Precision

Denied Party Screening: Why It Matters

2022-11-30T13:25:43Z

If you’re the operations, supply chain or logistics manager of a manufacturing firm, knowing who your trading partners are — and that you’re engaging with authorized suppliers and customers — is critical.

Law enforcement and trade regulators around the globe compel organizations to verify the identities of their trading partners. This helps them to close the net on terrorist and criminal organizations, as well as rogue states.

In order to comply with global trade regulations, manufacturers must ensure that their trading partners do not appear on any sanctions or denied party lists (DPLs). In addition, they need to verify if an item requires an export license and ensure that the individuals or locations that have ordered their products are eligible to receive them.

Organizations that fail to provide adequate screening can face severe penalties. For some recent examples, take a look at “Don’t Let This Happen To You” — a round-up of fines imposed by the US Department of Commerce’s Bureau of Industry and Security. As this document makes clear, BIS will impose penalties for license missteps as well as for more serious compliance violations.

It is important to note that denied party screening, also known as sanctioned party list screening or restricted party screening, does not just apply to overseas shipments. Manufacturers of dual-use goods must screen domestic shipments to ensure that money and products don’t flow to terrorist and criminal organizations. Dual-use goods are items that can be used both for civilian and military applications. Furthermore, manufacturers in the US, must take into account deemed export laws. Under these regulations, shipping technology, goods or even information to a foreign national based in the US is known as a “deemed export” even though the goods have not left US soil.

These challenges are driving demand for automated screening software. The alternative? Checking each shipment manually to determine whether the recipient’s name or business entity, along with the name of the recipient's bank, business partners, and known associates, do not appear on any published list of sanctioned organizations and individuals.

Manual screening against all of these lists is labor intensive — particularly for high volume shippers. Nevertheless, failure to comply with these restrictions and regulations is not an option. Organizations who violate trade regulations are at risk of high fines, ruptured business relationships and damaging publicity if their products fall into the wrong hands.

Six Reasons Why Businesses Need Denied Party Screening

Let’s look at six reasons why manufacturers need automated trade compliance screening.

TOO MUCH INFORMATION

Published lists of sanctioned parties and controlled products are subject to near constant change. Unfortunately, manually keeping track of changes to DPLs is time-consuming and labor intensive. This can lead organizations to be somewhat lax about updating their information when applying these checks.

Automated trade compliance screening software makes the process easy. It accesses real-time data from published lists of sanctioned entities, ensuring that your screening process is consistently updated and accurate.

DUAL-USE PRODUCTS

Certain industries — such as high tech, industrial manufacturing, and life sciences — deal with added complexity when shipping their products. That complexity is due to the potential for misuse of their products. Electronics and components that seem harmless enough often face added regulations. This is due to the fact that criminals, terrorists or other bad actors could potentially use their parts in ways not intended by their primary purpose.

For instance, a diesel engine can power a lawn mower — or a rocket launcher. Live viruses intended for vaccinations could instead be used to build a biological weapon. Car batteries can provide a ready source of power for almost any use — not all of them friendly. Nitrogen-based fertilizer can be used to build bombs. Even electronics from a music power amplifier, or PA, could be repurposed to build rudimentary electronic weapons.

Because of this potential for dual product usage, it’s important to ensure that trading partners are who they say they are. Implementing automated screening and checking products and components against ECCN lists are key steps to ensure export safety.

SUPPLIER REQUIREMENTS

As penalties for trade compliance violations become more expensive and tightly enforced, many manufacturers have found themselves on the radar of regulatory agencies. Suppliers are held responsible to ensure that their products don’t end up in the wrong hands. They, in turn, are holding their customers responsible, requiring that the distributors that purchase products from them implement trade compliance as well.

Automated trade compliance software helps manufacturers comply with these supplier requirements. As a result, this helps to maintain business relationships and prevent losses in revenue.

FOLLOW THE MONEY

The potential for money laundering and terrorist financing are major concerns for any organization involved in global trade. Cyber-criminals, terrorists, and organized crime figures operate in every corner of the world. As a result, no matter where you trade, you must ensure that any payment you receive does not come from hackers, terrorists or organized crime syndicates.

REPUTATION PROTECTION

No manufacturer wishes to see their company or brand name associated with a rogue state, terrorist attack or criminal event. That’s why denied party screening is a critical part of your brand protection and risk mitigation strategy. Automated screening can not only prevent your products from falling into the wrong hands, it also shows that you exercised due diligence to prevent that from happening. Denied party screening and compliance checks are essential parts of the audit trail, helping you prove to authorities that you did your part to keep your shipments safe.

E-COMMERCE

Manufacturing firms are increasingly engaged in B2B e-commerce. Globally, e-Commerce is expected to grow from $3.3 trillion USD today to $5.6 trillion in 2026.

As e-commerce volumes grow, it’s becoming more challenging to ensure that products aren’t misplaced or misused. Organizations that work with third party fulfillment or contract shippers must be especially careful to ensure that their products don’t end up in the hands of blacklisted individuals.

Manufacturing firms are increasingly dependent on global and e-commerce trading relationships. Yet, with access to foreign markets and fewer in-person interactions comes a greater responsibility to ensure the safety and security of every shipment. With automated trade compliance screening, companies can save time, avoid fines, and ensure that their trading partners are reputable as they grow their global businesses.

For further information, learn how QAD Global Trade and Transportation Execution (GTTE) can help your organization ensure accurate denied party screening and reduce supply chain risk.

Six Ways Multi Carrier Shipping Lowers Parcel Delivery Costs

2022-11-23T13:10:40Z

Transportation makes up a significant portion of a product’s landed cost. Parcel shipping, in particular, is an expensive business, especially for expedited, overnight delivery. Shippers who sell goods business-to-consumer have to contend with the fact that customers are unwilling to pay high delivery costs.

Last-mile delivery service is a big deal for shippers because it takes a lot of time and money. The costs involved in providing excellent last-mile delivery services are way too high and comprise labor costs, fuel costs, cargo carriers’ costs, and drivers’ salaries.

Statistics show that the last mile delivery market was valued at 18.7 billion USD in 2020, and it is expected to reach 62.7 billion USD by 2027. Along with the CAGR of 18.9%, during the forecast time period, the challenges are also expected to grow. A failed delivery only increases this already expensive process.

At times when the economy is bullish, unemployment is low and GDP is rising, controlling transportation spend may not seem particularly important. However, in this current period of inflation and at a time of economic uncertainty, ensuring that transportation is as cost-effective as possible is critical. To do this, best-in-class organizations have turned to multi carrier shipping solutions.

Single Carrier vs Many Carrier vs Multi Carrier Shipping

Organizations typically select a single carrier with the aim of lowering costs. Large volume shippers can negotiate favorable rates by working with a single carrier for all shipments. Nonetheless, this is not always the most cost-effective strategy.

Furthermore, by standardizing on one carrier, staff do not have to research and compare rates, which saves time. Having said that, all carriers have their strengths and weaknesses. Some are better than others at particular types of shipments or offer better transit times in certain geographies.

An organization using multi carrier shipping software always chooses the carrier and service that can deliver the goods within the promised timeframe at the lowest possible cost.

Additionally, a comprehensive multi carrier shipping strategy fully considers global trade requirements to not only significantly lower transportation costs, and manage the outbound flow of goods but also to mitigate regulatory risks. Today’s technology solutions help manage and simplify global trade in conjunction with multi carrier shipping activities.

International shipping and manufacturing comes with an array of regulations and paperwork — none of which shippers should ignore. Global trade missteps, when making shipping decisions can result in customs hold ups, lost shipments, missed delivery deadlines, loss of export privileges and fines.

Enterprise-level software solutions should automate the most time consuming processes of global trade, when planning and executing shipments, by ensuring all export and import processes are met, including trade compliance, documentation production and customs reporting. By automating compliance checks, manufacturers can perform due diligence, mitigate risks and create audit-ready electronic reports.

To be clear, multi carrier shipping is not simply having two or more carriers to choose from. Many companies use one carrier for domestic shipments and a second carrier for international deliveries. That is not multi carrier shipping, but rather, many carrier shipping.

Instead, a truly multi carrier shipping solution allows an organization to seamlessly switch between carriers for both domestic and international shipments. Here are six ways multi carrier shipping solutions help lower parcel delivery costs.

Six Ways Multi Carrier Solutions Reduce Parcel Shipping Costs

GET THE BEST RATES, ROUTES AND SERVICE LEVELS

Multi carrier shipping gives an organization more flexibility. Consequently, organizations always use the lowest cost carrier and service that will meet the promised delivery date. In addition, with thousands of carrier services to choose from around the world, organizations can also include local and regional carriers in their network.

Furthermore, although it is possible to rate-shop every shipment, high volume shippers use multi carrier shipping along with a configurable automated routing guide. As a result, shipments are automatically routed to the lowest cost carrier and service depending on the parcel’s characteristics, such as weight, delivery address and customers to name a few.

LEVERAGE A BETTER NEGOTIATING POSITION

When an organization uses a single carrier, they can be vulnerable to higher prices. Should an organization wish to switch carriers, they will have to spend significant time negotiating rates with the new carrier, a process that can take months.

If the carrier is generally meeting expectations, many organizations tend to leave well enough alone. But this does not mean that the organization is getting the most competitive rates and services from the carrier. If the customer is mostly satisfied with the service, there is no motivation to offer lower cost options.

With a multiple carrier strategy, organizations are in a better negotiating position. The organization always has access to the best rates and routes that will deliver your parcel on time. Therefore, carriers have to earn your business on every parcel. As a result, your organization has the power to negotiate more favorable rates and drive down shipping costs.

ACHIEVE FURTHER SAVINGS WITH CONSOLIDATIONS

Enterprises can make additional cost savings by consolidating shipments bound for the same region or country. Of course, carriers do offer consolidation services, but at a price. Instead, high volume parcel shippers can manage consolidations in-house using the zone-skip functional of their multi carrier solution.

Consolidation is especially important when you ship internationally. Organizations can use one carrier for the international leg of the journey and a local carrier or carriers for the last mile. For organizations that ship to Europe or Asia this is particularly advantageous as there are a vast number of carriers across both regions, and leveraging these local carriers can result in significant savings.

There is another distinct advantage to consolidating international shipments — less regulatory headaches. A consolidated shipment requires one customs declaration, whereas each parcel sent separately would have needed its own customs declaration.

GET MORE FLEXIBLE AND CHEAPER RETURNS

If your enterprise sells goods through online channels, returns are almost unavoidable. Consumers return online purchases in much higher quantities than goods bought in-store. In addition, when consumers purchase items from a physical outlet, they are also more likely to return unwanted goods the same way.

The high volume of returns can be a challenge to manage, particularly if an organization uses a single carrier. A carrier that excels at outbound shipping does not necessarily have processes in place that make reverse logistics a core strength. Furthermore, a carrier that provides both outbound and reverse logistics may not offer the most cost-effective rates.

Therefore, in order to get the best rates and services for both outbound and reverse shipping, more than one carrier is generally necessary. This is even more so the case when an enterprise has multiple locations across a number of different countries.

By leveraging a multi carrier network, shippers have more flexibility for returns, and can ensure that goods coming back do so at the lowest possible price.

ALWAYS REMAIN CARRIER COMPLIANT

Every carrier has a number of rules and requirements. The largest, global carriers have stringent rules regarding labeling and electronic communications. They must enforce these standards in order to efficiently process high volumes of parcels through their networks.

Remaining compliant with a number of different carrier standards can be a challenge, particularly if you ship from multiple locations. However, with a multi carrier shipping solution, your provider ensures that you remain compliant with changing carrier requirements.

