With contributions from Charles Trimarco

Global trade between countries is a regular occurrence and is critical to the financial stability of most organization. In order to survive, companies have expanded into global markets while setting up manufacturing and distribution center locations across the globe. Over half of the cost of goods sold and revenues for any major industry sector, including retail, consumer goods and automotive, are generated across borders. However, the concept exporting goods has become a much more complex situation in recent years. Multi-dimensional aspects such as threats of crime and terrorism as well as goods ending up in enemy hands have changed the dynamic of the global supply chain. Companies face stiff fines and increased liability if their product ends up with a denied party. Consequently, the tradeoff between the costs of managing global trade activities internally versus outsourcing is a decision that organizations have to determine going forward.

There are several different global trade solutions available including plug-in modules for an ERP solution, best of breed, software-as–a-service (SaaS), and managed outsources services. Areas of focus include import, export, trade agreements, and global logistics. An organization that utilizes an in-house Global Trade Management system is responsible for installing the related technology and managing the entire process. This includes frequently upgrading hardware, software, and data which become outdated. Typically, the decision to outsource depends on the level of activity taking place in an organization. Whether the activity is managed internally, or outsourced, companies should be able to source materials anywhere in the world at the lowest possible cost; utilize the harmonized code to lower landed costs; and identify denied parties that have been restricted by the U.S. Government to purchase goods.

The Denied Persons List includes individuals and companies whose export privileges have been denied by the Department of Commerce’s Bureau of Industry and Security (BIS). Consequently, an American company or individual may not participate in an export transaction with an individual or company on the list. The purpose of the list is to prevent the illegal export of goods and educate freight forwards and manufacturers of their responsibilities when exporting product. Companies have to continually look for red flags when exporting products to foreign destinations. Many companies screen purchase orders and sales documents against restricted party lists on a manual basis, or with a partially automated solution. Even though an organization may have a dedicated staff to handle the task of managing restricted parties lists, one of their biggest challenges is still maintaining the ever changing lists published by several different agencies. An internal team needs to have the experience and required skills to continually monitor the updated lists. A customer list can include nicknames, aliases, and different versions of word order. Non-compliance can occur if a company’s internal database does not identify a restricted party due to misspellings or aliases. An organization can be audited at any given time. Consequently, clear internal processes must be developed to ensure accurate information is generated on a regular basis.

The U.S. Department of Commerce provides a checklist of things to look for in export transactions. Companies such as MK Data Services, eCustomes, and Precision Software provide services to manage all aspects of Global Trade Management, including restricted parties lists. The ramifications of a company’s being non compliant can be enormous. These include fines or Temporary Denial Orders which are issued by the Assistant Secretary for Export Enforcement. The order can stop all of the export activities of a company or individual in order to prevent a continual export control violation. The orders not only impact export activities, but put a halt on all company import activities as well. The practice of maintaining an organization’s global trade management activities can be very complex. A company must continually manage all aspects of export operations in order to avoid any major disruptions to global supply chain activities.