Category Archives: Global Trade

No One Gets Out of Here Alive …

… only the D.U.M.B. survive!

Wow! Twenty years ago, the case was that only the strong survive. Now, the only way to survive in the global marketplace is if your product [is] D.U.M.B. enough to take overseas. How the mighty have fallen.

But seriously, the article in question makes some good points. Your product is only going to make it in a foreign market if it is:

  • Demonstrable
    You have to be able to demonstrate that your product does whatever you say it does, and do it in a manner that the common person in your target market can understand. If only an engineer with a PhD can understand your message, your product is not going to go very far.
  • Unique
    If your product comes off as another “me too” product, than the local brands that are currently established are going to maintain their marketshare.
  • Meaningful
    Your product has to serve a purpose in the eyes of the local consumer in addition to being demonstrable and unique. The example in the article is a great one: low-fat/low-calorie snacks aren’t going to sell when in Spain, or other Mediterranean markets where diets are already low-fat/low-calorie.
  • Believable
    Outrageous claims will not be rewarded. For example, never claim an athletic product will “prevent injury” when it’s clear that all it will do is reduce the risk.

And each of these requirements has a lesson for your local supply chain.

  • Use local partners.
    You need to be able to demonstrate you can get the job done. Using trusted partners will help.
  • Use modern technology solutions.
    Used properly, they will help give you a unique edge in terms of efficiency and performance.
  • Use the right modes of transportation.
    Depending on geography, it might be air, rail, truck, bus, or even courier! Be sure to adapt to the market. In some South American countries, high priced electronics (smartphones) are shipped in unmarked boxes in busses because it’s cheaper and less prone to theft. In busy cities in Asia with narrow streets, you’ll need small delivery vehicles that deliver daily, as some shops are so small they can only hold a few days of inventory at most.
  • Use meaningful, and transparently generated, forecasts.
    Forecasting sales numbers that are way too low or way too high isn’t going to do much for generating good will and trust in your new “partners” who will get the impression that you’re not a serious player in their market.

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Are You Ready For The New EU ICS and ECS Legislation?

That’s right — in addition to the new UK Bribery Act, you now have to deal with the EU’s new Import Control System (ICS) and Export Control System (ECS). The ICS, which is the electronic security declaration management system for the importation of goods into the EU, comes into effect with the Export Control System, which is the electronic security declaration management system for the exportation of goods out of the EU, on December 31, 2010. Following in the footsteps of similar electronic customs filing systems, like the US Importer Security Filing (better known as 10+2), the EU is now requiring that a number of data elements must be sent to the EU customs office of first entry before the merchandise enters the territory.

Considering that the data requirements outlined in Annex 30A (as amended by Regulation 169/2010) defines seven (7) different tables of approximately 30 elements each (one for air & sea, express consignments, road, rail, AEO, diversion requests, and “simplified procedures”), and that the Consolidated FAQ (for Annex II) is 53 pages, there is a considerable amount of documentation that needs to be reviewed in order to make sure your organization is compliant. While it is theoretically as simple as insuring that, depending on the mode of transport, a set of data fields is provided before the goods enter the territory or, depending on shipment time an/or country of origin, the filing is made before the goods leave the port, verifying compliance is not likely to be as simple.

Plus, as this recent article points out over in MM&D on how you have to “prepare for complexity”, you have the added complexity in that you will have to handle the specifications for 27 separate countries when the regulations come into effect.

For more information, refer to the European Customs Information Portal.

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When It Comes to Global Trade …

… Singapore has it down pat! As in a recent article over on BBC Business News, not only is Singapore [the] ‘best country in which to run a business’, but you only need four documents to export and import. Compare this to the US where you need at least half a dozen forms just to start the process (Entry Summary, Customs Declaration, Customs Bond, Certificate of Origin, Bill of Lading, and Invoice.) In fact, as noted by many of the companies that specialize in automating the production and submission of global trade documents, it’s not uncommon to require twenty (20) or more documents for import and/or export!

You would think that in the modern age, where information can easily be shared between government departments over secure computer networks, we could get it down to one primary import/export form and then one supplementary form based on the product and/or HTS classification, and possibly an optional form if you are part of an optional security program (like C-TPAT), but apparently we can’t. And it’s sad. There’s no good reason for Singapore, Hong Kong, New Zealand, and the UK to be better countries in which to run a business. But until we smarten up and make things simple, that’s not going to change — and that’s a bad thing in a global age where global investors can take their money to countries of minimal burden.

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Has Global Sourcing Finally Started to Level Off?

Has the ever-increasing cost of oil and its effects on global shipments combined with the ever-increasing risk of outsourcing to low-cost locations that are high-risk and the down economy finally put a damper on global sourcing? Has it levelled off? It’s a good question considering that it seems that there are now almost as many stories about companies returning to near-sourcing as there are stories about companies outsourcing for the first time.

It’s a tough question to answer, but one thing we can do is look at the data and the projections based on the data. The U.S. Department of Transportation Federal Highway Administration just released the Freight Analysis Framework version 3 (FAF3) that provides estimates for tonnage and value, by commodity type, mode, origin, and destination for 2007 as well as forecasts for 2015 through 2040 in 5 year increments, based on data from a variety of sources.

According to the data and the corresponding forecasts, total freight movement in 2015 is only expected to be 4% greater than total freight movement in 2007, suggesting that shipping has plateaued as the projected increase in freight is only half of the projected increase in population (which is estimated to be about 8% between 2007 and 2015). And while one might be tempted to conclude that the rate of increase in global trade would slow accordingly, the estimates seem to indicate that by 2015, the share of globally sourced products will increase by almost 17%, or increase at a rate that is four times that of the total increase in sourcing.

This suggest that, by 2015, global sourcing will soon account for 13.3% of shipments by weight and 22.9% of value. In other words, 2 out of every 15 products are will soon be of foreign origin and more than $1 from every $5 you spend will leave the country.

In other words, it looks like the near-sourcing global-sourcing naysayers are still in the minority camp.

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Time to Stop Worrying About China

Yes they’re the number two economy and yes they will reclaim their spot as the number one economy in thirty (30) to forty (40) years, but they’re not worth all the attention they’re getting. As per this recent article in The Economist on Chinese Acquisitions, China owns a mere 6% of global investment in international business. That’s less than 1/15th. Compare that to Britian’s stake in international business in 1914 or America’s stake in international business in 1967 when they both held about 50%, or 1/2, of global investment in international business, and you see that there’s really nothing to worry about.

Since most developed world markets have rules in place that insure that no global investor can divert business away from the home country or export trade secrets or compete in a monopolistic way, the rules we have in place for foreign investors right now are good enough. There’s no point wasting time and money developing special rules for China, especially when most of our economies need our attention as it is. And as far as our supply chain is concerned, how about we spend the time and effort making sure they are adhering to our regulations and safety protocols instead? After all, even when they become the dominant economy, they’re not likely to be more than 20% of global GDP (especially since the rest of the BRIC countries are expected to increase significantly in GDP as well) or control more than 20% of global investment. And while 20% is significant, it’s far from majority control. Time to stop the much ado about nothing and get back to business.