KEEP YOUR CUSTOMERS HAPPY

Certain organizations, particularly those that ship B2B, may have to accommodate customer requirements regarding carrier selection. For example, B2B customers may prefer that you ship parcels to them on their account. An organization using a single carrier cannot accommodate these types of requests without significant hassle. In addition, the preferred carrier may even penalize your organization with loss of favored shipper status and higher rates.

With a multi carrier shipping strategy, an organization can easily meet these customer expectations around shipping.
Learn how QAD Global Trade and Transportation Execution (GTTE) can help your organization lower parcel shipping costs and boost competitive advantages.

What does FTZ software do?

2022-11-17T16:38:26Z

Foreign Trade Zone (FTZ) management has a reputation for being complex, especially regarding inventory management. US Customs and Border Protection (CBP) requires precise inventory recordkeeping and control. Companies operating in an FTZ must track all inventory entering and exiting the zone. Failing to do so can result in fines and, in some cases, losing the ability to operate within a zone. Fears of this complexity have kept some companies from using the program. However, with concerns about a recession and thinning margins top of mind for many leaders, companies are taking a second look at this tried and tested solution for minimizing duties, fees and supply chain costs.

To manage FTZs, companies are legally obliged to have software systems to help them manage their FTZ operations. While you might have heard of the benefits of FTZs, and that there is software available to help with ongoing management, you might still need to figure out what exactly FTZ software does. That’s what we’ll be answering today.

Tracking inventory

FTZ software arose as an answer to the question, “how can we keep track of FTZ inventory and stay in compliance with CBP requirements without spending excessive administrative time?” Thus, FTZ software focuses on inventory management and is a specialized form of inventory control and recordkeeping system (ICRS).

FTZ software tracks the following aspects of all inventory in the zone at a given time:

Location of merchandise
Zone status
Cost or value of the merchandise
Beginning balance, cumulative receipts and removals, adjustments, and the current balance on hand by date and quantity
Destruction of merchandise
Scrap, waste, and by-products

Integrating with ACE

CBP has created an Automated Commercial Environment system, better known as ACE. When operating in an FTZ, companies must report all imports and exports in ACE so that CBP can determine admissibility. If a company tracks its inventory manually, it must duplicate effort by separately inputting this data in ACE. FTZ software can integrate with ACE, streamlining the process and avoiding duplicate work. Furthermore, this integration ensures that critical customs data is automatically updated, such as LACEY Act declarations, currency conversion rates, country codes, and HTSUS updates.

Creating annual reports

Companies operating within an FTZ must prepare an annual reconciliation report. This report must contain the following information for all zone inventory:

Quantity on hand at the beginning of the year
Cumulative receipts and transfers (by unit)
Quantity on hand at the end of the year
Cumulative positive and negative adjustments (by unit) made during the year

Companies must prepare this report within 90 days of the end of the year, and then the zone operator must send a certification of its completion to CBP within ten days of preparing the report. At any point in the year, CBP retains the right to do an audit and request the report.

For companies using advanced FTZ software, not only is all this information tracked by the system throughout the year, but the software also automatically creates the report. In that case, with a clean paper trail in hand, audits become a breeze.

Ensuring compliance

The above points all add up to compliance. FTZs help companies achieve significant savings, but those savings depend on remaining compliant. Not only does FTZ software streamline management, but it gives companies peace of mind. They know their inventory recordkeeping is always compliant and their savings are safe for years to come. Furthermore, FTZ software can proactively notify operators of upcoming deadlines, weekly entry estimate status, and more to ensure that the relevant parties are always one step ahead.

Delivering analytics

In addition to ensuring compliance, FTZ software also helps companies leverage data for business goals. The role of data in the supply chain has rapidly changed in the last decade. Companies are collecting more data than ever. Now, the challenge is knowing what to do with it.

Collecting and tracking inventory data is just one part of FTZ software. FTZ software with advanced analytics capabilities delivers greater value by turning this data into actionable insights. These insights empower operators to quickly view the current inventory flow status and optimize operations for continuous improvement.

Learn More about QAD FTZ ICRS

When it comes to available solutions, no FTZ software can compare with the track record of QAD FTZ ICRS. Our solution was tailor-made in conjunction with FTZ operators to solve the felt needs of those working within a zone. This industry expertise is why it continues to be the go-to solution for global enterprises. To date, our senior FTZ consultants have overseen over 1,000 FTZ projects. Yours could be next.

To learn more about QAD FTZ ICRS, schedule a consultation with our FTZ experts.

3 Minute Explainer: Why You Should Automate Trade Compliance

2022-11-16T13:07:20Z

Global trade comes with a host of rules. Import and export compliance cannot be ignored. Violating trade laws and regulations puts a company at the risk of fines.

Recently, governments around the world have responded to the Russian-Ukrainian conflict by imposing sanctions on Russian individuals and businesses.

More recently, companies are facing fresh supply chain challenges in responding to a new US law that requires proof that imported goods are not sourced with forced labor in China, particularly in the Xinjiang region.

And coming soon, companies will have to address future global trade legislation like the German Supply Chain Act and the EU Supply Chain Law.

Unexpected disruptions occur — consider that the 2021 Suez Canal blockage held up $9.6B in global trade per day, according to KPMG. Furthermore, certain goods can face enhanced restrictions like oil and semiconductor chips.

Companies engaged in international trade are obliged to abide by new restrictions as they come into force. However, this can be a significant challenge for companies that need to manually check groups, entities and individuals against sanctioned party lists.

The Cost of Non-Compliance

Depending on the origin or destination of shipments, companies have a huge number of rules and regulations that they must follow.

In 2021, the US Treasury Department’s Office of Foreign Assets Control (OFAC) issued over $20 million in fines for sanctions violations. Last year was a slow one for OFAC. In 2019, the organization issues $1.3 billion in monetary penalties.

Many companies outside the US are also subject to OFAC regulations. Any company that issues or receives payments in US dollars must abide by OFAC rules.

The European Union has similar laws restricting or prohibiting goods. Under Article 267 of the Union Customs Code (UCC), the EU can restrict goods to protect human health, the environment, public security and so forth.

Shippers need to be aware of, and abide by, all the national and international trade compliance regulations that apply across the supply chain. Furthermore, shippers must correctly classify their goods. Customs authorities around the world issue fines if companies fail to use the correct commodity codes.

In addition to fines, incomplete compliance procedures can result in missed delivery deadlines, lost shipments and other supply disruptions. Repeat offenders may have their export privileges revoked. All of this can impact a company’s customer relationships, reputation and ultimately, its bottom line.

Global shippers that automate trade compliance mitigate these risks, and remove costly time- and labor-intensive processes.

Trade Compliance Automation Explained

Automation removes the guesswork out of trade compliance processes. Automated trade compliance solutions offer:

Access to international HS codes, country-specific commodity codes, and any changes made to these
Up-to date international and government lists of denied or restricted parties
The ability to automatically run background checks on customers and prospective trading partners
The ability to identify and complete license requirements with minimal manual research
Audit trails and compliance metrics for ongoing improvements

With an automated trade compliance solution, shippers proactively mitigate risk, as well as remove time and labor intensive manual processes. We will now look at these in more detail.

IMPROVED INTERNAL EFFICIENCIES

A manual process, such as a restricted party screening or a denied party list screening check, that would have taken hours can be done automatically. Automatic screening has a minimal risk of errors, reducing the possibility of fines and penalties.

Automated compliance tools combine historical data, with real-time regulatory information, plus previously stored customer and partner profiles. Therefore, a trade compliance solution creates a holistic compliance workflow.

TRACKING CRITICAL PROCESSES

For effective trade compliance, every process, workflow and report must be tracked and documented. These must also be stored for future reference. This is known as the compliance audit trail.

The audit trail is critical to ensuring compliance with international regulations. Therefore, an automated solution must be able to cross-reference a compliance audit trail with various international regulations and customs requirements.

SANCTIONS AND RESTRICTED PARTIES

Global trade compliance solutions help export teams to ensure that they are not sending goods to embargoed countries or restricted individuals.

International and government lists of denied parties are subject to frequent changes. As a result, manually checking these lists is a daunting task.

Automated trade compliance solutions give shippers access to the latest trade content data. This allows personnel to identify denied parties, controlled products, embargoes and sanctioned countries.

MITIGATING RISK

Automated trade compliance solutions allow you to run a compliance check whenever you need. This could be at the beginning of a customer relationship, at shipment, or any time in between. As a result, trade compliance automation makes it easy for companies to perform due diligence. This allows shippers to significantly reduce penalties, fines and shipping errors.

By automating trade compliance, shippers streamline internal processes, mitigate the risk of violations, and improve customer experience. Automation is not simply about avoiding fines — it offers a competitive advantage.

Now is the time to thoroughly evaluate your organization’s ability to automate global trade compliance. For further information, visit QAD Global Trade and Transportation Execution (GTTE).

Import Management: The Importance of Correct Classification

2022-11-09T13:09:45Z

Classifying goods using the correct commodity code is the first, and arguably, most important step in import management. These codes tell customs officials what is being imported, if the goods are admissible, and what taxes, if any, are due.

Any importer who gets the classification wrong is violating import laws. As a result, the importer is vulnerable to delayed cycle times, confiscated shipments, and fines. When you add in the fact that 52% of companies lack the headcount to perform all their import operations, according to Deloitte, managing importation requirements can cause unexpected business pain and disruption.

Commodity Codes Explained

Supply chains are global. As goods cross the world, they travel with a six-digit code, known as a subheading. These six-digits are an almost universally recognized tariff nomenclature system. This is known as the Harmonized Commodity Description and Coding System — or Harmonized System (HS).

Almost every trading nation uses and recognizes the HS. Therefore, customs authorities around the world share a common language to track the inbound and outbound flow of goods. When used correctly, the six-digit HS code of a particular item will be the same in all WCO member countries.

Furthermore, as well as the six-digit HS subheading, WCO member countries can add further numbers to the commodity code. This allows customs authorities in those countries to track imports and exports according to its particular tariff needs. The US’s Harmonized Tariff Schedule (HTS) and TARIC, the integrated Tariff of the European Union, both use ten-digits.

The Importance of Accuracy

Foreign goods imported into a country may be subject to tariffs. Therefore, importers must classify their incoming goods according to the HS and the import country’s own tariff nomenclature.

This is not an aspect of global trade management that can be treated without due diligence — correct classification is a matter of regulatory compliance. Get it wrong, and the importer can face serious consequences. The vast majority of penalties are as a result of a violation in one of the following three areas:

The importer improperly classified goods, either by mistake, or to avoid duties, or to bypass admissibility criteria
An importer submitted an inaccurate valuation and undervalued the goods to avoid paying taxes and duties
The importer misrepresented the country of origin in order to illegally qualify goods for preferential duties under a free trade agreement

It is, of course, possible to purposely use an incorrect commodity code to gain a fraudulent advantage. However, classification is a complicated process, making it vulnerable to human error.

An importer who incorrectly classifies their goods will face penalties whether the mistake arose from fraud or negligence. Violators may also be subject to a longer customs clearance process, and more frequent inspections from customs authorities.

Global Trade and Transportation Integration is Crucial

Import compliance missteps can result in customs delays, fines and damaged customer relationships. Despite this, enterprises with a number of manufacturing and distribution sites across the world may not have standardized compliance procedures. Some sites may be better than others at managing import compliance processes because they have the necessary staff to do so.

Furthermore, many multinational companies have different shipping practices across different sites - and shipping practices rely heavily on addressing the various country specific import documentation requirements. This makes it almost impossible to have a clear picture of global trade and shipping operations.

