Global Trade Compliance Systems

The Global Trade Compliance (GTC) Systems market research delivers current market analysis plus a five year market and technology forecast. The research is available in multiple editions including worldwide, all regions, and most major countries.

Global Trade Compliance Market Grows by Double Digit Rates the Second Year in a Row

ARC Advisory Group’s research of the Global Trade Compliance (GTC) market reveals that it has grown by double digit rates for the second year in a row despite the fact that there is no standard user for this type of software and consequently there is no common understanding of what the end-to-end global trade compliance process should be. Sometimes the trade function rolls up to the supply chain function to support agility in cross border movements. Sometimes, it rolls up to legal for companies who want to be sure they are compliant with global regulations. And increasingly we are seeing industry specific solutions. Further, no GTC provider can provide compliance to all trade regulations across all nations which leads to many small domestic suppliers of these solutions.

Global Trade Compliance Solutions Strategic Issues

In addition to providing a five-year market forecast, the Global Trade Compliance Systems market research report provides detailed quantitative current market data and addresses key strategic issues for both suppliers and potential buyers of these systems. 

Different Approaches to Improved Trade Compliance

Companies that need to classify goods and services for import and export have different choices. They can set up a program in-house and choose not to use any technology. They can have a trade compliance program that does leverage technology. Or they can outsource trade compliance to a consulting firm. For companies with any complexity or scale surrounding imports and exports, the safest choice is often an internal trade compliance program that leverages GTC technology. Some solutions continually update the trade classification content. GTC software, in turn, enforces processes that help companies reliably comply with trade laws. Better compliance will result if oversight of the compliance function is centralized, even if some trade compliance officers continue to work in different regions of the world. 

Many companies depend on freight forwarders or customs brokers to classify their goods and file all the correct forms. However, if an error is made, the seller of goods is typically designated as the exporter of goods and the party responsible for paying the fines. Similarly, when importing, compliance responsibility typically falls on the purchaser of imported goods. If a service provider makes a mistake that damages the company’s brand, the company has no one to blame but themselves. Further, companies that have insourced trade compliance often find they can respond with greater agility to unexpected disruptions.

Trade Compliance Requirements

For each of the risk/benefit areas – improved compliance, protecting the brand, logistics efficiency, improved sourcing, and freeing up cash flow – there is specific functionality in the GTC solution. Understand the benefits you are seeking and ensure that the supporting functionality exists in a GTC solution to capitalize on that benefit. Companies need both trade content and an application that enforces the compliance process. Companies should ask themselves if they prefer to get the trade content from the same company that provides the GTC application. Or is it all right if the GTC solution provider has an alliance to get that data from a content vendor?   

Compliance functionality should be based upon the ability of a system to provide an audit trail that shows how goods were classified with a logic tree that explains why the goods were classified that way.  In many jurisdictions, this audit trail demonstrates “good faith” and means even if a declared good was misclassified, the company would be given credit for exercising diligence and would likely avoid the most severe penalties (if they received any at all).  Many shippers, if audited, have no ability to explain why they classified goods as they did. 

Solutions That Ease Trade Classification

Harmonized Commodity Description and Coding System (HS) commodity classification is one of the most labor-intensive tasks trade compliance officers face.  HS is a commodity description and coding system, which forms the basis upon which all goods are identified for customs.  The system is used by customs authorities worldwide.  Using the right HS code allows companies to pay the correct tariffs.  And paying the right tariffs are necessary to avoid government fines, calculating the true landed cost of products, and identifying promising selling and sourcing opportunities abroad.  
    
The problem is that there is an incredible gap between how products are described commercially by trade and how they are expressed in the national customs tariff schedules.  This has resulted in error rates of 30 percent according to several government sources.  Worse, every country or trading bloc has its own taxonomy beyond the international 6-digit level. Error rates are high because the task is complex and nonintuitive.  What a regular person would describe as “baby food” in HS speak is known as a “homogenized composite food preparation;” a “hair blower” is an “electrothermic hair dressing apparatus;” before you can classify “rayon” you have to know whether this is an “artificial” or a “synthetic” fiber; and if you were classifying an automotive part, like a car alarm, you might think you would go to the section of the HS code focused on automobiles, but no – this is an electronic signaling device.  

GTC suppliers are beginning to build expert systems that use AI to read and understand everyday commercial goods descriptions and reason their way through the classification process.  An AI-based system allows shippers to describe products in their own words and check to see if there is enough relevant detail to assign an HS code automatically, and if there is not, asks relevant questions until a single code is reached.