Automating global trade compliance in an era of uncertainty

The world’s supply chains are becoming more interconnected, intertwined, and interdependent. As this evolution continues, the suppliers, service providers, business partners, and other entities that help shepherd goods from one country to the next need to be able to collaborate effectively. They also have to follow the regulatory rules of the road, most are which are not homogenous from one country to the next.

The nuances of global trade requirements can be complex and confusing. For example, every international import entering the U.S. must be legibly marked with the country of origin’s English name. All commercial shipments entering Canada must be accompanied by a Canada Customs Invoice; consumer electronics exported to Hong Kong have at adhere to the country’s Mandatory Energy Efficiency Labeling Scheme (MEELS) requirements; and you can’t ever import rugs or used tires to Morocco.

These and other requirements fall under the guise of global trade compliance, which can be effectively managed with a global trade management (GTM) platform. These solutions go beyond compliance and also encompass the entire, end-to-end global trade process.

As global trade continues to expand at a rate of about 2.5% annually (for developing countries that number jumps up into the 3.5% to 4% range), demand for GTM will continue to grow.

RSM says its global trade forecast accounts for an expectation of higher import taxes in the U.S. market, particularly for goods that flow through Chinese supply chains.

However, with the new presidential administration promising new or higher tariffs, the complexities of managing global trade may deepen further as companies work to keep up with these changes.

“More companies are looking to automate global trade compliance in order to be ready and prepared for whatever regulatory frameworks come down,” says Kira Bilecky, director-supply chain strategy at St. Onge Co. “We’re definitely seeing a lot of interest there on the part of companies, but we’re also seeing some ‘analysis paralysis’ as those organizations assess the different software options and integrations.”

Saving money and minimizing risk

At its core, GTM gives companies end-to-end visibility and control over their international trade processes. Its capabilities include import and export compliance, customs management, trade finance and logistics—all of which help organizations navigate trade requirement complexity, comply with international regulations, minimize risk, save money (on fines and duties), and optimize their global supply chains.

“Fluctuating trade regulations and increasing penalties for non-compliance are making global trade more difficult and costly to manage,” a spokesperson at GTM provider e2open points out. “However, with the right technology, companies can navigate these challenges and even achieve significant cost savings and competitive advantages.”

Once in place, GTM helps companies automate international trade management processes and “minimize the costs of international business in a volatile world economy,” the spokesperson says. From their GTM platforms, companies are also using integrated solutions that streamline their operations and enhance efficiencies.

This trend has led to a growing demand for “one-stop shop” providers that offer a comprehensive suite of business software applications. That way, instead of relying on a patchwork of disparate systems from various vendors to run their global supply chains, businesses can leverage integrated platforms that provide a unified view of their operations.

Bilecky says GTM vendors are answering the call by creating platforms that “do more,” but points out that producing and marketing a broader spectrum of solutions isn’t always easy.

“Software providers may want to be one-stop-shops, but that doesn’t always mean they have the equivalent level of maturity across financial reporting, supply chain planning and GTM, for instance,” says Bilecky. “GTM providers may want to incorporate it all, but they’re struggling to be consistently successful in each of those different modules.”

A robust space

As challenges like tariffs, geopolitical tensions, compliance demands, and supply chain disruptions continue to reshape traditional business models, more companies are turning to technology to build more operational
resilience and agility.

As he sat down to pen ARC Advisory Group’s latest “Global Trade Compliance Study,” Gaven Simon, the company’s sustainability and supply chain research analyst, says that he got the feeling that global trade compliance was on track to become a “very robust space” within the next few years.

“This software sector was already growing, but now I think it’s going to grow at an even faster pace,” says Simon, who admits that accurately projecting “what’s going to happen” in this realm right now is a bit difficult due to the uncertainty over new and higher tariffs—and related trade issues. Once the smoke clears, however, he expects to have a clearer vision of what’s coming next.

“I’d say 2025 will provide a better idea of what’s going to happen for the next three years, just based on what actually comes to fruition and the actual regulatory changes,” says Simon, who spoke with several GTM providers for his report.

Through those conversations, Simon says he learned that more of them are implementing artificial intelligence (AI) capabilities into their solutions. For example, he sees AI playing an increasing role in the management of denied or restricted party lists, or those individuals, organizations, or entities that are prohibited from doing business with certain governments or agencies.

Software vendors are also developing functionalities that use AI to handle the monotonous task of going through and checking against denied party lists. The advanced technology can also be used to help companies determine the most affordable and efficient way to get their products to and from specific international locations.

This involves free trade agreements and the circumvention of certain tariffs by using a specific ocean port or free trade zone (FTZ). In these zones, goods can be imported, stored, manufactured or re-exported without incurring customs duties and taxes.

Simon is also seeing more software developers embedding weather and climate warnings into their platforms, which shippers can use to predict, identify and work around issues that may be looming or already taking place. This level of predictive analytics can be extremely useful on the global front, where it’s nearly impossible to keep track of everything that’s going on in the world all at once.

“If there’s a hurricane spinning up in the Gulf of Mexico, and if you have a key supplier situated on the coast in Louisiana, the software will trigger a warning notification about the storm,” says Simon, who has a background in sustainability. “I think that’s an extremely important capability that’s also very timely because it converges climate and supply chain.”

Don’t cut corners with GTM

Similar to any major software implementation, Bilecky says companies investing in GTM tend to get hung up on the complexities of the software itself and aren’t always sure which platforms are most effective for their individual situations.

“You really have to do the due diligence to determine if and how to use the software, and for which particular functions,” Bilecky explains. “These challenges aside, companies need some type of global trade management solution—be it bolt-on for a supply chain application or some type of trade compliance software—because regulatory compliance is becoming a lot more stringent.”

Another key consideration is whether the tool itself relies on the most accurate, up-to-date data sources available. This is an important point because trade and import/export rules are changing all the time, and keeping up with them on spreadsheets is a recipe for failure, shipment delays and higher duties. Bilecky says the company’s own maturity level should also be factored into any GTM
purchase decision.

For example, a company that’s just starting to do business with companies and customers in other countries may need a simple compliance tool that integrates with an existing enterprise resource planning (ERP) system. A larger organization that’s been doing business globally for 10+ years may have different needs and may require a more sophisticated GTM with advanced analytics, predictive capabilities and a robust integration ecosystem to manage complex global supply chains.

Bilecky encourages companies to do a careful, internal assessment of their needs before adopting a new global trade platform. Understand your requirements and needs first, she adds, and hone in on the goals you want to achieve.

“There’s an incremental path to follow when adopting these types of technologies,” she says. “The trick is to find which tools are ‘fit for purpose’ for your organization. Then as your company evolves, it can start exploring the next-level options.”