30 January 2014

Global Trade Management: do you need it?

Storck Harbour scene

Cross-border transactions require massive attention to detail. The following all contribute to this:
  • product codes for purchased items need to be matched with the country of origin and be property identified under the Harmonized System
  • product codes for manufactured items need to be analyzed to determine whether tariff shifts have taken place under applicable rules of origin
  • trade parties (ie, customers, suppliers, carriers, customs brokers, freight forwarders and third-party logistics providers) need to prove compliance with applicable requirements, such as end use and end user for products, necessary registrations and certifications, and security-related information
  • appropriate security arrangements (such as the US Customs-Trade Partnership Against Terrorism and the Canadian Partners in Protection) need to be in place in order to receive preferential clearance treatment through the various customs authorities
  • economic sanctions, import/export/re-export controls and licensing requirements will require review to ensure that designated goods do not get shipped either to prohibited countries or for prohibited purposes, or to (or through) prohibited trade parties
  • free trade agreements will require certificates of origin to be on file to prove that shipped goods qualify for preferential treatment
  • duties, taxes and fees have to be properly matched to applicable product codes in line with the above
  • accounting for activity that occurs in duty-free zones
  • the matching of transactions with applicable letters of credit (where they are used)
  • full documentation of the above, and how they have been applied to specific transactions, will need to be kept on file for future audit by the appropriate authorities
 This is a very daunting list, and many organizations still tend to still treat this as a manual operation, and that can be cumbersome. With most organizations operating ERP these days (and shame on those who still don't), it is a valid question as to whether that can be extended to handle the above through what is referred to as a Global Trade Management platform.

This is a decision that cannot be taken lightly. It is estimated that the software cost for such a move will be between 0.25-1 million dollars or more, and implementation costs will be 2-3 times that amount. The following vendors are currently promoting their own particular solutions:

If you are a reasonably complex enterprise operating in two or more countries or having extensive cross-border supplier and customer networks, these may be worth investigating. As always, be aware that most IT projects do fail for lack of proper cost-benefit analysis, lack of buy-in (a huge consideration in Canada), or improper training (a huge failing here as well).

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