By integrating global trade compliance along with a transportation solution, companies will follow the same standards, workflows and processes across the organization. This ensures that compliance processes are being met, and that enterprise-wide shipping controls are being followed to accurately address import regulations.

Compliance is a Legal Responsibility

Any import activity must begin with correct classification. This is a legal responsibility. This is true, even if a third party, such as a customs broker, classifies goods for you.

Ensuring that you have the correct code depends on a number of factors. Importers will need:

A complete description of the good
Complete details of the components or raw materials used to make the good
The primary use of the good

Take for example, a shaving razor made with a metal frame and a plastic grip. The importer could have difficulty deciding if it is a metal razor or a plastic one.

The classification process also allows for sets. What if the razor comes as part of a set with shaving cream and aftershave? In such a case, it is possible that a different commodity code will apply.

In order to work through these questions, the importer must use the General Rules of Interpretation (GRI). The GRI is a set of rules that importers use to interpret the HS. The GRI includes rules for the ‘essential character’ of a good as well as rules for sets.

How QAD Can Help

By correctly classifying their goods, importers not only avoid penalties, they can save money too. It is not uncommon for importers to pay too much duty. This is because they do not take advantage of all the possible tariff provisions available.

For example, a good may qualify for lower or zero tariffs under a free trade agreement. Furthermore, the primary purpose of a good can mean that a lower tariff rate will apply.

QAD Import Management automates the import processes. The solution offers specialized tools to assist importers ensure compliance with global trade laws, including the correct commodity codes and import documentation.

QAD’s import management system includes an automated Classification Worksheet and GRI Wizard to ensure correct classification. All classification determinations are then added to the solution’s Global Product Item Master. This captures a good’s key attributes, as well as supporting documentation and decision criteria. Furthermore, the solution automatically generates admissibility flags as well as identifies preferential duty eligibility under a Free Trade Agreement.

The Global Product Item Master allows for multiple import and export commodity codes to be assigned to goods, based on the importing or exporting country. As a result, companies with global import operations can use a consistent and uniform application of commodity codes. The proper codes are available for all documentation and customs reporting purposes, across the entire enterprise.

What actions are you taking today to address import documentation requirements and regulations? What steps have you taken to integrate global trade compliance with transportation activities? For more information, learn how QAD Global Trade and Transportation Execution (GTTE) can help your organization streamline your import management efforts and integrate more closely with shipping practices.

Insights from Manhattan Exchange 2023: Agents of Change

2022-11-07T13:26:27Z

By Trevor Long

The recent Manhattan Exchange that took place in Berlin was titled “Agents of Change”. This was a very relevant topic, especially given the ongoing disruptions that are forcing supply chain leaders to rethink how supply chains are designed, how all the different parties communicate, and what is possible.

Supply chain conversations are shifting from the boardroom to the dining room. Delayed shipments for birthday presents causes nail biting family anguish, and lack of spare automotive parts means additional visits to the garage as your annual vehicle inspection date creeps ever closer! As these disruptions impact our daily lives, what can we do differently to manage this? However, they really shine a light on the adage “the only constant is change”.

Change is Constant… And Few People Like It

In the compelling opening keynote speech by Manhattan President and CEO Eddie Capel, the 400 strong audience gave a collective sigh of relief, as we were all given an alibi for perhaps not embracing change or moving quicker than we do. It was explained that it is “nature's fault”... blame the Amygdala! This is a small almond sized region of all of our brains that is designed to protect us and keep us safe — including the potential threats from change.

But we live in a world where instant gratification is becoming the norm and where consumers want their deliveries now. Consumers and customers want things faster, with more convenient delivery options. These include delivery to home, delivery to work, pick up from the store. In addition, customers want more control, including the ability to change the delivery options after placing the order. Plans change, and for a customer it may now be more convenient to pick up their purchase from the store, rather than have it delivered to an office.

In this new world, is it possible to avoid change? It is not… to resist it is like standing on a travelator going backwards. So change we must, even if it does involve a certain level of natural discomfort.

Return on Pain Eliminated

To help us understand the process of change, Eddie introduced an equation called Gleicher's Formula.

Gleicher's Formula states that: D x V x F > R.

D is the dissatisfaction with current conditions
V for vision of what things could be like
F for initial practical (first) steps towards change.
All of these elements multiplied had to overcome R, standing for resistance, for change to take place.

Or, another way to approach the issue of change from a different perspective, and for those that prefer language to equations, consider the word ROPE.

Return On Pain Eliminated.

Essentially, what could your business look like, if you found a way to eliminate your primary pains? What would the benefits be? What could you do differently? What new opportunities might open up to you?

Changing Carriers… And the Pain of Onboarding New Carriers

From our conversations during the day, two important topics kept re-emerging. Latency of information for label printing in the full end-to-end process (more about this in a follow-up blog), and length of time it takes to onboard a new carrier.

Some people had actually agreed to extend contracts with existing carriers, knowing that they would be paying more, rather than adding new carriers into their network. They also felt “painted into a corner”, as the business lacked the agility and flexibility to respond to market change.

If the onboarding pain were eliminated, many attendees stated that this would open up the possibility of offering new services to the market. This included shifting from a B2B, to a more B2C fulfilment model, winning new customers, and providing more and better services to existing customers. Eliminating this pain could put the company — and their customers — in greater control of when and how deliveries were managed.

Eddie concluded by encouraging us to challenge. To challenge each other — and through doing so seeing what insights come to light. Sometimes a new idea only has to be slightly different to achieve a massive breakthrough. To use these insights to challenge the status quo, and think about what can be done differently. And finally to challenge ourselves, and to act in a way to create a positive change for the future… to become “The Agents of Change”.

About Trevor Long

Trevor Long has over 20 years’ experience of selling Supply Chain solutions including: Transport Management, Global Trade Compliance, Supply Chain Optimization, Manufacturing Execution, and Mobile applications across Manufacturing, Life Sciences, Retail and 3PL industries. In his spare time, Trevor enjoys playing cricket, walking his Cavalier King Charles spaniel and spending time with his family.

To connect with Trevor please contact us or reach out to him on LinkedIn.

Simplifying Global Trade: Threats, Challenges and Hacks

2022-11-02T13:23:50Z

Global trade is complex, and seemingly increases on a weekly or monthly basis.

In 2017, world trade looked healthy. The World Trade Organization reported that global merchandise trade volumes grew by 4.7 percent — the strongest growth in six years. Perhaps even more importantly, the ratio of trade growth to GDP growth was back to its historic average of 1.5. During the years following the 2008 economic crash, the ratio was 1.0.

This expansion was due to growth across most regions of the world, but especially in developing economies. In 2017, exports from developing economies grew an impressive 12 percent. As a result, together the developing economies reached a 43 percent share of world trade. Significantly, more than half of that trade was between developing economies.

Fast forward to 2022, and the picture looks somewhat different. The pandemic has played a key role in fluctuating world trade during the past two years. Currently, the crisis in Ukraine and the geopolitical tensions have slowed world trade volumes during the first half of 2022. According to a July 2022 World Trade Organization report, the global economic outlook has deteriorated since February as a result of the war in Ukraine. This has resulted in the WTO reducing its forecasts for world trade over the next two years from 4.7% to 3.0%.

Tariffs and Ongoing Trade Tensions

The alleviation of tensions between some of the world’s largest economies seems unlikely to happen any time soon. Despite a long-term effort to reduce global trade barriers, the US and China began the mutual escalation of tariffs on over $400 billion worth of trade in 2018 and 2019. This tariff escalation reduced trade between the US and China but helped create trade opportunities for other countries.

Today, the 2018-2019 US and China tariffs are the new normal. China is still dealing with coronavirus and their zero-COVID policy has hampered both import demand and economic growth. Economic conditions in the US are not helping American exports to China due to inflation and a stronger US dollar. In another example, US exports of gas, oil, and coal to China have declined as a result of the Russia aggression in Ukraine. Now, the US is selling and exporting more energy to Europe.

Tariffs are an ongoing theme and seem to constantly change. In 2018-2019, the US also imposed steel and aluminum tariffs on imports from the EU. With an agreement between the parties made in October 2021, the US will now pull back on those tariffs which have been a contentious issue between these parties for the past couple years. Under the new agreement, the EU is permitted to export a certain amount of steel and aluminum duty free with any excess amount subject to agreed upon tariffs.

The US, the EU and China are the world’s largest economies by GDP. Retaliatory tariffs — and the threat thereof between large economies — can significantly hamper global trade and disrupt customer relations, impacting importers, exporters, manufacturers and consumers around much of the world.

Negotiating the New Normal

Global enterprises have a number of ways that they can respond to these threats. These include holding back on purchase orders in the hopes that tariffs will be removed or reduced after further trade talks, moving production facilities, or applying for tariff remedy programs. None of these are easy options. Canceling orders or not fulfilling contracts can come with penalties and damaged supplier relationships. Moving production facilities is time-consuming and expensive, even if you already have a location in a country not subject to tariffs. Applying for tariff exemptions where possible is smart, however, this can take several months or more.

If you cannot move the production of your goods, you might be able to change the classification of them. Changing the design or assembly of a product to minimize tariffs is known as “tariff engineering.” This allows manufacturers to classify their products with a different Harmonized Tariff Schedule (HTS) code to take advantage of more favorable duties. Manufacturers may also assemble separate parts of their products in different regions to leverage free trade agreements available there.

Tariff engineering — when done correctly — is legal and should be taken into account at the start of the design process. As well as favorable duties, manufacturers should also consider the costs of the materials, the cost of making the goods, transportation and the resources needed to ensure compliance with regulations. Authorities will take a dim view of companies that use artifice to classify products to obtain lower duties.

Taking Advantage of Free Trade Agreements

When you work across different regions of the world, leveraging all the free trade agreements that you are entitled to makes good business sense. If your products qualify for low or zero import duties, you are a more competitive supplier. The majority of global enterprises do not take advantage of all the FTAs that they could, largely because of the complexities of remaining compliant with them. Moreover, there are also significant penalties for violations.

Qualifying products under FTAs is a complex process. To qualify their products, manufacturers need to pull production bills of material, perform respective content calculations, then prepare and distribute potentially thousands of FTA Certificates of Origin.

Manufacturers cannot qualify products just once. It may be necessary to qualify products several times every year, such as if there are changes to the costs of materials or when you add new vendors. Furthermore, with each new qualification, manufacturers will have to produce and disseminate new Certificates of Origin too. For some enterprises, remaining compliant with FTAs may seem too burdensome a task.

Rethinking Policies and Procedures

Difficult trading conditions, tariffs and other geopolitical uncertainties, such as Brexit, can hamper operations and negatively impact profitability. An enterprise facing such challenges should examine their trading policies and procedures. In many companies, including industry giants, strategies that have been in place for a long time often go unexamined. Accordingly, a mindset of “that’s the way we have always done things” prevails. However, “good enough” processes are not the same as “best in class” — and may not be robust enough for current trading conditions.

Manufacturers looking to optimize trade operations and drive efficiencies must first critically examine their procedures, map processes and see where gaps exist. Once this exercise is complete, a company will have a clearer idea of what technologies they could use to support their operations.

Simplifying Global Trade and Transportation Operations

Technological solutions help manage and simplify global trade. International shipping and manufacturing comes with an array of regulations and paperwork — none of which shippers should ignore. Missteps can result in customs hold ups, lost shipments, missed delivery deadlines, loss of export privileges and fines.

Enterprise-level software solutions should automate the most time consuming processes of global trade by ensuring all export and import processes are met, including trade compliance, documentation production and customs reporting. By automating compliance checks, manufacturers can perform due diligence, mitigate risks and create audit-ready electronic reports.

