4

Technology in Global Trade

The future of international trade lies with the greater use of technology. The export and import options and the comprehensive utilization technology are discussed in this chapter.

Import/export transactions handled totally by technology are here now. It is not a pipe dream. Those companies that are not spending time, money, and resources on automating import/export operations will not be in global trade for long. The efficiencies gained in import/export/supply chain technology automation will make one company substantially more competitive then another.

Guidelines and options for the use of technology in global trade are outlined in this chapter, with an emphasis on leveraging in areas relating to documentation, tracking, integration, and information management. Technology correctly applied have the very specific benefits of mitigating risk and cost in global trade and in the operations of an international supply chain.

USING TECHNOLOGY TO GAIN A COMPETITIVE ADVANTAGE IN GLOBAL TRADE

U.S. importers and exporters can gain significant competitive advantage in global trade using technology. Access to new markets, more cost-effective sales efforts, and less-costly logistics are but a few of the immediate benefits.

Global technology as it relates to international trade is changing and growing every day. There are many options available to the large, medium, or small import/export company. Hook up a personal computer (PC), secure a modem, and you are ready to go for less than U.S. $2,000. An in-depth review of global technology reveals more than thirty specific tools available in this technological era.

Smartphones and tablets are state of the art and can prove to be valued optional tools through 2017 and beyond.

Many software and service providers provide extensive data on businesses overseas. These resources are governmental and commercially based. Using electronic data interchange (EDI) or the Internet, one can log on and find an array of information on the following:

Market data on overseas opportunities

Names and contact data on overseas companies (compliance and security management)

Names and contact data on resources, support services, and service providers

Research profiles on products, services, and demographics

Specific product and prospect opportunities

Trade compliance and security information

Government regulations

Many of these data providers, like Amber Road, Oracle, SAP, etc. based in Washington, D.C., have become serious information providers. Others, like the Department of Commerce, AT&T, Verizon, and Dun & Bradstreet, have been providing the service a long time but have greatly expanded their individual capabilities.

More progressive companies have developed their own web pages to advertise the products and services they sell. This can be accomplished by the smallest of companies for less than twenty-five U.S. dollars per month. Very extensive and more elaborate websites can cost tens of thousands of dollars and have electronic commerce capabilities that offer the customer the ability to place an order on the website, among other services.

Email affords a cost-effective, timely communication between sellers and buyers. It can replace the fax or enhance it. It has “broadcast” capability that allows the user to form one message and send it to a wide audience automatically at times when usage rates are the lowest, allowing very cost-effective communication. It allows marketing and sales pieces to be forwarded without the expense of overnight mail and express services. It allows more flexibility and “tailorability” to individual client needs, in different languages, or with different presentation designs to allow for cultural, ethnic, and religious nuances.

Letters of credit, which are heavily used in global trade, can be transacted via automation without the need for all of the historical paperwork. Wire transfers, sight drafts, and other means of documentary credit devices can now be accommodated via EDI. Many of the world’s leading financial institutions have begun various initiatives independently and in conjunction with various banking service providers to establish

Common EDI means of communication

Secure methods of protecting confidential data

More timely paperless transactions

Global links between foreign companies in an array of countries with local and international banks

Successful logistics providers now view their roles as information and communication providers and companies that move freight.

The integrated carrier, the freight forwarder, the customhouse broker, the ocean and air carriers, and others who are making the investments in technology will be the only ones who will survive into the twenty-first century.

The logistics industry is enhancing its use of technology by

Developing defined EDI or Internet interfaces with its customers’ import/export order entry systems

Providing linkage into warehousing, inventory management, and shipping functions

Establishing systems for tracking freight and to deal with customer service issues

Becoming an integral partner with its clients as an information resource

Having programs that ease the knowledge of preparation and execution of international documentation

Affording access to governmental reporting requirements and export licensing matters

The integrated carriers like Federal Express, DHL, and United Parcel Service (UPS), along with the larger freight forwarders and air/ocean carriers, have generally taken leadership positions offering various competitive products.

Many logistics providers are expanding the array of services they are providing because technology has afforded options not previously available.

