When we begin conversations with trade compliance practitioners and ask them their top 3 challenges, most talk about the need to manage 1 or more functional activities. By functional activity, we mean point solutions that support the user in accomplishing a specific task, such as product classification (HS, ECCN, USML, etc), Restricted Party Screening (RPS or DPS), License Determination, Free Trade Agreement qualification, and other regulatory related stuff.All of these activities are important in ensuring that trade compliance is executed effectively, and, depending on your trading practice, these functional areas should be managed with the help of technology. But if these functional areas are not integrated to support the entire trade compliance process, they won't deliver an effective trade compliance solution.
Why is functional integration important?
The answer is really quite simple - at an operational level businesses are an integrated agglomeration of physical activities that are executed at a functional level. The key point is that the functional activities of a business are executed on a continuum that represents the physical world. What enables these functional areas to work is that they use data that represents the physical world. To the extent that they are able to integrate these functional areas of the business is most often reflected in how successful they are when measured against their peers. The more highly automated and integrated an organization is, the more likely it is successful versus its peers.
How does this relate to Trade Compliance?
When you look at the various discreet functional activities that are required to support highly functioning trade compliance, there is clear interdependence within and between these activities. Within these discreet functional activities, there are further discreet sub-functions which require management.
- Account record control - Name and Address control, Contact control, Registration Number management, Denied Party Screening management, trade management control, etc.
- Product record management - Description and specification management, Multi-purpose UoM control, Regulatory agency profile management. classification management [import and export], license management, etc.
Account and Product details are fundamental elements to the trade compliance activity and their record profiles are required to support all aspects of trade compliance. Failing to integrate them as part of the downstream trade compliance activities reduces the effectiveness and proficiency of the trade compliance practice.
- Security (ISF) validation
- Commercial Invoice validation
- Customs and PGA Entry validation
- Broker Audits
- Post Entry Activity
- ACH Payments
Administrative functional activities are dependent on the account and product records to provide information required to manage trade compliance with the government agencies regulating the import/export processes. Separating the account and product records from the downstream trade compliance activity increases the amount of manual effort, time, opportunity for error, and cost into managing trade compliance.
- Internal Systems - Purchase Orders, Sales Orders, Warehouse Records
- Logistics information - Bills of Lading, Advice Notices, PODs
- Supplier shipment detail (Imports) - ASNs, Packing Lists, Invoices
- Customer details - Sales Orders, Delivery Instructions, etc.
Operation functional activities reflect activities in the physical supply chain. The information owned by both internal operations and 3rd parties is critical to the trade compliance function and the more that this information is integrated into the processes the more effective trade compliance becomes.
Trade Compliance functional integration is the answer
It might sound utopian but it is very attainable...for any size organization, and the benefits are significant. The automation solutions that support functional integration within trade compliance run the spectrum from narrow to very comprehensive. The results for managing trade compliance with broad functional integration are dramatic and the return on investment substantial.With the changes that have taken place in ACE and the rise of the CEEs, it behooves import and export organizations to check out the results and benefits of trade compliance functional integration.