Resources formerly devoted to the traditional mission of trade facilitation and liberalisation are being diverted to mandated border control and security initiatives - at a time when bilateral trade agreements are causing a dramatic drop in the amount of duties and taxes that countries collect from trade transactions. This declining revenue, combined with new security and data requirements that require additional investments in IT and infrastructure, are further complicating an already challenging operating environment for traders. In coming months, importers and exporters are likely to face even greater scrutiny at border crossings and heightened enforcement efforts designed, at least in part, to assure revenue.
This translates to disruptions and delays for global supply chains, especially those involving developing countries. According to data from Doing Business, trade transactions with least developed countries already take three times as many days, nearly twice as many documents and six times as many signatures as do similar transactions with developed countries. New security, enforcement and reporting mandates will only increase this disparity. Moreover, Customs officers, who in some countries are now held personally liable for illegal or undervalued importations, are becoming more rigorous in their management of border controls, even asking for technical details and engineers' drawings that raise complex intellectual property issues - another potential source of delay.
Clearly, what is needed is reform and standardization of border management processes worldwide in a way that facilitates trade, improves efficiency and ensures supply-chain security. Groups like the World Customs Organization and World Trade Organization are well aware of this need and have made Collaborative or Coordinated Border Management (CBM) a key goal. CBM envisions a future environment in which lead government agencies work together to reduce trade barriers, ensure security through risk management, and harmonize standards to make requirements more uniform and easier to navigate. This goal would partly be achieved by having data on cross-border transactions shared electronically in a "single window" among all relevant agencies.
Steps toward achieving CBM were addressed in the Kyoto Convention and, more recently, in the Framework of Standards to Secure and Facilitate Global Trade (SAFE). The most recognized programs developed to date under the SAFE Framework are those like C-TPAT in the U.S. and the Authorized Economic Operator (AEO) program of the international business community, which provides faster clearance for trusted traders with approved security processes. Even these programs lack needed standardization, however. The U.S. C-TPAT program focuses on import security and does not fully address the export component. AEO approaches and eligibility vary considerably in the countries that have adopted it, meaning that providers accredited under one system may not be recognized by another. Trade would be greatly facilitated by a business-friendly approach with consensus on achievable harmonized standards, security assurances for government agencies and data confidentiality guarantees for the trade, so goods could be easily imported and exported between traders.
As important as the SAFE Framework is, it is just that - a framework. Realizing its vision will require a lot of work and partnership. At some future point, CBM will allow countries to exchange data on traders and shipments in a live environment so that non-compliance and perceived threats can be readily identified, measured and monitored. In the interim, traders must operate in an environment that gives new meaning to the caveat "know before you go." Traders will need to ensure the integrity of their business partnerships both upstream and downstream in the supply chain. They will be accountable for fully understanding, qualifying, vetting and verifying very specific details about their products, even including applicable health, safety, and environmental data. Moreover, all of this information will have to be electronically provided to Customs and other government agencies as a defined set of data well in advance of the actual shipment.
To stay ahead of this curve, global traders need to develop two strengths: a robust in-country presence wherever they do business and a solid technology plan. The best ways to achieve a strong in-country presence are to invest in strategic partnerships with quality local providers and develop relationships with national and local government officials. In addition, traders should seek organizations that have a global network of customs and legal or other knowledgeable experts, who can provide them with a local partner as issues arise. Having feet on the ground is a must; trying to maintain a country presence through email will no longer suffice.
To ensure compliance with complex and constantly changing trade regulations - and for reasons of efficiency - companies must have appropriate and adequate technology to manage international trade. Too frequently companies leave this aspect of their business to a third party or assume the information is buried somewhere in their ERP system. Each trade transaction can cover more than 600 regulations and may have up to 200 different elements, and ERP systems are simply not designed for the task - nor can they maintain the necessary database of applicable and constantly changing rules and regulations. A more effective solution is to employ one of the many software-as-a-service systems (SAAS) on the market. Users don't own the actual application, which is hosted and managed by the vendor, so server space is conserved and upgrades or updates are automatically configured. The most important advantage to these systems, however, is that all of the trade data is managed in one spot and can be easily accessed, analyzed and shared.
Finally, I strongly urge companies to become aware of and actively participate in entities like the World Customs Organization that are working on global trade issues. Traders need to advocate for their interests and ensure that policymakers understand how the burdens imposed by some regulations can actually stymie trade. Now is the time to have a collective voice speaking for traders in the international arena, offering input and advice on issues we live with everyday. If you're interested, let me know!
Source: Choice Logistics
Keywords: transportation management, 3PL, third party logistics, logistics services, logistics management, logistics & supply chain, supply chain management, Customs and border Protection, Collaborative or Coordinated Border Management, Framework of Standards to Secure and Facilitate Global Trade (SAFE), C-TPAT, Authorized Economic Operator
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