Compliance and Security Management

Global supply chains can use technology in managing some of the compliance and security responsibilities, including but not limited to

Documentation accuracy

Denied Parties Screening/Office of Foreign Asset Controls (OFAC)/Department of State (DOS)

Export license requirements (Department of Commerce [DOC] and DOS)

Screening of vendors and unverified parties

Country profiling

Documentation transfer

Data security

Retrieval of compliance and security information from various data banks, both private and governmental

ISF filings

These are but a few of the areas in which a technology interface could be used to assist a corporation in managing the security and compliance responsibilities. There is an array of software providers, as outlined in the appendix, that can provide these services to various extents. In addition, many service providers, like freight forwarders, customhouse brokers, and banks, offer software solutions as part of their overall service packages.

AUTOMATION TAKES THE PAIN OUT OF INTERNATIONAL TRADE DOCUMENTATION

Within five years, exporters and importers will be exchanging their arduous, painstaking, transactional documents via the Internet or some other EDI capability. International documentation typically proves ownership and facilitates transportation and reacts with customs for entry into the buyers’ country. Some documents are used for other purposes, like an insurance certificate in case of loss or damage.

For many international transactions and the accompanying documentation, much of the detail is the same from document to document. Pieces, weight, commodity description, value, from/to, commercial and pro forma invoices, certificates of origin, shippers export declarations, and bills of lading are the key export/import facts and documents, all with lots of repetitive data.

Automation affords the most cost-effective approach to creating these documents and managing their distribution and use.

The U.S. government is taking an aggressive approach to import/export trade automation. For more than ten years, the government’s import initiative, the Automated Brokerage System (ABS), and now ACE, has been very successful, basically automating the import transaction for customs brokers and U.S.-based importers. While the system still has numerous bugs that are being worked on, it can be declared a success. Most recently, a combined effort of U.S. Customs and Border Protection, the Census Bureau, and the Bureau of Industry and Security (BIS) has resulted in the Automated Export System (AES). The AES is designed to automate the exporter’s requirement to send a shipper’s export declaration to the government. This can be done manually at the time a shipment is dropped off with the outbound carrier.

As we move through 2017, almost all exporters, their forwarders, or their agents are already online with U.S. Customs to report export SED data. While the details of the process, timing, and substance of the transfer of this data are still being negotiated, the responsibility to report some SED information came in 2001. This will lead exporters to automate other aspects of their export operation, which will have immediate and long-term favorable effects as we move into the third decade of the new millennium.

Automation allows cost-effective export administration and an EDI-based tracking capability. It affords ease of transfer of export data between various company units (export to accounting to shipping) and allows interface with forwarders and carriers.

Eventually, it will allow transfer of data directly to customers, their overseas agents, and their host customs entity. This will do away with “hard copy,” which is expensive and difficult to manage successfully.

Keep in mind that many individuals and companies shy away from exporting because of the problems associated with managing export documentation.

Technology in the documentation supply chain creates the opportunity to ease this task, facilitating import/export activity. It also provides numerous benefits in reducing the cost of the transaction, tracking the logistics/transportation, and providing useful data for future management utilization.

As we progress into the new millennium, technology will be an excellent foundation for import/export compliance management.

EDI—WHAT TO EXPECT FROM THE CARRIER

Importers/exporters searching for timely information, tracking capabilities, and methods of reducing the cost of exporting are depending increasingly on carriers with EDI facilities. What products or services is EDI offering? What methods is EDI using to deliver these products and services to customers?

Some exporters consider forwarders an extension of the cargo carriers. In this case, the forwarder will be considered a carrier. Forwarders also have taken a leadership role in maintaining a competitive advantage by the use of technology.

BASIC EDI SERVICES THE CARRIER PROVIDES

Automated bills of lading

Routing and booking

Pricing

Tracking

Documentation information

ISF filings

Trade compliance responsibilities

Most carriers provide electronic bills of lading. This readily reduces the cost of executing shipments, particularly for frequent or repeat exports. Integrated carriers, like UPS, DHL, and Federal Express, have responded to exporters by providing automated processing of bills of lading associated with export transactions. Most larger freight forwarders and steamship lines can also provide this service. Some air carriers have a limited capability. Others, like United Airlines, American Airlines, Delta, and Lufthansa, have updated their capabilities for this service. Many carriers have enhanced their services to assist a shipper to find out about levels and routing options. These advanced carriers allow easy booking, which is another cost-saving measure.

Shipping rates are available online with some carriers, except for integrated carriers, on a limited basis.

