Managing import and export transactions is a complex task for any company, as the rules of international trade and commerce seem to shift overnight with new treaties, taxes, embargoes, and security requirements.
Many shippers, carriers, customs brokers, and freight forwarders rely on global trade management (GTM) software to navigate these fast-changing rules, avoid penalties for trading with prohibited partners, and ensure they qualify for every available exemption from tariffs.
The challenge will only grow more complex in 2016 as waves of change roil the international landscape, from treaties such as the Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP) on track for approval in the coming year to the loosening of embargoes such as Iran's July agreement to cap its nuclear enrichment activities in exchange for the lifting of financial sanctions.
Importers, exporters, and other GTM software users can save time, money, and labor by automating the day-to-day operational tasks associated with international trade and regulatory compliance. But these products can also help them to address some of the "big picture" issues they are likely to encounter today. Here are four broad capabilities that any GTM platform should offer customers to help them tackle the changing requirements of international trade in 2016.EXPANDED SECURITY COMPLIANCE
The set of legislative controls affecting international shipping has grown significantly broader than traditional import and export declarations in the last 10 years, as mounting security concerns have led countries to place further restrictions on trading partners, sales of certain products and commodities, and their uses, said Evan Puzey, former chief marketing officer at Kewill. Accordingly, robust, comprehensive, and constantly updated security compliance capabilities are becoming increasingly important.
Businesses must comply with regulations such as denied-party screening, licensed goods determinations, and embargoed country lists. While these basic requirements have been around for decades, the pace of change continued to accelerate in 2015, and GTM software vendors have to keep their automated updates up to speed.
The volume and variety of restricted buyers, sellers, intermediaries, and locations is so great today that traders cannot efficiently stay in compliance with the laws without automation. To cover all the bases, a software provider like Kewill must monitor a whopping 238 lists, such as the FBI's "Ten Most Wanted" list and the Bank of England's financial sanctions list, Puzey said.
Other growing restrictions pertain to licensed goods that may appear innocent for commercial use, but could have illegal applications, such as titanium plumbing taps (whose lightweight metal could be repurposed for use in aircraft parts or armored vehicles) or snorkeling swim fins (which are crucial for naval combat swimmers). Companies trading in such goods must demonstrate "duty of care"—a legal obligation to exercise reasonable care in preventing harm that could result from their actions—in determining who is using the items and ensuring they are not repurposed.
Multiply that level of precision tracking and control by the roughly 190 countries in a global company's shipping network—including those in the increasingly volatile Middle East, Eastern Europe, and Africa—and it's clear that businesses need security compliance help from GTM software more than ever.CLOUD-BASED UPDATES
Keeping up with this level of complexity demands a software platform that is updated several times a day with dozens of changes, which is a level of software maintenance far beyond the typical standard of support required for desktop or enterprise applications.
Many GTM software suppliers meet this demand by building their platforms on the software-as-a-service (SaaS) model, hosting the application on remote, cloud-based servers so customers can simply log in to use them, said Chad Singiser, senior sales executive at Descartes.
This approach shifts the burden of making frequent software updates to the IT provider, and allows users to concentrate on their core shipping business.FLEXIBILITY TO ADAPT TO TPP AND OTHER PACTS
Most experts agree the TPP is on track for eventual ratification, with member countries standing to participate in one of the biggest free trade agreements in history. Despite this outlook, the deal is still in the ratification stages, which prevents both governments and international traders from preparing for specific regulations until it becomes law in all affected countries.
Facing this uncertain future, importers and exporters will likely find the best GTM for their business is one that has the flexibility to quickly incorporate the myriad changes as soon as TPP and other trade agreements become law. Companies armed with up-to-the-minute GTM software can take full advantage of complex trade pacts, claiming preferential treatment for their goods and trading partners so they can avoid paying expensive tariffs.ABILITY TO CONNECT TO ERP SYSTEMS
Facing the growing challenges of importing and exporting goods in the global market, many shippers, carriers, customs brokers, and freight forwarders are outgrowing their previous approaches to handling trade compliance. Managing multilayered import and export transactions through a generic business software platform such as the company's enterprise resource planning (ERP), material resources planning, or transportation management system can be cumbersome, slow, and inefficient.
To stay current with evolving regulations, companies are increasingly looking to GTM platforms to improve their trade compliance process.
However, the complexity of modern international trade means that a mature GTM platform can no longer work as a single-point solution, focused merely on automating paperwork. Instead, it must take on a product management role, merging the competing demands of imports, exports, tariffs, and laws, said Anthony Hardenburgh, vice president of global trade content at Amber Road.
Without visibility into the impact of international tariffs, a company can easily lose track of a given product's total landed cost (the manufactured cost of an item combined with the cost of delivering it to the intended market), Hardenburgh said. In one example, a U.S. laptop retailer tried to sell $2,500 computers to consumers in São Paulo, Brazil, but failed to realize that taxes and duties added another $2,000 to the sticker price. The final cost was so high it had to abandon the project.
To avoid these pitfalls, a GTM system should be able to tie in to the full range of the user's ERP systems, combining information drawn from software silos such as import, export, transportation, and procurement applications.
The global trade network is changing fast, with ever-more-complex regulations for logistics practitioners. A GTM software platform with these four broad capabilities can be a crucial tool for users as they seek to ship cargo around the world at high speed and low cost.
Looking for software to help you manage complex import/export processes? Here are some of the vendors that offer GTM applications:
Champ Cargosystems* *Only for airfreight forwarders and airlines
Global Logistics System
MIC Customs Solutions
SAP Global Trade Services
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