53% believe that technology could improve trade compliance

By Madhvi Mavadiya | 28 October 2016

In a new report compiled by Thomson Reuters and KPMG International, it was found that most trade and supply chain departments do not have the correct systems and processes in place to automate tasks. 1,700 trade professionals were surveyed from multinational companies based in 30 countries and more than half of the participants said that the key item that would improve their trade compliance program is technology.

Taneli Ruda, senior vice president and managing director for Thomson Reuters ONESOURCE Global Trade, highlighted that there is a serious and potentially dangerous disconnection between what trade professionals have and what they need. “Results speak of inefficiencies in operational practices across the global trade and supply chain functions.

There are different degrees of impact when we look into the particulars of product classification, systems integration, process centralisation and free trade agreement utilisation; but they are all pointing at automation as pivotal to addressing those inefficiencies in order to contribute to the success of their businesses,” Ruda said.

The report produced several findings from the survey, all providing evidence for the fact that automated systems would save time and cut costs. “The survey results show that the operational mechanics of import and export continue to be a significant time drain on trade teams, with import documentation and licensing, product import classification, and global supply chain management taking up the most time and resources, according to respondents. This creates more opportunities for automation,” the report read.

Product import classification and export documentation and licensing have been longstanding issues according to survey results, and some regional trends also stood out. Respondents from the US felt like product export classification was a burden, while those in Asia were more concerned about how global transportation management was time consuming. In addition to this, Latin America found import valuation to be a big problem.

Custom broker management is also considered to be time and resource intensive because more brokerage will result in greater costs, but also that there is an increased amount of transactions occurring and ports of entry being used. “Companies can ease this burden with Global Trade Management Systems (GTM) that connect to brokers’ systems, thereby reducing the brokerage management workload,” the report advised.

Lack of automation continues to be a challenge for trade professionals worldwide. Trade teams largely see the value in automation and would be keen to adopt technology that reduces risk and makes their jobs more rewarding and dynamic. Among respondents that do not use GTM technology, the top challenge cited was the lack of automated systems.” However, many companies do not leverage GTM tech – only 34% currently use a GTM system.

Although GTM systems are not used extensively, awareness of the need for automation does exist but is not consistent in different regions. While 58% of participants in the US were aware of this need, only 27% in Asia were educated on this subject. Heidi Mustonen, managing director of the trade and customs practice for KPMG in the US highlighted: “Trade professionals are increasingly viewing their GTM implementations as an evolution. Developing a flexible roadmap that prioritises the modules, countries, and configurations that fit the organisation and corporate objectives is as important as the system that is selected.”

Alongside this, last year only 30% of participants revealed their companies were fully making use of all the free trade agreements available to them. Results from an expanded survey this year found that that figure was indeed 23%. Full utilisation of FTAs can become problematic if the required documentation is not available or if there is a lack of expertise, the report said. “Technology can help automate the standard tasks so trade compliance teams only need to solve the exceptions, essentially eliminating most of the work related to FTA qualification.”

A staggering 91% of respondents said that they had a problem with product classification and this result was consistent across all industries and regions. However, a resolution exists and again, education plays a big part. Keith Haurle, VP Business Development of Thomson Reuters ONESOURCE Global Trade, said: “Classification needs are ongoing, and the sheer volume and constant regulatory changes make this a time-consuming and challenging activity for trade compliance departments. Investing in the right tools to ensure the accuracy of classification from the start should be a key priority for trade professionals.”

As well as automation, multinational corporations should place importance on aligning transfer pricing policy and customs valuation; only 7% said that they have no challenges in managing transfer pricing. “Technology can truly drive the process of monitoring transfer pricing requirements, and centralisation can streamline how it is carried out. Both these problems have concrete solutions.”

The report concludes that at the moment, there is a grim outlook for global trade because of the state of global economy and the uncertainty associated with it. Trade has stopped growing, but corporations cannot control this and this is why efficiency is key. It says: “First, it means automating manual tasks, better utilising free trade agreements, reducing the complexity of the classification process, and aligning transfer pricing and customs valuation. Moreover, it means creating an environment where trade compliance is strategic and drives cost efficiencies through the use of special customs programs, free trade agreements, Authorized Economic Operator programs, and new supply chain structures.”

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