Tracking is critical to the overall evaluation of a carrier’s performance. Airlines and integrated carriers have taken the leadership role in this area. Steamships have made great strides but are behind in providing automated data. Compared to airfreight, ocean freight is more complicated to track.

Carriers, particularly freight forwarders, are required to adhere to documentation procedures for export transactions. Integrated carriers like Federal Express have automated the process with newly developed software programs for PCs, Macs, and related others.

While there are governmental and private written sources on documentation procedures, these are often outdated. Automation facilitates the ability to update changes in a timely manner.

Delivery Systems

The means used for communication is as important as the information provided. Many carriers, particularly major ocean and air carriers who often provide 800 telephone numbers, are automated internally. A customer service representative at a computer terminal should answer questions based on information in the computer. This is an acceptable option for small shippers.

This does not work for frequent shippers, who should have the capability to obtain information online.

Some forwarders and carriers with in-house EDI systems deliver the data via fax or email. This may work in some cases, but direct interface is more cost-effective. Most carriers allow limited access via modem, which is a quick and reliable means for transferring data between carrier and shipper. From the carrier’s perspective, it also allows control over access to the entire system.

Some systems provide interface from mainframe to mainframe. This system is more expensive but provides quick detection of viruses, which could have devastating effects if undetected. Many companies use third-party facilities (called firewalls) that interface between carriers and shippers. This slows the process of data interchange, but the tradeoff guarantees security. Many of the third-party facilities act as conduits for carriers before the transfer to the shipper. Teledyne Brown is one such third-party facility that interfaces with various air carriers and feeds the information to forwarders and shippers. The direct interface includes bills of lading, booking, tracking, billing, payment transfers, exchange of documentation information, costing and rating data, and email.

What one expects from the carrier is governed by need and competition. Carriers are being forced to respond to the need to provide extensive data and services on a direct interface basis with its shippers and exporters.

EDI is expanding quickly, and over the next two to five years will become state of the art for carrier/exporter communication and services provided. The exporter should demand the services afforded by technology and keep the pressure on during this revolution that is taking place in international trade.

Where Is My Export Freight?

You have completed a $225,000 transaction with a buyer in Thailand and shipped the freight via an air carrier just three days earlier for delivery on Thursday. You walk into your office at 0845 on Friday morning and find a fax from an irate new customer screaming, “Where’s my freight?”

You call your freight forwarder or integrated carrier, and it takes all day Friday to track the shipment. You find out that it had arrived on Wednesday, but it has been delayed in customs, awaiting documentation from the shipper, and you knew nothing about it. Customs is closed in Bangkok on Saturday, so you have to wait until Monday to begin to resolve the problem. In the end, the freight is delivered on Tuesday, five calendar days after the scheduled date. Not a great scenario, but also not atypical.

In the better scenario, you ship the freight on Monday, as before. On Tuesday, you look in your computer, which is directly linked to your air carrier, and note that the shipment is confirmed on a flight to Tokyo to meet a transfer flight to Bangkok. On Wednesday, when you come into the office, you have a message from the air carrier or forwarder, advising you that the freight arrived last night but the invoice was missing from the pouch of documents attached to the master air waybill. Your agent in Bangkok advises you to fax a copy, and he will clear with that document. You do as advised. On Thursday, you receive a confirmation from your computer that the freight was out for delivery at 1500 local time in Bangkok. On Friday, the fax from your new client advises that all has arrived and he appreciates that all was in order and delivered on time.

Obviously, the second scenario is one that quality exporters would prefer. With certain international carriers, forwarders, and integrated transportation companies, this can be a reality. The carriers that have this capability will survive in the twenty-first century. Those that do not get onto the bandwagon and cannot provide quality, proactive tracking and tracing will not be in business in the year 2018 and beyond. Many smaller and unresponsive, non-forward-thinking companies have already fallen by the wayside because they have not participated in the race along the information superhighway. EDI is here to stay and will become the measure of the more qualified, service-oriented transportation companies. There are four key areas that EDI will play a role in:

1.Transfer of shipping information to organize and execute international exports

2.Tracking and tracing shipments

3.Management information and reports

4.Trade Compliance Management

Transfer of Shipping Data

Everyone involved in export understands the voluminous documentation reports involved with export orders. Much of the information is repetitive, and the time required to produce these documents could easily be reduced using electronic interface.