Automating free trade agreement compliance will allow manufacturers to verify thousands of products across multiple FTAs quickly and according to current preferential Rules of Origin legislation. In addition, the solution should automatically solicit for inbound Certificates of Origin from suppliers and generate outbound Certificates of Origin to customers, create detailed audit trails and comply with record retention rules.

Global enterprises benefit from integrating compliance and transportation. This is because switching between a compliance and a transportation solution is time consuming and may require you to re-enter information with the risk of keystroke errors. Furthermore, manually switching between carriers looking for the best rates, transit times and service levels is labor intensive. This is not feasible for high volume shippers, since you must ensure that each shipment is compliant with that carrier’s specific requirements.

Simplifying global trade and transportation with integrated solutions offers significant benefits. These include shorter cycle times, an ongoing compliance and risk mitigation strategy, a competitive advantage through low or zero tariffs and increased efficiencies. With integrated solutions, your enterprise works smarter — not harder. Learn how QAD Global Trade and Transportation Execution (GTTE) can help your organization streamline global trade management and boost competitive advantages.

Assembling Savings with FTZs: Key Benefits for Manufacturers

2023-01-24T19:00:39Z

Global supply chains are facing the greatest strains seen in recent history. Shipping containers are grinding busy ports to a standstill, labor strikes in Europe are causing backlogs and production slow downs in China are all having an impact on global supply chains. while consumer demand has resulted in higher prices and spiking product shortages. Experts believe that supply chain issues will continue well into 2023.

There has been some relief in US port congestion in the past year. Some experts reckon the worst of the crisis has passed, but warn that a number of issues remain. Many manufacturing businesses have borne the brunt of these issues. Shortages of goods critical key parts (such as microchips for vehicles) have hampered supply lines even further, many of which were strained prior to the pandemic.

Preparing for Today’s Disruptions… and Tomorrow’s

US based manufacturers are working to recover in any way they can. As a result, many are considering operational changes to ensure that mission critical imports are always available.

Often, manufacturers will turn to global trade management solutions to help navigate these costs and complex regulations. Tariffs, taxes, and customs regulations can be difficult to navigate for any product shipped into the US from overseas. What’s more, mistakes made during entry through US Customs and Border Protection (CBP) can be extremely costly.

Tariffs can also be unfavorable depending on where companies source critical parts. This can impact the competitiveness of US manufacturers. This is especially the case if the manufacturer is assembling goods in the US and shipping the final product overseas. US-based manufacturers that supply both the domestic and international market should seriously consider leveraging the US Foreign-Trade Zones program to cut their tariff burden.

A Foreign-Trade Zone (FTZ) reduces the import costs and duties associated with shipping products from foreign sources. CBP considers FTZs as outside of the country for tax and duty purposes.

FTZs provide manufacturers three key benefits that can help reduce operating costs as supply lines struggle to recover from ongoing disruption. We discuss these below.

Greater Duty Savings

CBP monitors FTZs, but they are largely operated by whoever manages them. Manufacturers can assemble individual parts within the FTZ into a new product. After that, manufacturers either send the final products out of the zone into US commerce, or ship these abroad to different countries. This can offer reduced tariffs and savings on duties, particularly during the process of importing goods into the zone.

REDUCED TARIFFS

A company using an FTZ can reduce tariffs on “inputs” brought into the zone. The company only pays duty on the finished product once assembled, and entered into the domestic market for sale. In some cases, the tariff on a finished product might be lower duty rate — or even zero — when it enters the US market.

Without an FTZ, the manufacturer would be liable to pay duties on all the multiple imported components that make up the product. This can result in huge savings for manufacturers when they import large quantities of “inputs” to be assembled and then sold to US customers.

ZERO DUTIES ON EXPORTS

Since duty is not charged on anything that leaves the US, many manufacturers use FTZs to assemble and ship products to international locations without paying any duties on them at all. Any product that enters a FTZ that is either shipped to a new foreign location, or scrapped because of waste, is not subject to typical duties on imports.

This makes FTZs a perfect location to set up assembly operations for businesses that frequently send products abroad but want to keep their business in the US.

Increased Cash Flow Flexibility

Since goods are only subject to duties once they leave the FTZ, the zone can act as a buffer and storage location depending on demand for products. As mentioned above, any product that doesn’t enter the US is not subject to duties until it leaves the zone. This allows businesses to control the flow of capital surrounding their FTZs, only paying duties on products when they go to market.

This can be of further benefit to industries like retail, or any business where entry is subject to quotas by CBP. Companies with higher capital costs can also see benefits, as they may need to delay paying duties on a particularly large shipment of goods.

The Right FTZ Partner

Whether decreasing duties on crucial imports or increasing the flexibility of a supply chain operation, partnering with a global trade management provider that makes good use of these tactics sets manufacturing businesses up for success in an uncertain future.

A good FTZ solution provider should be able to show cash flow benefits. There are costs to leveraging the FTZ program. Therefore, your provider should be able to break that down for you so that you have a clear understanding of both the savings and FTZ administration costs.

This should include not only duty savings, but also potential import costs savings due to the weekly entry program applicable to zone users. For high volume importers, a single weekly Merchandise Processing Fee (MPF) for Customs entries can yield as much, or more, in savings as lower duties.

When looking for a good global trade management partner, be sure to ask about the cost benefits of using a FTZ, as well as their offerings for accurate product classification, improved compliance, and consolidated tracking. These benefits can help ensure that goods flow smoothly through shipping hubs, saving precious time and money in the process.

To discuss how an FTZ could benefit your business, reach out today.

Four Steps To Streamline Global Shipping

2022-10-24T12:00:35Z

For global manufacturers, managing logistics across locations, countries and regions, as well as carriers, is no easy task. Add to that fact that disruption has been ever present the past two years and global trade is getting more complex.

According to a July 2022 World Trade Organization report, the global economic outlook has deteriorated since February as a result of the war in Ukraine. This has resulted in the WTO reducing its forecasts for world trade over the next two years from 4.7% to 3.0%. With other economic indicators showing low global growth, the WTO may need to revise this already low forecast should trade tensions between the world’s largest economies persist.

Geopolitical maneuvering is beyond the control of global shippers. What they can do, however, is to standardize global trade operations across all their sites. When you have multiple manufacturing locations across the world, it can feel as though your enterprise is not one organization, but a number of different companies, all using different guidelines. With a standardized global shipping solution, all sites operate and adhere to the same procedures, workflows and processes.

This is a significant differentiator when building relationships with customers and partners. It bolsters trust because they know that no matter where they engage with your enterprise, they can expect consistent service. Additionally, global shipping is further complicated with fluctuating fuel costs, increasing customer expectations, soaring parcel shipments and other factors. Following are four steps for standardizing shipping across your manufacturing enterprise.

Step 1: Automate Compliance

Global manufacturing and shipping involves an increasing and ever changing number of compliance regulations. Whether you ship containers or parcels, you must ensure every shipment adheres to global trade policies.

Done manually, compliance would require spending hours of manual labor. sifting through regulatory reports, denied party lists, licensing agencies and other critical information. Automated trade compliance streamlines this process and ensures a reliable approach to avoiding compliance missteps. An automated compliance solution that is integrated with your transportation execution solution speeds up processing time.

Furthermore, by automating compliance your company is not relying upon the knowledge of a few specialists to handle day-to-day operations. Instead, global trade professionals and logistics managers are free to concentrate on long term planning and strategy.

Step 2: Automate Documentation and Reporting

Global shipping involves a ton of customs and export reporting. Manually creating all the documents needed to complete a shipment is time-consuming. These may include accredited carrier labels, general purpose shipping labels, address labels, packing lists, bills of lading, dangerous goods notes, driver manifests and commercial invoices.

Incomplete documentation or license requirement errors will lead to delayed shipments. Recurring delays lead to damaged customer relations, and possibly canceled orders. Automating documentation and customs reporting streamlines the international shipping process and reduces the possibility of hold-ups.

Step 3: Leverage a Global Multi-Carrier Solution

Global manufacturers have highly complicated, intertwined transportation needs. In this case, they may decide it best to rely on a few known and trusted carriers. Trust is of course critical. But when you rely heavily on a handful of carriers, you are vulnerable to higher pricing as a result of not taking advantage of all shipping options.

A global multi carrier shipping solution could include local and regional carriers as well as global ones. Some regions — such as Europe and Asia — have numerous regional carriers. It makes sense to include the ones that offer the routes and services you most need. By leveraging a multi-carrier shipping solution, companies can seamlessly switch between carriers while still maintaining standardized shipping processes.

A multi carrier shipping solution should allow logistics managers to:

Find the best carriers: Instead of relying on a few carriers for all global shipping needs, logistics managers should be able to easily compare carriers to see which ones have the best rates and routes for specific jobs.
Proactively resolve delays: Logistics managers should have visibility across every step of the transportation and shipping process, and receive alerts should issues arise, allowing them to be more proactive.
Create standardized shipping processes: Instead of needing multiple processes for different locations or carriers, standardized global shipping processes make it easier to manage carriers, compare prices and organize critical paperwork.

Reinforce customer and partner relationships: Efficiently managing shipments will increase customer satisfaction, bolster trust and build credibility for an organization.

Step 4: Ensure Ongoing Carrier Compliance

Leveraging multiple carriers reduces costs in the long run. However, it can still be a challenge to remain compliant with each carrier.

Different carriers have their own requirements, and shippers must comply with their labeling and electronic communication standards. Carriers must enforce these standards in order to efficiently process high volumes of shipments through their networks. When you use a multi-carrier solution, your provider is responsible for ensuring carrier compliance standards remain up to date.

By automating trade compliance checks, automating export documentation, transportation labels and customs reporting along with a global multi-carrier shipping solution, manufacturers can create standardized export processes, reduce overheads, improve cycle times and increase visibility into global shipping operations. Learn how QAD Global Trade and Transportation Execution (GTTE) can help your organization streamline global shipping and boost competitive advantages.

The Benefits of Integrating Trade Compliance and Shipping

2022-10-12T11:00:57Z

For most companies, the last few years have been characterized by disruption. From geopolitical issues like the tit-for-tat tariff war between the US and China; the customs and regulatory headaches of trading between the UK and EU since the beginning of 2021; and of course, escalating transportation costs and supply disruptions caused by the coronavirus pandemic.

For global organizations, the only constant is change. Manufacturers may not be able to do much about some of these global trade uncertainties, but they can boost supply chain resiliency with tighter connectivity of trade compliance and shipping activities.

Growth Down, Costs Up

According to a July 2022 World Trade Organization report, the global economic outlook has deteriorated since February as a result of the war in Ukraine. This has resulted in the WTO reducing its forecasts for world trade over the next two years from 4.7% to 3.0%. Shippers have seen transportation prices increase as part of this economic impact. Consider that trucking prices increased 2% year-over-year since 2008 — but have increased 45% in the past two years, according to KPMG.

Tariffs are an ongoing theme and seem to constantly change. In 2018-2019, the US imposed steel and aluminum tariffs on imports from the EU. With an agreement between the parties made in October 2021, the US will now pull back on those tariffs which have been a contentious issue between these parties for the past couple years. Under the new agreement, the EU is permitted to export a certain amount of steel and aluminum duty free with any excess amount subject to agreed upon tariffs.

Relations between the US and China remain difficult. Today, the 2018-2019 US and China tariffs are the new normal. China is still dealing with coronavirus and their zero-COVID policy has hampered both import demand and economic growth.

Economic conditions in the US are not helping American exports to China due to inflation and a stronger US dollar. In another example, US exports of gas, oil, and coal to China have declined as a result of the Russia aggression in Ukraine. Now, the US is selling and exporting more energy to Europe.

