The global trade environment is experiencing greater uncertainty than at any time in the recent past. Geopolitical events, environmental challenges, supply chain sustainability, and consumer activism all create exceptional volatility in trade patterns that ripple through the entire supply chain. How a company manages this volatility determines how it performs against its peers.Aggravating the issues of trade volatility is the increased oversight of Customs and other government agencies. With the launching of the ACE environment, CBP and PGAs are able to manage and enforce import and export activity to a much greater extent than ever before. The visibility that regulators collectively have into importer/exporter reporting and performance results in greater risk to the trade community. The increased risk comes with added costs that fall squarely on the trade community.To manage the accelerating trade and trade compliance volatility and the increasing business complexity and risk, a company needs to have a strategic approach to its supply chain and trade compliance practices.
The explosion of data - a curse and a blessing
The trade landscape has changed radically in the past decade due to the explosion of available data. Between 2010 and 2020 the amount of information is exploding at a rate more than double every two years. This means that in the decade the amount of information will be more than 50X greater in 2020 than it was in 2010. The explosion of data impacts everything and challenges the way our lives are run and business transacted. How we control the data is turning into the greatest challenge and opportunity for individuals and companies. In a supply chain and trade compliance context, a company that has a strategic plan to manage the plethora of data has a marked edge on its competition and its ability to survive into the future.The explosion of data is a blessing because it provides the ability for a more detailed, colored, multi-dimensional, and contextualized picture. Its curse is that without a way to manage the data, contextualization is difficult, decision support minimized, and actionable activity sub-optimized.
Reducing Risk #1: Trade compliance automation
The trade compliance landscape is rapidly shifting. The shifts are all about data and the ease by which government agencies can now ask for and process data. Customs has ceased to be the only actor that importers/exporters primarily need to worry about. Driven by an ethical and sustainable focus in response to consumer pressure groups, governments around the world are imposing trade standards on the industry. This manifests itself in increased regulatory oversight which drives greater reporting requirements and record management.A perfect example of what is coming at the trade community is the new US NOAA (National Oceanic and Atmospheric Agency) requirements concerning seafood imports into the United States. Driven by concern about seafood species sustainability and fraud in the seafood chain, NOAA, through the newly inaugurated SIMP (Seafood Import Monitoring Program) now requires importers to file a vessel report for every line item imported on an entry. The reporting requirements are extensive and detailed.These import filings are done at the time of entry through the ACE system. Along with the benefit of protecting endangered seafood species from illegal and improper fishing, there are associated costs. In this example, importers using a customs broker, the new additional direct costs associated with the importing of the designated seafood species range from $20 for a relatively simple entry, upwards of $70/entry. On top of the direct costs is the overhead burden (indirect cost) of maintaining the documentation and records associated with each entry.NOAA is but one example. FDA, FCC, TTB and other PGAs have all discovered that through ACE they have a vehicle to acquire vast amounts of information. For the import/export community, this will likely mean additional regulatory oversight and reporting requirements and document management. Failure to comply increases the risks to the business from both a disruption and reputation perspective.
Reducing Risk #2: Trade management automation
With the increasing availability of and demand for, information it is almost impossible for importers or exporters to remain compliant and cost competitive without the support of trade automation tools. Trade automation tools enable a company to capture, manage, analyze, and contextualize vast amounts of data and mine it for a broad variety of applications. Automation enables a company to reduce its trade compliance risk across a broad spectrum by ensuring:
- conformance of supply chain partners (external and internal) with regulatory agencies - i.e., restricted party screening
- controlled classification of products with all regulatory and business requirements - i.e. registration code management, hazmat control, country of origin management, etc.
- appropriate product and account profiling and control for CBP and PGA management
- simplified documentation management
- standardized and controllable trade compliance processes
- automatic control and preparation of Customs and PGA entries for import and export
- automated entry audit (pre or post)
- entry analytics
- customs broker performance management
Eliminating Costs #1: Trade management automation
A related factor in managing the trade compliance risk is the exposure to rising costs related to trade compliance. Regulatory agencies are demanding more information and this trend is only going to continue. The information demand expresses itself in the filing of entries and supporting data. Currently, the vast majority of companies still file with Customs and PGAs traditionally, through customs brokers who do much of the administration work and charge according to the time and effort required to prepare the entries and manage the followup. As the demand for more information increases so will the related entry filing costs. As we see with the NOAA example, these new additional charges have the potential to be more than the original entry filing.Upward pressure on trade compliance costs is becoming the norm. Automation is the only way to combat rising costs. Automation provides the following opportunities to maintain or lower trade compliance costs;
- standardizing and streamlining trade compliance processes eliminates needless manual off-system activity
- automatic uploading and sharing of information reduces manual effort in needless data entry
- centralized data management eliminates data inaccuracies and errors
- automated document control streamlines and simplifies document generation, storage, and retrieval
- simplifies product classification (imports/exports), denied party screening, solicitations
- increases opportunities for tariff rate reduction strategies
- supports and streamlines duty drawback capability
- reduces Entry and PGA filing costs - generates all Customs, Census, and other filing message sets for either customs broker or self-filing
- enables data analytics for cost transparency
Trade compliance is behind on the technology curve
Unfortunately, most companies with trade compliance organization are not keeping up with available technology, and they are falling further behind on technological capabilities. Sadly, many companies are losing out on opportunities to contain or reduce trade compliance risk. Equally disturbing, companies are needlessly paying for services that they can easily automate.The government has invested very heavily in ACE. The regulatory agencies are discovering the value of the information. They realize that it is possible to collect more data and they are demanding more of industry.Customs brokers real value is the expertise and understanding they have of the regulatory regimes. However, much of the customs brokers charge is for administrative work and manual entry. This will only increase as the demand for more information by the regulatory agencies increase.Automation is ideally suited to increase an import/exporter's ability to eliminate the administrative, manual effort related to entry preparation. This reduces both the risks associated with entry preparation and its associated costs. Without the supporting automation technology a company is facing much greater exposure to trade compliance risk and escalating costs. Both the increased risk and additional costs are threats to the efficient and effective management of global supply chains.