Whenever supply chain professionals bandy about words to describe their jobs and their industry, complexity is very near the top of the list. Nothing, it seems, is easy.
That’s certainly true when it comes to shipping to and from international ports. The difficulties range from duties, fees and taxes, to language barriers, security and more. It’s quite the Gordian Knot that needs to be untied, but unlike the legend of Alexander the Great, it can’t be loosened by the slash of a sword.
“First, with international trade, you have to look at companies by size and where they are doing cross-border trade,” said Anthony Hardenburgh, Vice President, Global Trade Content, Amber Road. “Cross-border trade is much more complex than domestic—more parties are involved. International logistics components include ports, authorities and regulatory agencies. If I make a blanket statement on impacts to all companies, it’s just the complexity of all the parties you need to deal with.”
“When you get specific, when you look at security—if you are coming out of the U.S., you have multiple agencies you need to deal with depending on the goods shipped, determining if they even can be shipped,” he added. “There are constant regulatory changes. It’s always a challenge. A lot has to do with national security. And what may be a U.S. concern is not necessarily a concern of other countries, of those in the Middle East or Africa. You’ve got to adhere to those regulations as well.”
Eric Souza, Director of Ocean Freight Products for UPS, said one of the great challenges for companies shipping from international ports is the complexity of entering and managing new markets.
“In a slow or no-growth economy, executives are challenged to continue to drive revenue and profit growth,” he said. “Many companies target emerging markets as growth opportunities and ways to lower sourcing costs, pointing to rapid growth in Vietnam, for example, as a lower cost alternative to China.”
“When expanding supply chains to these new regions, supply chain executives face challenges related to increased complexity, greater resource demand and higher risks,” Souza added. “For example, they must deal with new compliance regulations, such as the FCPA [The Foreign Corrupt Practices Act] and navigate the complexity of calculating the landed cost equation, which requires accurate classification and knowledge of duty rates, along with constantly changing trade agreements.”
There’s a lot to be aware of, pointed out Anand Raghavendran, President and Chief Operating Officer of Netwin Solutions. “Any company moving cargo from a port has to comply with all the laws pertaining to that geography and nation. Companies should be aware of permits and clearance needs for that region/port, [including] specific documentation that has to be created to comply with all the export needs for that port.”
They also must keep in mind that they have to meet the requirements of both the source and destination countries, in addition to any transship countries. Customs declarations, duties, taxes and other fee payments vary based on the countries and can be very challenging to manage.
Cutting the knot
There are a number of positive trends towards relieving these challenges, said Raghavendran, including Harmonized Customs regulations; global security programs with mutual recognition; specialty service providers; and technology.
The Harmonized Commodity Description and Coding System of tariff nomenclature is an internationally standardized system of names and numbers for classifying traded products developed and maintained by the World Customs Organization (WCO) (formerly the Customs Co-operation Council), an independent, Brussels-based intergovernmental organization with over 170 member countries.
“Harmonized Customs is a system for tariff classification and world customs framework that has helped countries move toward a common approach to global trade management,” Raghavendran explained, “but this does not completely alleviate the complexities and flavors specific to each country.”