Simplify Global Trade Management

There is very little that enterprises can do to mitigate global trade uncertainties like geopolitical disputes, changing tariffs and natural disasters. Nevertheless, they can optimize their own operations to ensure that they are better placed to navigate difficult trading conditions.

However, optimizing trade operations is easier said than done, particularly for multinationals that work across a number of geographies. Accessing and maintaining global trade and transportation information can be difficult. Business disruption and change is ever present in the forms of increasing transportation costs, accelerating customer expectations and a growing regulatory environment. Trade policies and export regulations are subject to change, and companies have a legal obligation to keep abreast of these changes.

One of the most effective and reliable ways of mitigating the risk of compliance violations is by automating trade compliance. Manually checking each shipment and customer is an onerous task. Critical compliance checks, such a denied party screening, would require ensuring that you have access to the latest government and denied party lists, as these are subject to frequent change. Furthermore, even if a company has the staff resources for this, human error can occur.

Automated trade compliance software streamlines workflows, speeding up processing times. In addition, by using an automated solution a company can standardize compliance processing across all locations. This also frees up global trade professionals to concentrate on long term planning and strategy.

The Benefits of Integrating Trade Compliance and Shipping

Multinational enterprises and global shippers have two critical needs that sometimes can seem to be at odds with one another:

The need to mitigate trade compliance risks;
The need to ensure that their products reach their customers efficiently and cost-effectively.

Compliance missteps can result in customs delays, fines and damaged customer relationships. Despite this, enterprises with a number of manufacturing and distribution sites across the world may not have standardized compliance procedures. Some sites may be better than others at compliance processes because they have the necessary staff to do so.

Furthermore, many multinational companies have different shipping practices across different sites. This makes it almost impossible to have a clear picture of global trade and shipping operations.

By integrating trade compliance along with a global shipping solution, all sites will follow the same standards, workflows and processes. This ensures that compliance processes are being met, and that enterprise-wide shipping controls are being followed. As a result, global companies mitigate the risk of a compliance violation, while building stronger relationships with customers and partners by providing a consistent, reliable service.

Why Multinationals Need Multi Carrier Shipping Solutions

Most multinational companies have complex operations. As a result, many rely on just a handful of carriers. However, as we have seen during the recent pandemic, certain carriers have better capacity than others to respond to difficult circumstances. Relying on a single carrier, therefore, puts a company’s shipping operations at risk.

Of course, the pandemic is an unprecedented situation. Nevertheless, other disruptions can occur, including capacity crunches, labor disputes, and route and lane outages.

Leveraging multiple carriers also reduces costs. When you have access to a truly global network of carriers, you can seamlessly switch between carriers to always avail of the lowest cost service that will meet your delivery requirements. However, if an enterprise is using different carrier systems to process shipments, it will be necessary to compare routes and rates first — a time consuming and inefficient process. Furthermore, all your shipping and tracking data is spread across different systems.

With a comprehensive multi carrier shipping solution, all shipment data is in one place. As a result, no matter which carriers you use, or where you ship, logistics staff can track all shipments from a single, accessible-anywhere location. For further information, learn how QAD Global Trade and Transportation Execution (GTTE) can help your organization streamline global trade management and boost competitive advantages.

The ABCs of FTZs

2022-08-17T11:00:57Z

US manufacturers and distributors can realize significant cost savings by leveraging the Foreign-Trade Zone (FTZ) program. In this QAD Precision Report we look at the ABCs of FTZs.

What is an Foreign-Trade Zone?

A Foreign-Trade Zone (FTZ) is a designated zone within the US that is considered outside the US for duty and tax purposes. Because of this, companies operating an FTZ can reap massive benefits. These include duty deferrals, eliminations and reductions, as well as savings in Merchandise Processing Fees (MPF).

While many FTZs are located near ports of entry, all 50 states have FTZs. Best of all, companies do not have to move their operations to take advantage of an FTZ. Rather, they can apply for their current location to be a new FTZ. Within an FTZ, companies are able to store, sample, salvage, repackage, process, display, repair, destroy, manipulate, assemble, test, clean, relabel, mix, and manufacture goods.

Four Reasons to Use an FTZ

1: Duty Deferral

Usually, when a shipment enters the US, the importer must pay duties upon arrival. When utilizing an FTZ, duties are not paid until a product leaves the FTZ and enters the US market.

FTZs are not the same as customs bonded warehouses. You can store products duty free for a maximum of five years in a custom bonded warehouse. Conversely, there is no limit on how long a company can hold a product in an FTZ.

As companies adjust to supply chain disruptions, many are looking to increase inventory to prepare for future bottlenecks. Outside of an FTZ, this stockpiled product would incur import duties as well as state ad valorem taxes, resulting in heavy tax burdens. Furthermore, by deferring duties until the product enters the market, they’re reducing the payback period on duties, helping stay cash flow positive.

2: Duty Reduction

In an FTZ, companies are able to choose to pay duties only on finished products rather than parts. Imagine that a company manufactures vacuums. Outside of an FTZ, they would pay duties on each individual part imported into the US. If they import a motor, the company would pay 4% duties, plastic wheels imported from China would incur a 5.3% tax, and so on.

However, in an FTZ, the manufacturer could import the parts duty free, and instead only pay duties on the finished product – in this case, the vacuum, which is duty free. Multiply these savings across thousands of vacuums, and manufacturing in an FTZ could be the difference between establishing a thriving American manufacturer and falling behind foreign companies.

3: Duty Elimination

Not only do shipments usually incur duty taxes when entering the US, but they are also subject to state taxes during domestic transport. However, when companies leverage the power of FTZs, they are able to transfer between FTZs without any tax burdens. With the right strategy, a company could move products and parts from the Atlantic to Pacific entirely through FTZs.

Additionally, companies pay no duties when re-exporting goods from an FTZ. This is because an FTZ is — legally speaking — outside of the US. When a company exports from an FTZ, they eliminate the usual import duties seeing as, strictly speaking, the product was never within the US in the first place.

This allows manufacturers to import foreign parts, manufacture in the US, and export to global markets without falling behind global competitors due to overwhelming tax, duty, and customs fees. By making this possible, FTZs encourage domestic manufacturing and promote US economic growth.

4: Merchandise Processing Fee (MPF) Reduction

When foreign shipments enter the US, they are subject to Merchandise Processing Fees (MPF) based on the value of the goods. The MFP is 0.3464% of the cargo’s value. In 2022, the minimum MFP is $27.75, and capped at $538.40.

Companies not using an FTZ pay the MPFs for every shipment. However, companies using an FTZ pay a weekly MPF.

This means that if a company imported 10 shipments per week at $538.40 per shipment outside of an FTZ, they would spend $279,968.00 annually. Inside an FTZ, the same volume and value of shipments billed weekly would only cost $27,996.80 annually.

How QAD Precision FTZ can Help

With such extraordinary savings available through FTZs, why don’t more companies take advantage of them? Setting up an FTZ can be complicated. The process involves applying to the local FTZ grantee, undergoing an inspection by US Customs and Border Protection (CBP), obtaining approval from the FTZ board, as well as paying initial and annual fees. In addition, companies must have Inventory Control and Recordkeeping software before the FTZ can go into operation.

Simply put, most manufacturers don’t have the time or expertise to set up an FTZ. Luckily, manufacturers don’t have to do this on their own.

That’s where QAD Precision FTZ comes in. Our FTZ experts have successfully completed more than 1,000 FTZ.

We can help start the process by first conducting a cost-benefit analysis and feasibility studies. If it’s the right solution, our team will then prepare and submit an application and coordinate with CBP. By helping our partners through each step of the process, QAD Precision FTZ offers a host of benefits, including:

Simplified and accelerated FTZ setup
Industry leading Inventory Control and Recordkeeping software
Simplified inventory tracking
Adherence to compliance regulations
Proactively managed FTZ process
Reduction of manually intensive processes

Best of all, QAD Precision FTZ brings their clients all of these benefits while preserving current processes to ensure that operations continue as seamlessly as possible. To discuss how your company could benefit from leveraging an FTZ, please contact us.

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5 Moves for a More Adaptable Supply Chain

2022-08-10T11:00:57Z

To succeed in the midst of volatile global markets, companies must ensure maximum adaptability in their supply chains. In this QAD Precision Report we look at 5 moves you can use to make your supply chain more adaptable.

“Adapt or die,” said coach Billy Beane, played by Brad Pitt, in the 2011 film Moneyball. In context, coach Beane of the Major League Baseball team, the Oakland Athletics, was pioneering a radical change in baseball. He was running his team based on data-driven analytics as opposed to gut instincts. This change went against conventional thinking and would go on to revolutionize not only his team, but the entire world of baseball.

Over the past few years, the same words have echoed through board rooms across the world. Technological advancements have brought record-breaking speeds of change. These have been compounded by the Amazon Effect and COVID-19, both of which forced companies to rethink global and local trade. While this has brought to light countless insights, perhaps none is more clear: supply chain adaptability is key to success.

To succeed in the midst of volatile global markets, companies must ensure maximum adaptability in their supply chains. Here are 5 moves that your company can make to make your supply chain more adaptable:

Step 1: Digitize

Digitization is the key to supply chain agility and adaptability. End-to-end digitization of supply chain management allows companies to implement changes at the click of a button. Far too many companies are in the dark when it comes to the location of their products in the supply chain. That is because they’re still using antiquated technology: pen and paper (or their only slightly more modern counterpart, email and Excel).

Adapting to an ever-changing supply chain with manual process management is a recipe for mistakes. Plus a slow rate of change leaves companies lagging behind competitors. Therefore, finding the right end-to-end supply chain management software should be at the top of any company’s to-do list.

Digitization enables companies to easily share information across departments, and with supply chain partners. This leads very nicely to our next point — the importance of visibility.

Step 2: Increase Visibility

The adage that you’re only as strong as your weakest link holds true in supply chains. When there’s a problem in your supply chain, companies need to have visibility for every link.

In today’s complex logistical environment, there are often multiple buyer-supplier relationships within one chain. Many companies only see one tier of this, namely the one closest to the end product. This is because their data is often siloed across multiple different systems, businesses, and geographical regions.

However, a problem at any point in the chain is a problem for the whole company. By integrating multiple apps and capturing data, companies can eliminate data silos, increase communications, and gain visibility over every link of the chain. In today’s competitive world, companies need real-time information on the status of incoming raw materials, and the delivery of end products to customers.

Step 3: Gain Access to Carrier Networks

For years, companies maintained relationships with one or two carriers. Most of the time, this was out of convenience. Onboarding new carriers was time consuming.

Today, multi-carrier shipping software allows immediate access to thousands of carrier rates. This empowers companies to become vendor agnostic, optimizing for the greatest price, rather than merely sticking with the status quo for the sake of convenience.

Step 4: Streamline Trade Compliance

With the volatility of international markets, it’s not uncommon for businesses to need to pivot to take new regulations into account. Furthermore, denied party lists (DPLs) of people and groups with whom it is illegal to trade change very frequently.

When working through trade compliance manually, human errors are likely. However, when using global trade compliance software, trade compliance is streamlined, allowing businesses to adapt to new markets quickly, all while complying with complex government regulations.

Step 5: Partner with Industry Experts

To remain adaptable, businesses need to be able to have the foresight to expect the unexpected, a skill that is honed over years. Every business has specific core competencies, and trying to add “supply chain software experts” to that list may not be feasible. By partnering with an industry expert, any business can have the wisdom of decades on their side, helping to navigate uncharted territories with confidence.

At QAD Precision GTTE, our team is here to help with supply chain needs so that businesses can rest assured that products will move through the supply chain even in the most turbulent times.

