When he first started shipping products overseas in 2005, Alex Ayalew, owner of Joint International Business Group L.L.C., learned that he had to fill out 60 documents the first time he sent just five electric generators to Ethiopia and Tanzania. In addition, he had to search through some 8,000 commodity classifications codes to assign codes to the products.
If all the regulation caused a shipment to be delayed, Ayalew says the buyer could try to penalize his Charlotte, North Carolina-based trading company. In fact, a customer once penalized him 10%, $85,000 in that instance, for a shipment that was a few days late. As the company grew, Ayalew started to ship up to 60 products a year to the Middle East, South America, and Africa. When the paperwork became too much to handle in 2007, he turned to Cargo Logistics Networks, a freight forwarding company that arranges to ship products and handles the compliance process for small businesses. Cargo Logistics uses global trade management software (GTM) to automatically scan every transaction to verify its compliance with laws governing international trade, licensing, and security.
Nearly 97% of U.S. exporters are small and medium-size firms, and most of them are operating under the customs radar, meaning they do all of the paperwork and shipping manually, says Lauri Lee Elliott, president of Conceptualee Inc., a business incubator for those focused on emerging markets. Demand for American goods has increased. In fact, U.S. exports rose by 16% from January to March of 2010 compared to the same period in 2009, according to the Export-Import Bank of the United States.
GTM software has an extremely high learning curve and entry costs may prevent some businesses from implementing it in-house. Low-end vendors can charge from $10,000 to $50,000 per year for software as a service (SaaS) and higher-end GTM software for large businesses can range between $150,000 and $1 million per year, according to a research analyst at Gartner Inc. Companies that offer SaaS solutions such as QuestaWeb, have opened the market to a broader client base because of the lower price point. But like Ayalew, many small businesses often hire freight forwarding companies that have the experience, channels, relationships, and platforms, says Elliott. The cost of hiring a freight forwarder can vary widely, depending on the port you ship from, ship to, or the size of the shipment.
Whether owners decide to handle their own compliance or hire a logistics company to do it, they need to be familiar with how to use the software to access reports and improve the transparency and efficiency of their supply chain.
Before you invest in software, make sure it is compatible with the U.S. Census Bureau’s Automated Export System.
It should be current with regulatory requirements for any country in the world. For example, Management Dynamics maintains a comprehensive database of trade content and international business rules from 122 countries and checks customer eligibility against more than 90 restricted-party lists.
Also, it should be written in a web-based or web-native language. With programs like Integration Point’s automated export management software, you can get live, real-time data and track your products throughout the transaction from port to port.
For a list of trade compliance software, visit: Federation of International Trade Associations at www.fita.org.