Freight forwarders have taken the lead in this regard. Many large- and medium-size freight forwarders have spent the time and money and made the effort to link their in-house computer systems with their customers’ systems. This affords ease of communication and allows electronic transfer of data that would normally travel by fax, mail, courier, or other means. This speeds up the documentation turnaround time, provides greater accuracy, and may provide other ancillary benefits like control of inventory, accountability systems, and easier quality control management.

Because of the repetitive information in an export order, like the shipper and consignee address, having information in a system’s memory to access if one is preparing an invoice, a packing list, an export declaration, a house bill of lading, or other document could speed up the execution of these documents. With a specialized export document program, many additional variables, like pieces, weights, product codes, clearing agents, and shipping instructions, also are readily available and reproducible in all of the various required documents.

In elaborate systems, many documents can be forwarded ahead of the shipment via an EDI database, affording the foreign clearance agent the opportunity to clear the goods before arrival. This expedites delivery and makes customers happy.

The banking, governmental, and shipping communities entered this arena long ago via such organizations as the National Committee of International Trade Documentation (NCITD), attempting to standardize shipping EDI needs and to speed up document transfers and payments.

Tracking and Tracing

Integrated carriers like UPS, Federal Express, and DHL have taken great strides in this regard. Their efforts still are evolving but are light years ahead of where these companies were two or three years ago.

Steamship lines and air carriers, including United Airlines, American, Lufthansa, Maersk, and APL Logistics are but a few of the carriers that use 800-number access through web portals to give clients the capability to track and trace their shipments.

Airlines maintain exact data because of the more time-sensitive nature of their shipping clientele. Steamship lines have quality systems that afford basic tracking and updates of estimated times of arrival (ETAs) around the world. The problem with airlines and steamship lines is that they depend on people to input data in a timely and accurate fashion. They all could use better input quality-control management and systems.

In addition, there is a syndrome that the people who use the computer to track and trace develop that I have named the ugly track face syndrome. What happens is that they depend on the computer 100 percent and forget that the computer is tracking something physical. For example, a shipper calls the 800 number of an airline to find out why the freight has not shown up in Brussels.

The shipper needs someone at the airline or the integrated carrier to find out why the computer is wrong and to do a physical search. This always becomes a struggle and is one of the reasons many shippers turn to forwarders, who will usually do this arduous work for them.

The computer, which was supposed to resolve the problem, can become the bone of contention and cause more harm than good. Many carriers are looking to more modern methods of tracking and tracing. UPS, DHL, and Federal Express drivers have coding devices to provide up-to-the-minute data. They are good examples of companies that are using the latest in technology to stay ahead of the competition.

Steamship lines and long-haul trucking companies that enter Mexico and Canada are using satellite tracking devices to locate containers and trailers. Many transport companies are bar-coding freight to track its position as it passes through the various checkpoints in the transit cycle.

High-technology carriers on specialized reefer transport loads are using sophisticated equipment to monitor the performance of refrigeration units and measure the temperature of the stow. Some have limited capability to make changes necessary to protect the cargo from loss or damage.

Many forwarders from abroad have “banded” their resources to form technology networks. They interface and exchange data to the benefit of their mutual clients. This gives them the capability to compete with larger forwarders and integrated carriers. Almost all transport carriers provide in-house computers to their clients, offering varying degrees of EDI capability interface.

In evaluating what serves you best, identify your needs and then your best scenario case. Do not be fooled by buzzwords and fancy names or slogans. Find substantive points, get referrals, and call them.

MANAGEMENT INFORMATION AND REPORTS

Once all of this information is available and has been recorded and saved, it can be made available to management to dissect, discuss, and draw conclusions. Once the quality of data has been qualified with acceptable degrees of accuracy, management needs to identify the usefulness of it in various formats. Most carriers, integrated companies, steamship lines, and truckers fall in this area. It is the forwarders and logistics management companies that can deal with all of the raw data and provide useful reports for management to evaluate. The following are some reports that use shipping data:

Sales by carrier and mode

Shipper on-time performance

Volumes by customer, country, and mode of transit

Shipping costs by various units of measure, for example, shipping to Asia costs twenty cents per kilogram, compared to Europe, where the cost is seventeen cents per kilogram. Why?

Loss and damage reports by carrier and mode of transit

Shipping expenditures by carrier, mode, and areas of the world

Outturn reports showing differentials in shipped and received weights

Inventory and quality-control reports

Management Information can greatly assist companies in managing their global supply operations.