Schedule a consultation with our experts today.

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Is Just in Time Dead?

2022-07-27T11:00:57Z

In this QAD Precision Report, Ian Berman asks the question: Is Just-in-Time no longer a viable inventory management strategy.

There should be no surprise that companies are starting to rethink their whole supply chain organization. After more than two years, we are all familiar with the supply chain woes that currently plague almost every industry.

The bullwhip effect is being played out over and over again. For many industries, there is no real end in sight. I believe that this can be directly attributed to the reliance on Just In Time (JIT) inventory management programs.

Just-in-Time Explained

For decades manufacturers and retailers have been trying to figure out how to minimize their inventory costs. Instead of ensuring high inventory levels, even of critical items, manufacturers wanted these goods to arrive at their facilities “just in time” for the production schedule.

This led to a reliance on expedited freight transportation and an unhealthy requirement of availability in the transportation realm. Companies kept looking for ways to cut inventory holding. One of the ways many did this was to push inventory back upstream to 3PLs or contract warehouses. By doing so, they could write off those costs to make the bottom line look better.

This came at the expense of near perfect world transportation network designs. In theory that was amazing. Nevertheless, for a while we saw this working well. Therefore, it is no surprise that many and more companies looked at these strategies to keep up with the market.

Ocean Shipping Blues

JIT worked well… until it didn’t. Ocean shipping — the backbone of the transportation of mercantile trade — was deeply impacted by port closures in many parts of the world. This included some of the busiest ports in North America and Asia.

Port closures had two important impacts. First, it became impossible to unload goods that had already arrived. Secondly, it became very difficult to get new goods from originating countries.

In the United States specifically, much of this disruption was caused by a heavy reliance on China and other Asian countries for raw materials and finished goods.

At this stage, most consumers are now familiar with those issues affecting the goods that they buy every day and week. However annoying stock outages are for consumers, some manufacturers are facing an existential crisis.

A manufacturing company that cannot get the raw materials or parts they need cannot produce goods. Even if consumers favor buying products that are “Made in the USA”, chances are that manufacturers are importing raw materials from suppliers in other countries.

The good news for manufacturers is that ocean container freight prices have been dropping. However, prices are still significantly higher than they were pre-pandemic.

Fixing the Problem or Overcompensating?

The snarled global supply chain has prompted many companies to reconsider their operations. Some companies with the financial clout to do so responded by placing larger than necessary orders to hedge against worst-case scenarios.

However, many general merchandise stores have been left with piles of unsold goods. This is because strategies to ensure that stock is on hand are out of alignment with consumer buying patterns.

This type of overcompensation can significantly impact a company’s bottom line. If the customer orders simply are not there, a company is left holding raw materials and finished products nobody wants to buy.

In addition, while companies are dealing with these issues, a new constraint has arrived — inflation.

Inflation is, unsurprisingly, driving consumer spending habits. This has a larger butterfly effect. Again, unsurprisingly, major organizations are hesitating to spend money if there is a recession coming.

Furthermore, on June 15 this year, the Federal Reserve on June 15, 2022, raised interest rates by 0.75 percentage point. This was the third time the rate was raised in 2022. As a result, capital investment costs more.

Reducing Supply Chain Costs

This confluence of events means that companies that have heavily invested in minimizing inventory and safety stock are rethinking this strategy. The question they need to answer is whether or not meeting specific deadlines is more important than carrying costs.

It is no wonder many organizations are looking at new ways to reduce costs associated with their inventory. For some, this means seeing if they can leverage economies of scale by partnering with customs brokers or 3PLs.

Others are seeking to get a much clearer picture of their costs per item — including landed costs or freight and importation costs. This would allow companies to perform more accurate modeling and review of their supply chain.

Yet again, other companies are looking at ways of reducing costs in other parts of the supply chain. These include duty minimizing strategies such as leveraging free trade agreements or foreign-trade zones (FTZs).

FTZs in particular can help companies balance the cost savings of JIT, while still keeping inventory on hand. With an FTZ, no duty is paid until finished goods are released to the market. Furthermore, companies that rely heavily on imports can also achieve significant savings with weekly entry procedures.

Visibility and control are key. But so is sharing this visibility and control outside the four walls of your organization. For companies navigating these uncertainties, making sure their partners share the same vision is something that is going to be a talking point for many quarters to come.

About Ian Berman

Ian Berman is a Solutions Consultant with QAD Precision. Ian has over 10 years of experience in international transportation and compliance. He holds a Masters Degree in Supply Chain Management and has APICS CLTD Certification.

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Knowing What’s What: Classification Codes

2022-07-20T11:00:57Z

Correctly classifying your imports is crucial. In this QAD Precision Report we look at why classification can be challenging, and how importers can simplify this process.

It all comes down to perspective. When you take a step back, the international trade system can seem simple: one company’s export is someone else’s import. Across the supply chain, everyone is playing a part in this system that spans the globe.

Of course, it’s much more complex than that. Companies around the world require a way to communicate and keep everyone on the same page. There may be no such thing as a single universal language. However, there is a trade classification system in place that efficiently operates through a common language: the Harmonized Commodity Description and Coding System (HS).

Defining the Harmonized Commodity Description and Coding System

The HS was developed and is maintained by the World Customs Organization (WCO). Using this system, practically every traded good has a six digit code that relays product information to customs officials. These codes are known as subheadings. Every exported and imported good must be classified using these codes.

Authorities from different countries use these commodity codes to identify and track which products are being imported into their respective country. With that information, customs officials can quickly determine if a product is eligible to enter and what duties or tariffs may apply. In short: everyone needs to speak the language of numbers.

Why Correct Classification is Crucial

More than 211 countries around the world use this system and around 98% of international merchandise is covered under HS guidelines. Data is collected by WCO for international trade statistics. As a result, these can affect trade negotiations and the monitoring of controlled goods. All imports must be classified in accordance with the HS as well as the import country’s own tariff classification policies.

Many WCO Member countries go beyond the six digits as a way to be even more specific. Nonetheless, it is these first six that establish exactly what the particular item is and its proper classification is a critical first step.

For companies, proper classification will directly impact costs. Simply put: with appropriate classification, you’ll pay the appropriate duties and taxes. Whereas if you overpay, naturally, you’ll hurt your bottom line.

Conversely, if you pay too little up front, you’ll end up paying more in the long run. Significant penalties are levied against companies that underpay, and it is especially bad for repeat offenders.

However, choosing the correct commodity code can get complicated. Take for example, a gold mahogany pen. Is it a mahogany pen or a gold pen? Is it a part of a larger set that comes with other items?

Factors range from the component materials used in manufacturing, the principle use, and a full description of the goods. It’s up to an Importer of Record (IOR) to correctly use the General Rules of Interpretation (GRI). This is the set of rules that govern the interpretation of the HS. The IOR must ensure no mistakes are made.

Compliance is the Only Option

Improper classification, on the other hand, can lead to major setbacks for the company participating in the global trade. Whether it was purposeful or accidental, their own fault or a third-party’s, if you are participating in global trade, proper classification is your legal responsibility. Regulatory compliance is not optional.

A violation can take many forms, but the following methods are common violations that can lead to import fraud:

Improper classification - Trying to avoid duties or get around admissibility criteria
Inaccurate valuation - Greatly undervaluing the goods to avoid paying taxes and duties
Incorrect qualification - Stating the country of origin incorrectly in order to get the goods to qualify under a free trade agreement when it normally would not

It may be hard to prove some of the above as deliberate fraud. Nevertheless, if authorities allege fraud or even gross negligence against you, it will lead to a myriad of consequences that can include:

Up to 5 years of additional back duties and interests
Increased requirements that add time, cost, and oversight
Significant penalties

How to Approach Classification

While compliance may seem difficult to navigate, the good news is you don’t have to go it alone. Find an Import Management software that automates and executes the processes associated with clearing imports through customs authorities.

The QAD Precision solution has specialized tools for compliance and a GRI Wizard that walks any user through interpretation of the rules. Once classification determinations are made, they are added to the solution’s Global Product Item Master. This captures a product’s attributes, documentation, and classification decision criteria. As a result, this information can be used again in the future. It also automatically generates admissibility flags and identifies preferential duty eligibility under a Free Trade Agreement.

If used correctly, it can save you money, too. Importers often end up paying too much duty because they aren’t aware of all the tariff provisions available for them. Check out the solution to ensure that your company is uniform and consistent with HS codes today.

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The Shift to E-Commerce: DTC for Retailers & Manufacturers

2022-07-13T11:00:57Z

E-commerce is on the rise, and manufacturers are increasingly choosing to sell direct-to-consumer (DTC). In the latest QAD Precision Report we look at what DTC means for manufacturers, along with the challenges, benefits, and solutions to support this sales model.

The skyrocketing growth of e-commerce has impacted almost every industry. The distance between manufacturers and the end-consumer has shortened, allowing manufacturers greater access to customers but also allowing rivals to flourish. Savvy digital start-ups and international competition can both deplete an established brand’s market share.

E-commerce may yet make up a fraction of all B2C sales, but the trend is only going in one direction — up. Online sales have been growing 20 percent every year for the last ten years. In addition, digital natives are turning to the internet for an increasing range of goods and services. Furthermore, consumers are increasingly making larger, more expensive purchases online.

A Lesson from Levi Strauss & Co

E-commerce is becoming increasingly important to established, iconic brands. According to Levi Strauss & Co, the economic environment will not affect its denim sales.

The company has a five-year target of annual revenue growth in the range of 6% to 8%. This is an increase from its prior range of 4% to 6%. If achieved, this would bring Levi's total revenue close to $10 billion by 2027. In 2027, Levi's aims to increase its direct-to-consumer business to 55% of total sales, tripling its e-commerce revenue.

DTC for B2C and B2B

In the years before the pandemic, digitally-native brands were seen as the most innovative retailers. Now, traditional retailers and brands are incorporating these valuable lessons into their strategy. They have had to in order to compete for the future of e-commerce.

In order to attract and retain customers, many traditional retailers have begun offering the same experience provided by DTC brands. Nike, for example, began pulling away from department stores and other wholesale outlets a few years prior to the pandemic. According to Forbes, in the first quarter of 2020, Nike’s bet on DTC paid off: Its e-commerce sales skyrocketed 82%.

The success of digital-first companies such as Wayfair, Warby Parker and Dollar Shave Club all attest to the same lesson. Whether it is home furnishings, eyewear or grooming products, consumers are increasingly turning to e-commerce to fulfill their needs.

It would be a mistake to think that e-commerce is best suited to business-to-consumer (B2C) brands only. While consumer brands and B2C e-commerce get the vast majority of media attention, business-to-business (B2B) brands are leveraging e-commerce with significant success too. Last year, Grainger increased its web-only sales by over 18%.

DTC E-Commerce Trends

More manufacturers and retailers will make the move to a digital-only, or digital-first model. It's important to keep up with the latest trends in DTC e-commerce. This year, there will be three trends to watch:

Retailers will increasingly use direct-to-consumer selling strategies

To compete with the growing number of digital-first brands, many traditional retailers will begin to offer their products directly to consumers online. This shift will result in a change in the customer experience. Customers will be able to shop without physically visiting a brick-and-mortar location.

DTC brands may seek to extend their product ranges beyond their core categories

The pandemic caused a drop in sales across many brands. However, Covid has also driven up demand for athletic gear and self-care products among consumers working from home. In the future, digital native companies will continue to grow and expand into adjacent categories.

DTC brands will continue to appeal to tech-savvy consumers

Retailers needed an e-commerce platform at the onset of the Covid outbreak, but they received an added incentive to adopt digital sales channels. Nearly two years later, consumers continue to shop online more and less in stores. E-commerce sales were up 45.6% compared to brick-and-mortar sales in Q3 2021.

