Daniel Schoerner, Principal Product Strategy Manager
Oracle Transportation Management (OTM) and Oracle Global Trade Management (GTM) are two sibling applications in Oracle’s Logistics product family that are co-developed on the same platform enabling process synergies that are often difficult to achieve with two independent products that must be integrated together. By developing Oracle’s global trade solution on top of the best in class transportation platform used to manage the physical movement of goods, it becomes much easier to ensure the compliance of the supply chain and accelerate customs processes.
What is Global Trade Management?
Global Trade Management encompasses all the processes involved to move goods, information, and money across geographical & fiscal borders between parties. The process typically starts with a purchase order for inbound shipments or sales order for outbound shipments and involves interacting with a board set of internal stakeholders such as: Purchasing, Sales, Compliance, Operations, Finance, and Logistics. In addition, multiple external third parties are commonly involved as well, such as: Vendors, Customers, Banks, Logistics Service Providers (LSPs), Freight Forwarders, Customs Brokers, and Government Agencies. A typical international shipment is subject to any number of hundreds of laws and regulations found around the globe and can involve generating a multitude complex regulatory documents required for the physical movement of goods.
Why Do I Need a Global Trade Solution?
Regulatory complexity continues to grow. When goods move around the world, they need to go through varied processes that are different in every country. However, underlying them is a high level of commonality of the processes that are expected to be executed. Countries that haven’t had complex import and export regimes in the past are beginning to establish controls and processes similar to what is seen in the US and the EU. Often, international shipments will be subject to the need for restricted party screening, product classification, license or other regulatory controls, documentation needs, and customs clearance processes.
These regulations can impose harsh fines and penalties if violated. In one instance, a large mobile phone case manufacturer was fined for not correctly reporting assists. They were incorrectly calculating the dutiable value of the goods they imported. The lack of process for accurately capturing this data and reporting it led to underpaying duty significantly and the government fined them millions of dollars in penalties.
In cases where employees deliberately work to circumvent import and export regulations, jail time is a consideration. In another instance, an importer of fish and other agricultural products was deliberately mislabeling foods that it imported to circumvent anti-dumping regulations. The company was fined millions of dollars and two employees were sent to prison.
GTM Enables Compliance for Your Global Shipments
Import and Export processes have some similarities and some differences. GTM has been built on top of OTM to enable supporting the necessary processes for both inbound and outbound shipments. Let’s quickly cover a few of the customs and compliance processes that GTM can help enable when combined with OTM to help you holistically manage your imports and exports.
Product Classification – Know Your Products!
It all starts with product classification. When importing or exporting it is important to know what you are importing or exporting and how the government regulates that item. That starts with classifying them under the Harmonized Tariff Schedule, and any applicable Dual-Use or Munitions lists. From here you start to get a picture of what regulatory controls will then apply to those items, what duties rates are applicable, and maybe what trade agreements you can benefit from if you are lucky.
Restricted Party Screening – Know Your Customer!
It is also extremely important to know your customers, and the other partners in your supply chain. Governments are extremely active sanctioning parties in today’s world and the lists of restricted parties are being continually updated. The best practice is to screen your customers in real-time as information about them becomes known, and daily as the government publishes updated watchlists.
Import & Export Management
And finally, it is necessary to screen business transactions to ensure their regulatory compliance. GTM has been modeled so that you can easily create Trade Transactions – our do anything business object – from OTM Order Releases, Shipments and Shipment Groups. It’s easy to configure GTM to screen for licenses, permits, or other restrictions, as well as identify all the required documents and customs filings that you require for a specific shipment.
Compliance isn’t the only benefit. Once you have your house in order and strong compliance practices in place, it becomes easier to leverage your global trade and transportation platform for financial savings as well. There are many opportunities for your global customs team to save money once they have a robust, accurate trade and transportation platform to work with. Below are a few areas that can help save money on the duty you pay to the government when importing goods.
- Accurate Classification: Pay only the duty and tax you owe
- Landed Cost Analysis: Identify opportunities for cost savings
- Duty Drawback: Claim refunds on duties paid
- Duty Relief Programs: Defer or reduce duty through government programs
- Free Trade Agreements: Import goods at reduced duty rates and help your customers save
Business Value of GTM
There are a number benefits to a strong trade and transportation platform. Below we help you identify some of the key contributors in creating a business case for deploying a trade and transportation platform, as well as specific quantitative and qualitative benefits that can be tracked through the implementation of the OTM+GTM platform.
Contributors to a Business Case
- Accurate Lead Times: Reduce delays through customs holdups and improve customer service
- Reduce Broker Fees: Take ownership of trade transactions and aggregate submission data to reduce external broker fees and potential customs duty overpayments
- Fewer Man Hours Per Trade Transaction: Automate trade processes and manage by exception improving trade and compliance resource productivity
- Reduce Customs Inquiries: Access to a single, up-to-date, source of trade and compliance data improves worker knowledge and reduces queries
- Reduce Penalty Assessments: Utilizing accurate trade and compliance processes reduces the chance of penalties and subsequent ongoing audit costs
- Expansion of Free Trade and other Agreements: Integrating trade and compliance processes within the business allows more strategic use of trade agreements to reduce costs
- Finished Goods Inventory Reduction: Get shipments sent out faster – don’t wait for decisions or paperwork
- Reduce FTE Effort: Automation of many tasks involved with trade management and compliance, reducing effort and personnel requirements
- Reduce Expedited Freight Costs: Reduce payments for expedited shipping due to delays in getting paper work ready
- Reduce Penalties: Avoid penalties for incompliance or incomplete paper work; Lower insurance and legal fees
- Reduce Trade Agent Fees: Ability to more effectively consolidate items thus reducing the amount of line items sent for processing by trade agents
- Increased Service Level: Better service customers and retailers with more accurate timing of information and shorter delivery/lead times
- Reduce Loss of Business: Better service customers and deliver to more locations on time
- Legal Exposure: Reduce risk of delivering sanctioned material, or to sanctioned countries, or breach trade agreements
- Agility: Significantly faster to adopt new legislation and rules into trade compliance program
With all these benefits available, it is clear that investing in a joint trade and transportation platform can be a powerful force for improved compliance, increased speed of delivery, and generate a return on your investment.