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Right-Sizing Trade Compliance Automation for Improved Costs & Controls

Last modified: September 11, 2016

Ah, “trade compliance”. Sounds so simple. Only two words. And explaining what it encompasses could, and does take, if you read all the associated laws and regulations, thousands of pages.   And because the policy objectives are complex and sometimes even conflicting, can ‘trade compliance’ be automated? Well, of course it can! There are scores of companies that have the software to prove that trade compliance automation exists.  But the key is knowing (a) what parts of a process can, and should be automated, (b) what kind of automation is appropriate to your business, and (c) what to expect (and not expect) from trade compliance automation.

What to Automate in Trade Compliance Automation

Global trade compliance, or adhering to the spider web of applicable import and export laws and regulations, is not one thing, but a myriad of sometimes separate and sometimes interrelated tasks. To first identify what trade compliance automation is best for your company, you have to identify all the sub-tasks that make up trade compliance as a whole. And understand that only mechanistic, i.e., repeatable, logic-driven processes lend themselves to automation. In other words, only predictive systems can easily be automated. For example, given a product type, plus a destination, plus an end use of the product, and identified rules, trade compliance automation can wholly be relied upon to determine if an export license is required for a given shipment. By contrast, a highly complex and complicated process that requires additional research, and the application of judgment is not a good candidate for automation. An example here: Say you’ve just discovered that your company has been misclassifying a certain family of parts in the harmonized tariff schedule. Within the family, some may be properly classified, and some may not. For those that are incorrectly classified, some will have a change in applicable duty, some will not. Across the board, some are eligible for special treatment under a free trade agreement, but not all.  Should your company make a voluntary disclosure and protect itself from monetary penalties? Only individuals that can make a total calculation of not only actual dollars but subjective risks and rewards should make a decision such as this one. So the first thing is to identify all the moving parts of your trade compliance automation program and identify those parts that are repeatable and governable by consistent logic. For example, you could start by taking the table of contents of your trade compliance manual, and determining suitability for automation:

IMPORT & CUSTOMS MANAGEMENT AREAS
3.1 Background, Principles & Process Able to Automate If Y, then CBA
3.1.1 What is an Import? N/A
3.1.2 Right to Make Entry N
3.1.3 Customs Bonds and Powers of Attorney N
3.1.4 Supply Chain & Security Y
3.1.5 Entry Documents Y
3.1.6 Payment of Duties, Taxes & Fees Y
3.1.7 Post-Importation Reviews & Correction Y
3.2 Specific Compliance Elements
3.2.1 Classification N
3.2.2 Quantity & Valuation Y
3.2.3 Origin Marking & Declarations N
3.2.4 Anti-Dumping & Countervailing Duties (“ADD/CVD”) N
3.2.5 Special Programs: Free Trade Agreement (NAFTA) Y
3.2.6 Other Government Agency Requirements Y
3.2.7 Broker Management N/A
3.2.8 Record Keeping Y
3.2.9 Entry Review & Correction Y
3.2.10 Official Communications N
3.2.11 Penalties N

For each repeatable task or process, automation may be possible, but what kind of automation? Read on…

Right-Sized Trade Compliance Automation

What do I mean by ‘automation’? I mean a systems solution that may require manual inputs and reviews of outputs, but performs its own operations in the middle. An example would be a systems solution that integrates with a manufacturer’s ERP that pulls in the essential data elements to make origin determinations under one or more free trade agreements, like NAFTA, under a specific rule of origin (“SROO”) and/or a regional value content (“RVC”) analysis. Such software is pretty common. But what if the cost to integrate this software is $1,000,000 or more; and what if you only produce 4 different products, even though in high volumes; and your supply chain is very stable? Should you invest in this solution? Or are there alternatives? A manual solution might require having a full-time subject matter expert who could pull all the details from the ERP and perform the calculations, perhaps in an Excel spreadsheet or Access database. Or perhaps something in-between would be best: a scalable solution with a supply chain technology partner where you would feed your ERP data to their system solution and get right-sized trade compliance automation:

IMPORT & CUSTOMS MANAGEMENT AREAS
3.1 Background, Principles & Process Able to Automate Integrated to ERP One SME FTE Outsource Partner
3.1.1 What is an Import? N/A
3.1.2 Right to Make Entry N
3.1.3 Customs Bonds and Powers of Attorney N
3.1.4 Supply Chain & Security Y
3.1.5 Entry Documents Y
3.1.6 Payment of Duties, Taxes & Fees Y
3.1.7 Post-Importation Reviews & Correction Y
3.2 Specific Compliance Elements
3.2.1 Classification N
3.2.2 Quantity & Valuation Y
3.2.3 Origin Marking & Declarations N
3.2.4 Anti-Dumping & Countervailing Duties (“ADD/CVD”) N
3.2.5 Special Programs: Free Trade Agreement (NAFTA) Y  $ 1,000,000.00  $ 100,000.00  $ 50,000.00
3.2.6 Other Government Agency Requirements Y
3.2.7 Broker Management N/A
3.2.8 Record Keeping Y
3.2.9 Entry Review & Correction Y
3.2.10 Official Communications N
3.2.11 Penalties N

By not only identifying what can be automated but also performing, for each activity so identified, a cost-benefit analysis, a right-sized solution can be found.

Result of Right-Sized Automation

For each process and task that lends itself to being automated, and finding and implementing that automated solution, many tangible and intangible benefits can be gained. Of course, there is the tangible benefit of cost-savings. If you’ve performed a Cost-Benefit Analysis (CBA) for each task, then you can point to a concrete dollar savings for your implementation. And you can be assured that each time the same task is undertaken, it will yield the same results, meeting a higher standard of supported repeatability for improved risk mitigation: you can prove with written evidence that you are performing standardized tasks in an accepted method to industry standards and can support this control with your inputs, software processing documentation, and consistent outputs. And perhaps most exciting of all is that you can free your staff from repetitive, aka “boring” tasks and allow for significant personnel growth and development.  Why not take a look at trade compliance automation today?

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