Challenges & Benefits

For DTC companies, the most challenging aspect of selling online is fulfilling sales efficiently and cost-effectively. Selling one pair of jeans to 10,000 individual customers is more challenging than delivering a consignment of 1,000 pairs of jeans to 100 wholesalers. The complexities increase once you sell cross-border.

Companies also have to consider which channels and business models will best support their growth strategy. In addition to dedicated web stores, some manufacturers and retailers will benefit from using online marketplaces as well.

Although there are challenges with DTC selling, there are also a number of compelling reasons to embrace it. As in the case of Levi and Nike, DTC selling can increase gross margins. In addition, e-commerce offers manufacturers direct access to customers — something that cannot be accomplished through conventional channels. This information, including purchase habits and history, can allow brands to offer curated offers, prompting increased sales and customer loyalty.

Furthermore , there is a limit to how much stock can be made available to customers even in a manufacturer’s own dedicated stores. With DTC selling, manufacturers can offer customers access to their full product range.

However, to leverage DTC effectively, manufacturers will need to consider how to fulfill online orders. For some, partnering with a 3PL may be the best option. Others may prefer — or find it more profitable — to fulfill orders in house.

To do this, companies will need new technological capabilities. This could include a global multi carrier shipping solution, to ensure goods are shipped cost-effectively and efficiently. Companies looking to expand cross-border and global sales will need an export management solution to manage the regulatory requirements and paperwork.

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3 Minute Explainer: Evaluating Parcel Shipping Solutions

2022-06-29T11:00:57Z

Choosing a parcel shipping solution requires careful consideration of today’s needs and tomorrow’s goals. In this 3 Minute Explainer we look at the questions to ask when evaluating parcel shipping solutions for enterprises.

Parcel shipping is growing at an exponential rate. More than 100 billion parcels were shipped in 2019, but Forecasts suggest that more than 200 billion parcels will be shipped by 2026.

E-commerce has dramatically changed a variety of industries. These days, it is not just consumers buying retail goods online, but businesses too. More companies are sending more small packages, to more destinations, than ever before.

There are a number of different technological solutions that can help businesses simplify and streamline their parcel shipping operations. However, choosing the right solution is critical.

Question 1: How Complex Are Your Needs?

To the average person, parcel shipping means printing shipping labels, sticking them on boxes, and sending the boxes out the door. Logistics managers know that it is significantly more complicated than that.

In order to optimize parcel shipping, companies must research carrier rates, routes, and service levels. They need real-time data to track shipments and alerts if a package is likely to miss its delivery deadline.

It is possible to use manual processes or carrier-provided systems to handle parcel shipping. However, rate shopping and carrier selection is time-consuming and labor-intensive. As parcel volumes grow, this can quickly become unmanageable.

In order to evaluate parcel shipping solutions, ask yourself the following questions:

What kind of carrier network is available?
Will you need shipping options such as specialist or regional carriers?
Does the solution support consolidations?
Can the solution support automated, multi carrier parcel routing?
Is there a way of identifying delivery problems so that logistic staff can take proactive measures to resolve this?
What kind of tracking and chain of custody controls are available?

Question 2: Will You Optimize Logistics ROI?

It is not practical for high volume shippers to manually research carrier rates for every parcel. As a result, many organizations use a single carrier to handle all of their shipments. This has the benefit of allowing enterprises to negotiate volume discounts.

However, using a single carrier does not mean that your company is getting the absolute best rate for every shipment. Multi carrier parcel shipping solutions help reduce costs. The solution routes your parcels to the lowest cost carrier and service level that can meet the promised delivery date.

You’ll need the answer to these questions:

What carriers and services are available?
What modes of transportation are supported?
Does the solution support both outbound and inbound logistics?
Does the solution automate carrier invoice auditing?

Question 3: What are Your Growth Plans?

You could purchase a solution that suits your needs today. But how will those needs change in three, five or ten years? If your growth plans include expansion into new markets, your shipping solution must be able to support that.

Cross-border shipments are more complex than domestic ones, by orders of magnitude. Shippers will need to prepare customs documentation, understand tariffs, screen shipments and customers against government lists, and ensure all required licenses and permits are in place.

These are the key questions to ask:

Do we need access to new carriers in new markets?
What kind of export management tools are available for international shipping?
Will you have access to accurate trade compliance content, including government denied party lists, tariff books and so forth?
Will the solution be able to handle very high volumes?

Can the solution support multiple languages and currencies?
How will the solution support international returns and customer service?
Will we need 24/7, follow-the-sun support?

When choosing a solution you should not only consider your current requirements, but consider future needs as much as is possible. The best parcel shipping solution will offer scalability and flexibility that aligns with your own business goals.

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Look ahead and Fortify Your Supply Chain

2022-06-22T12:10:45Z

Supply chain disruption is set to continue for the foreseeable future. In this QAD Precision Report we examine business strategies companies can consider to fortify the supply chain.

We are almost already a quarter of the way done with the 21st century. These last few years have really weighed heavily on supply chain managers across the globe. Sickness, detrimental weather, fewer coworkers, new logistics rules and increasing customer demands are just some of the unwelcomed factors that have upturned the global supply chain.

Yes, time will pass and change is inevitable. Businesses that prepare for both are the ones best place to face the next challenge. Now is the time to rethink your supply chain strategy. You can strengthen the supply chain by taking the right precautions.

You can make the following moves to fortify your supply chain:

Welcome the digital transformation
Turn to the cloud
Keep it local
Prioritize compliance

Digitize Now and Scale

Modern supply chains should be digital. Get rid of the spreadsheets, bulletin boards, and even the sticky notes. Technology can do all that and faster.

Digital supply chain management (SCM):

Automates key processes
Grants access to a global trade network
Mitigates risks
Provides actionable real-time data
Adapts to changing regulations and market conditions

Digitization gives significant advantages end-to-end across the supply chain. It is possible to automate processes from supply and demand planning to finding the fastest— or cheapest — carrier for final mile delivery. As a result, you free up logistic staff from repetitive manual processes. Instead, they can concentrate on more value-added work, leading to an increase in productivity.

Unify on the Cloud

In a similar vein, you can’t think of instant information without thinking of the cloud. The cloud gives us the ability to easily connect with more customers and companies, no matter where they are in the world.

The cloud allows you to mature your logistics model, breaking down silos both within your organization and across your network of suppliers, customers and carriers. Technology can provide real-time visibility of supply chain conditions. The cloud provides quick visibility for accurate forecasts and accurate information for quick decisions. “Collaboration” isn’t just a buzzword, it’s possible.

Stay Close

It is possible to communicate and collaborate instantly to anyone around the world. Unfortunately, we have not yet reached a point where we can instantly materialize goods like in science fiction.

For a long time, many supply chain models included strategies such as Just-in-Time inventory. Parts and raw materials arrived from far flung suppliers around the world as they were needed. This allowed companies to reduce inventory costs.

In response to supply chain challenges brought about by ongoing disruption many companies are reassessing offshoring strategies. The inability to get goods just-in-time interrupted production cycles — in some cases, closing down resulting in temporary factory closures.

Nearshoring or reshoring is a huge undertaking, both logistically and financially. Having said that, it can be profitable to have some of the supply closer to where the demand is to fortify your supply chain.

FTZs, or Foreign-Trade Zones, are great investments in terms of supply and agility. An FTZ is an area where raw materials or goods can be landed, stored, manufactured or reconfigured without paying duties.

By placing inventory in an FTZ, you avoid paying tariffs, until such time as finished products are made available in the local market. If goods are re-exported no duties are ever paid. FTZs that are close to the demand can help strike a balance between local, regional, and global strategies.

Follow the Rules

Finally, the easiest move to make is one that simply takes diligence: make sure you’re knowledgeable and compliant. Companies are increasingly engaging in cross-border trade, but a regulation violation can set your company back dramatically with fees, reputational damage, and other consequences. To make matters worse, these regulations and other factors like the restricted parties list are quite fluid.

Global trade management software helps to effectively avoid any issues — and trade more profitably. Your global trade strategy could include duty reduction strategies, such as leveraging a free trade agreement. In addition, important compliance checks when importing or exporting goods can also be automated.

Global trade management is not simply about avoiding fines and compliance missteps. Done properly, it offers a distinct competitive advantage, helping reduce supply chain costs from procurement to the delivery of the final product.

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Fortifying your supply chain for the future is a move that seems reasonable to make. Teaming up with QAD Precision GTTE is an even easier one. Harness a global carrier network, master global trade management and stay permanently proactive with QAD Precision GTTE. Call +1 312 239 1630 or contact us here.

Trade Compliance Versus Tax Compliance

2022-06-15T11:00:57Z

Companies understand the importance of adhering to tax requirements. However, they often offer less support for trade compliance efforts. In this QAD Precision Report, we argue that both tax and trade compliance departments play a similarly important role in reducing corporate risk, eliminating violations and ensuring the correct monies are paid to the government.

The phrase “the more things change, the more they stay the same” is often attributed to Jean-Baptiste Alphonse Karr, a French journalist and novelist. This statement certainly applies to many of the challenges seen by today’s corporate trade compliance professionals. In the context of this phrase, “change” refers to the ongoing additions, deletions, modifications and amendments to domestic and global trade laws and regulations, while the non-changing element represents the limited support many corporate trade compliance departments receive despite the complex and risk-associated duties they perform.

This aspect of corporate behavior is often exasperating and captivating at the same time. If you’re a trade compliance professional working with a company that offers plenty of support to address trade compliance requirements, consider yourself fortunate. For those of you in the unenviable and more common situation of limited global trade resources, I may have a credible justification to help acquire the support you’ve been seeking.

Trade Compliance and Tax Departments Have Similar Missions

First, try comparing your organization’s tax department and trade compliance department based on a few characteristics. For starters, the key mission of tax and trade compliance professionals are incredibly similar — both focus on the accurate calculation and payment of taxes, or duties, to the federal government. A quick query on the internet produced a number of published mission statements for corporate tax departments, as per the one below. In this case, I’ve simply replaced references to “tax” with “trade” or “trade compliance.” In doing so, you can see how the following mission statement actually supports a common objective:

“The mission of the Trade Compliance Department is to provide a current centralized knowledge base of federal, state and international trade law and to develop appropriate policies and procedures for those aspects of the law which impact the company. The Trade Compliance staff endeavors to create and maintain a working relationship with the diverse business units, educating and informing them as to the trade compliance aspects of their current and future transactions. We work to ensure that the company’s trade compliance policy and procedures are adhered to and meet trade compliance requirements in a timely manner.”

In the United States, both tax and trade operations are overseen by the federal government and penalties can be imposed for noncompliance violations. In addition, both operations have similar categories of culpability in terms of negligence and fraud. Though, some experts cite that import and export fines can be up to eight times higher than tax penalties. With these similarities in terms of operations and corporate risk, is it logical to expect that enterprises should support both operations equally in terms of staffing and budget? For many trade professionals, we know that this is not the case today.

Trade Compliance Departments Often Lack Access to the C-Suite

Corporate tax departments have evolved over the years to the point where they are typically a separate department, headed by an executive with a strong tax background. This person often reports to the chief financial officer or may, in some cases, report directly to the CEO. Accordingly, tax professionals have achieved an organizational status that provides direct access to the “C-suite” on topics that include tax regulations, tax compliance risks, staffing needs and other areas.

