's of global trade - compliance, content and connectivity. With Customs focusing more and more on importers of textiles and wearing apparel, trade automation is one way to make sure your company doesn't get "stuck in the middle" between Customs and a dishonest importer - which ultimately leads to higher values on imports.
Liz Connell is Client Services Manager of Integration Point Inc.