Global Logistics and Supply Chain Strategies - August 2008 - (Page 50) “Compliance definitely needs to be elevated within the corporation,” says Clay Perry, vice president of global markets at Integration Point, a provider of global trade management solutions based in Charlotte, N.C. “We think the compliance function should be centralized and as close to the CEO as possible.” Melissa Irmen, vice president of products and strategy at Integration Point, stresses this point. “If the compliance department doesn’t have the ear of upper management, it is hard for them to get the resources they need to acquire technology. And if you don’t have technology in place, it can be a really daunting task to manage these programs.” Without technology “companies simply lack the information they need to really get their arms around the potential savings that are available under these agreements,” says Bernie Hart, global product executive at landed cost is lower. It is no longer just about going to China. You could have a slightly higher invoice from another country but if there is a preferential agreement in place, you could end up with a lower landed cost because of duty savings.” Trade Planner compares different sourcing or distribution strategies using trade content data from 120 countries, he says. “Companies can use Trade Planner to look at the impact of sourcing from multiple countries and do a side-by-side comparison of duty rates, transportation, insurance and other costs. They can compare apples to apples to see what is the best strategy.” With ‘what if’ scenarios, users can “can change the country of origin for various parts, change product values, change transportation costs and also change exchange rates,” says Anne van de Heetkamp, director of global trade compliance at TradeBeam, a global trade management software urgency and a disciplined process for performing an opportunity analysis to see if you are getting the most duty minimization possible.” This type of opportunity analysis is one of the services that JPMorgan provides clients, he says. “If we see a lot of products coming in from Mexico without using NAFTA, for example, we do an opportunity analysis and then sit down with the client to talk about what needs to be done to get those parts qualified so they can get rid of the duty payment.” JPMorgan Chase’s compliance solutions also enable “what if” scenarios. “Say a company has a source of supply in Mexico that qualifies for NAFTA, but it then finds a cheaper price for one component in the U.S.,” he says. “We can analyze how this change would affect its eligibility for NAFTA overall. A company can keep submitting these different scenarios to find out “Without technology, companies simply lack the information on the potential savings that are available under these agreements.” — Bernie Hart of JPMorgan Global Trade Services JPMorgan Global Trade Services, New York. However, companies are beginning to awaken to these opportunities and the need to have the technology to take advantage of them, says Nathan Pieri, senior vice president of marketing and product management at Management Dynamics, a global trade management vendor based in Rutherford, N.J. “I think we are seeing the beginning of the next level of low-cost country sourcing,” he says. “The first level was all about where to get the cheapest product. The next level is about taking a hard look at where components are manufactured and how to leverage preferential agreements to minimize total landed costs.” Management Dynamics has a number of customers that are starting down that path, importing under five to 25 different trade agreements and starting to plan their global supply chain with duty savings in mind, he says. “We have a number of tools, including Trade Planner, to help them figure out where the critical components of an end product should be sourced so that overall and services company based in San Mateo, Calif. “They can test all of the things that might impact their decision about where to source or manufacture.” It’s important to use these capabilities early in the design process of a product, she notes. “Say you are building a car and the engine will be sourced from Japan. No matter where you assemble your car, the engine will be such a high percentage of the value that you are likely not going to qualify for duty reduction. But if you identify that early, you may have time to change your sourcing structure and find an engine supplier in a country that would be eligible for preferential treatment.” JPMorgan Chase recommends that companies always have a handle on the top 10 part numbers—or the top 100 depending on the size of the company—that account for the most duty paid and/or that have the highest added value, says Hart. “You always want to know where these are being sourced and where they are crossing borders, so you can have a heightened sense of how its duty payments will be affected under different conditions.” One JPMorgan client, Black & Decker, has increased its NAFTA savings by 240 percent, from $3m to $7m annually, since turning this function over to JPMorgan on a managed-services basis in 2003. “More than 95 percent of Black & Decker products that are eligible are taking advantage of NAFTA today, whereas before that level was significantly lower,” Hart says. Integration Point’s specific solution for free-trade agreements “has both a rules engine that does the opportunity analysis as well as a content library, where we can load all the different trade agreement rules from around the world,” says Clay. “Essentially, if a new trade agreement comes up next week, it’s just a matter of loading the rules content into the engine and it can analyze that trade agreement for you. “The key thing our software gives clients is confidence,” Clay says. “From U.S. Customs’s standpoint, it is the responsibility of the importer to make sure that their claim 50 AUGUST 2008
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