In contrast, trade compliance activities are often found organized under a variety of operations, such as transportation and logistics, supply chain, legal, finance and other areas of a business. In some cases, trade compliance duties might even be secondary to other job responsibilities. Additionally, trade compliance typically lacks visibility with the executive staff and is one of those areas of business where “no news is good news.” You simply need to stay off the corporate radar by avoiding severe fines and supply chain delays that impact the customer experience. Does this sound familiar to the global trade professionals?

The Financial Costs of Non-Compliance

A final step for comparing tax activities with trade compliance should include an estimated cost figure highlighting the potential risk that trade noncompliance represents. Following is some advice from Adrienne Braumiller, partner at Braumiller Law Group:

“A safe rule-of-thumb for benchmarking Import exposure is to calculate 20 percent of your company’s total annual Entered Value, as based on Customs’ Negligence penalties. A company’s potential Export exposure, however, is more difficult to informally calculate as Export penalties are ‘per violation,’ which means that a single shipment can have multiple violations. It also depends on the type of violation (i.e., Export Administration Regulations, Office of Foreign Assets Control, International Traffic in Arms Regulations). While in many cases the civil penalties for OFAC and EAR violations are the same — up to $250,000 per violation or two times the amount of the transaction, whichever is greater — penalties for certain OFAC violations can be much lower.”

In addition, try to think of the last time a problem with tax resulted in an international order being “stuck in Customs”. And then there are both direct and indirect costs to consider, such as those associated with penalties and fines, as well as reputational damage, supply chain delays, loss of business, audit activities and other factors. Tax departments rarely need to explain

the importance their department brings to an organization -- let alone having to estimate the cost of non-compliance to justify tax activities. The same should be true for global trade management efforts. Hopefully, the approach above will provide you with a compelling case to influence management towards getting you the resources you need.

If you would like to speak to QAD to discuss how our global trade and transportation management solutions can support your organization, please contact us.

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The Data Black Hole vs Supply Chain Visibility

2022-06-08T12:27:48Z

Just-in-time manufacturing requires your shipments arriving in time. In this QAD Precision Report, Ian Berman explains why companies using forwarders may suffer from a “data black hole” that leaves production planners scrambling.

I am willing to go out on a limb here and claim that as a best case scenario ocean freight and the supply chain are burning.

First, were the issues with COVID lockdowns. Then we had the Ever Given stuck in the Suez Canal. Now, and for a while we have been experiencing the bullwhip in the semiconductor business. Last — and certainly not least — is the conflict in Ukraine.

All of these issues continue to lead to more and more instability within global transportation and the supply chain. This leaves transportation managers as well as production planners scrambling to build what they can, when they can.

The idea of a forecast is laughable at best.

Where’s My Delivery?

A significant number of manufacturers and distributors are running into major issues with their JIT inventory. No one is willing to guarantee a delivery date or anything that may remind us of an ETA. Each of these issues adds up to a whole lot of scrambling. But don’t worry… your forwarder has it handled!

A good freight forwarder has taken their expertise to the market to simplify and streamline the procurement of carriers — be that ships, trucks or airplanes. They work diligently to move your goods efficiently and at a reasonable price. But right now the forwarders are scrambling just like the rest of us.

They are busy 24/7 booking containers and drayage carriers, all while ensuring that the correct paperwork is filed for those shipments to get through customs with as little hold up as possible.

All of this underscores the need for better visibility into your shipments that the forwarder is handling.

You may say, “But they send us a spreadsheet once a day with updates.” Or maybe you are working with a larger forwarder that has the technology available to give you an online portal to view your shipments. That’s all very well and good. We can now go on there and find out what is happening and track down ETAs, and see if there are any delays.

More Shipments, More Complexity

This sounds really easy if you have a single forwarder and only one shipment moving at a time. What happens when your global company is using a number of forwarders, each managing multiple shipments a day in multiple regions of the world? Now this is starting to get a little more complicated.

Very few of us have the time to go to each forwarder website, login and check each shipment to see if an ETA changed. Plus, after that you would need to manually update your WMS/ERP with those proposed new ETAs so the production planner can start to work ahead.

This is all very time consuming. In an increasingly digitized world, why should we be manually entering any information? And why should you have to go to multiple portals to access something as basic — and as critical — as an ETA?

Why Digitization Matters

Welcome to 2022, and the aggregation of data. Some may start to call this big data or blockchain. But it really is as simple as the ability to link multiple platforms together. As a result, the interchange of data is smooth and eloquent — without the need of human interaction.

Having a software solution that can take those feeds directly from the forwarder and convert into human readable information is step one. The second step is a little more tricky — we need to perform a bit of matching and then push that information back upstream into the ERP/WMS. Now we’ve got something — a one-stop shop for all deliveries with all your carriers.

Forwarders are great at a lot of things. However, technology and data sharing has traditionally not been hasn’t been one of them. In years past, this was understandable, given the complex nature of their shipments.

Even when they do give us an ETA, sometimes we can’t confirm if that is the ETA to the port, to the dock, to a cross dock facility, or to the warehouse.

This is exactly why there needs to be a partner in the middle that can harmonize all of those statuses and only give you what you need. Not only that but a solution that filters out statuses that are not important and shows you the exceptions — the ones that need review. With all of that we can start to make better choices on suppliers, as well as give our warehouse and production planners as much time as possible to coordinate everything.

About Ian Berman

3 Minute Explainer: How to Choose Parcel Shipping Software

2022-06-01T11:00:57Z

In this 3 Minute Explainer, we look at the critical questions to ask when evaluating parcel shipping software.

The parcel shipping industry is growing at an exponential rate. Before the pandemic sent parcel volumes skyrocketing, the volumes were already impressive. In 2019, over 103 billion parcels were shipped and delivered across the US, Canada, Brazil, Germany, the UK, France, Italy, Norway, Sweden, China, Japan, Australia and India. In 2020, this rose to 131 billion. In 2021, increased demand for parcel shipping resulted in smaller carriers in the Unites States almost doubling both their package volume and revenue compared to the previous year.

The huge increase in e-commerce sales and cross-border shipping is driving much of this volume. Across a number of vertical industries, parcel shipping has become increasingly important in logistics, supply chain and sales operations. Efficiently and cost-effectively managing parcel shipping is therefore an ever more critical driver of profitability and customer satisfaction. If your organization is evaluating parcel shipping software, here are the questions you need to ask.

Do You Need Automated Routing?

There is a lot more to parcel solutions than printing shipping labels. For one thing, parcel shipping is expensive — particularly for the last mile. Therefore, containing shipping costs should be part of your evaluation of parcel shipping software.

To optimize cost and service, staff need to research shipping rates, routes, and service levels for every shipment. For high volume parcel shippers this is impractical.

Multi carrier parcel shipping software with automatic routing simplifies the shipping process. Parcels are automatically assigned to the lowest cost service that will meet the delivery deadline using the software’s routing guide, along with your business rules.

Are You Shipping Cross-Border?

International and cross-border shipping is more complicated than domestic shipping. Shippers will need to prepare customs documentation, as well as verify that the shipment complies with any applicable regulations.

It is possible to do this manually or using a separate system to your parcel shipping software. The downside is that this is laborious and limits your visibility across your entire logistics operations. Integrating export management with parcel shipping software saves time, and ensures that all data related to your logistics operations is in one place.

If you are expanding into new markets, you will need parcel shipping software that offers access to carriers in these markets. Furthermore, your solution will need to be able to handle multiple currencies and languages.

Are Your Parcel Volumes Growing?

When choosing parcel shipping software, you will want a solution that meets your needs now and in the future.

Both B2B and B2C shippers are experiencing parcel volume growth. In addition, parcel shipping is becoming increasingly competitive with other modes, including LTL. Consider how your parcel volumes have grown in the past five years, but particularly in the last 24 months. Your multi carrier shipping software needs to scale as your business grows.

Do You Need 360° Visibility?

If you are a high volume or high value parcel shipper, knowing where your parcels are is crucial. Your parcel shipping solution should allow you to track each and every parcel, with any carrier, in the same way.

It should also offer exception management. That means, if a parcel is at risk of missing its delivery deadline, the software will notify the appropriate personnel to take action. By proactively resolving problem shipments, your company will be able to improve customer service and satisfaction.

Ideally, your parcel shipping software should also offer real-time operational insight. This allows you to see what is happening across all your shipments, monitor KPI and proactively take action if something goes wrong. With real-time insights, shippers can access complete up-to-the-minute visibility into shipping data, and filter live data on the fly.

LET’S KEEP IN TOUCH

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Precision

Denied Party Screening: Why It Matters

Six Reasons Why Businesses Need Denied Party Screening

TOO MUCH INFORMATION

DUAL-USE PRODUCTS

SUPPLIER REQUIREMENTS

FOLLOW THE MONEY

REPUTATION PROTECTION

E-COMMERCE

Six Ways Multi Carrier Shipping Lowers Parcel Delivery Costs

Single Carrier vs Many Carrier vs Multi Carrier Shipping

Six Ways Multi Carrier Solutions Reduce Parcel Shipping Costs

GET THE BEST RATES, ROUTES AND SERVICE LEVELS

LEVERAGE A BETTER NEGOTIATING POSITION

ACHIEVE FURTHER SAVINGS WITH CONSOLIDATIONS

GET MORE FLEXIBLE AND CHEAPER RETURNS

ALWAYS REMAIN CARRIER COMPLIANT

KEEP YOUR CUSTOMERS HAPPY

What does FTZ software do?

Tracking inventory

Integrating with ACE

Creating annual reports

Ensuring compliance

Delivering analytics

Learn More about QAD FTZ ICRS

3 Minute Explainer: Why You Should Automate Trade Compliance

The Cost of Non-Compliance

Trade Compliance Automation Explained

IMPROVED INTERNAL EFFICIENCIES

TRACKING CRITICAL PROCESSES

SANCTIONS AND RESTRICTED PARTIES

MITIGATING RISK

Further Reading

Import Management: The Importance of Correct Classification

Commodity Codes Explained

The Importance of Accuracy

Global Trade and Transportation Integration is Crucial

Compliance is a Legal Responsibility

How QAD Can Help

Further Reading

Insights from Manhattan Exchange 2023: Agents of Change

Change is Constant… And Few People Like It

Return on Pain Eliminated

Return On Pain Eliminated.

Changing Carriers… And the Pain of Onboarding New Carriers

About Trevor Long

Simplifying Global Trade: Threats, Challenges and Hacks

Tariffs and Ongoing Trade Tensions

Negotiating the New Normal

Taking Advantage of Free Trade Agreements

Rethinking Policies and Procedures

Simplifying Global Trade and Transportation Operations

Assembling Savings with FTZs: Key Benefits for Manufacturers

Preparing for Today’s Disruptions… and Tomorrow’s

Greater Duty Savings

REDUCED TARIFFS

ZERO DUTIES ON EXPORTS

Increased Cash Flow Flexibility

The Right FTZ Partner

Four Steps To Streamline Global Shipping

Step 1: Automate Compliance

Step 2: Automate Documentation and Reporting

Step 3: Leverage a Global Multi-Carrier Solution

Step 4: Ensure Ongoing Carrier Compliance

The Benefits of Integrating Trade Compliance and Shipping

Growth Down, Costs Up

Simplify Global Trade Management

The Benefits of Integrating Trade Compliance and Shipping

Why Multinationals Need Multi Carrier Shipping Solutions

The ABCs of FTZs

What is an Foreign-Trade Zone?

Four Reasons to Use an FTZ

1: Duty Deferral

2: Duty Reduction

3: Duty Elimination

4: Merchandise Processing Fee (MPF) Reduction

How QAD Precision FTZ can Help

LET’S KEEP IN TOUCH

Further Reading

5 Moves for a More Adaptable Supply Chain