In our last post on Global Trade Data Management we indicated that not a lot of focus has been traditionally placed on the management of Global Trade Data because, if it’s done right, there are no significant savings opportunities and most companies still are not really aware that they should be focused on it. The reason they should be focused on it is that error rates in global trade processes approach 10% to 20% and this is costing many companies millions of dollars, especially when affordable technology solutions to tackle these problems now exist.
Why is managing global trade data so important? In addition to the fact that the Customs Modernization Act of 1993 shifted the responsibility of documentation accuracy from the government to the importer and that errors can result in long delays, huge fines or overpayments (that the government will not identify for you), this years budget for US Customers and Border Protection (CBP) increased 4.8%. As part of this increase, CBP plans to spend $305M in the implementation of the Automated Commercial Environment (ACE) and another $16M on the International Trade Data System (ITDS) program in conjunction with the Customs Trade Partnership Against Terrorism (C-TPAT). When you combine these initiatives with the compliance legislation of the recent Sarbanes-Oxley act, the level of visibility and control you really need with respect to your trade data is probably well beyond what you have. And since you never know when you could be audited, which is probably more likely than you think when you consider that statistics indicate that the goverment collects $7 in fines and interest on underpayments for every $1 it spends on a trade-compliance audit, you should be getting your data into shape now. (Furthermore, in addition to the Securities and Exchange Commission, depending on what you are importing or exporting, you may also be subject to oversight from the Department of Transportation, Department of Defense, Federal Communications Commission, Federal Aviation Commission, and the Food and Drug Administration, for example.)
You start with an audit of your current processes, systems, and, most importantly data, to determine where the issues are and what you have to address. A company like Global Data Mining can help you do this using a 3-R process that recreates years of historical import transactions to identify and quantify errors and non-compliance activities, produces executive-level reports to provide decision makers the information they need to determine priorities and define go-forward plans, and reparis existing data and current control processes to prevent the same mistakes from happening again.
Manual processes, which are still standard for the majority of importers, and which typically rely on a person to make a decision with only shorthand invoice descriptions available, are subject to errors and generally produce the following common inaccuracies:
- inaccurate notation of merchandise value
- improper classification of merchandise
- incorrect payment and documentation of duties
Generally speaking, your reporting process will highlight these issues and your repair process will focus on implementing new, preferably technology driven, processes that will prevent these errors from happening again.
The reality is that despite the fact there are tens of thousands of rulings by US Customs that need to be referred to in product classification, and that this shear number is beyond the grasp of even the best of human experts, this is a very small number from a systems perspective and a good technology solution can locate and apply the right ruling, classification, and rate in a fraction of a second with the right description and HTS codes.
For more information, I encourage you to check out Global Data Mining’s white papers and their white paper on Import Compliance in particular. I think it will be worth your time.