The numbers and types of reports are endless. If the data is available, of an acceptable level of accuracy, and can be captured, manipulated, and formatted, the value for management and operating personnel is extensive.

Importing/exporting is a maturing “industry” in the United States. Compared to more mature industries, EDI is in its infancy and has a long way to go. Fortunately, the support industries to exporting are recognizing the need to provide data in a timely and accurate manner and are reacting to this need immediately, and some interesting results are being provided by competitive forces. Five years from now, the carrier, the forwarder, and the integrated transporter will be here and surviving if their EDI capability is vast, substantive, and 100 percent user friendly.

E-COMMERCE: EXPORT LOGISTICS

E-commerce has become a large phenomenon in global trade. The fulfillment and logistics segments for domestic sales have incorporated e-commerce successfully. But in international trade, statistics point to huge rates of failure in the attempt to incorporate e-commerce.

The following problems remain to be resolved:

1.While ordering can be achieved in e-commerce from almost anywhere in the world over the Internet, there is still the need to deliver the freight. All the exposures this book has talked about in global trade exist for e-commerce, but perhaps more so.

2.Electronic ordering can be built into the system, but not electronic delivery.

3.Whatever system is structured for ordering, there is a basic premise in international business that you need to know who your customers are. Does e-commerce allow this? The BIS, Bureau of Industry and Security, requires U.S.-based exporters to know who they are selling to, to know what the customers are using the product for, and to protect against transshipment. Does the e-commerce system afford this control?

Failure to comply has the consequences of not being able to export and/or heavy fines and penalties.

4.Payment needs to be made. Credit cards work up until the first dispute. Then you realize how useless credit cards can be in international sales, when you do not know the other party.

5.Someone must make sure the customer understands the risks, liabilities, and costs under International Commercial (INCO) terms. If professionals rarely understand them, how would the public? Then who would be responsible for local clearance and delivery? Do they have local customs representation? Has power of attorney been authorized?

6.Returns need to be handled correctly. How will the e-commerce system manage returns?

The questions are frightening. Thus far, no one company has successfully worked out these issues on a global basis with e-commerce. The bottom line is that the e-commerce supply chain in exports must be set up to respond to all of these issues. It will require large EDI operating platforms of standard operating procedures (SOPs) by country, with compliance performance and all logistical concerns dealt with successfully.

A nuance to global trade is that successful logistics requires a lot of hand-holding and a lot of flexibility. I am not sure anyone involved in export e-commerce could achieve this without “mucho” tweaking.

TECHNOLOGY COMPANIES PROVIDING CAPABILITIES IN SUPPLY CHAIN MANAGEMENT

E-Global Logistics: www.stephens.com

Global Logistics Solutions Worldwide Outlook: www.ARCWeb.com

Capstan: www.capstan.com

Clear Cross: www.clearcross.com

Express Action: www.expressaction.com

Blue Tiger International: bluetigerintl.com

From 2 Global Solutions: www.from2.com

iLink Global: www.ilinkglobal.com

myCustoms: www.mycustoms.com

NextLinx: www.nextlinx.com

Vastera: www.vastera.com

National Institute of World Trade: www.niwt.org

Some of the key issues in selecting a provider in supply chain logistics, e-commerce, or import/export management are as follows:

Tenure in business. There are a lot of one-night wonders.

Flexibility. The ability to adapt to different situations.

Quality of programming personnel.

Integration capability.

Tailorability. The ability to provide specific tailoring to individual nuances.

State of the art. The ability to stay ahead of the marketplace.

Proactive versus reactive.

Comprehensive. The ability to integrate multiple needs into one solution.

Strength in trade compliance management.

We have found that in selecting potential technology solutions, a viable option is to work with your service providers, like your freight forwarder, carrier, and customhouse broker, who may have in-house technical capabilities that you can access as a “partner” in the logistics relationship. Often they can build the cost of the technology interface into the freight relationship, and they are often on the cutting edge of capability.

This could easily be a more cost-effective option in lieu of significant proprietary or third-party technology solution options.

CONCLUDING REMARKS

Technology controls the future of global commerce, and importing/exporting/supply chains is a major part of that formula. Taking the initiative to develop software solutions and manage the global supply chain with technology will go a long way in securing your business future. Following the guidelines and options in the use of technology in global trade from documentation to e-commerce provided in this chapter will support the importer/exporter in achieving this goal.