Global Trade Management is a system that manages the movement of goods, components and services across four borders: customs control, export controls, import controls and transit inspections. Developing a global trade management strategy is important as it can impact a company’s bottom line.
Most companies have been moving to a global strategy over the past 20–30 years. Today, nearly all U.S. firms do business in global markets and it’s important to be prepared for opportunities as well as challenges that these markets can bring.
How Does Global Trade Management Work?
In order to understand how global trade management works, it is important to first determine what it is not. Global Trade Management is not an alternative to a country’s domestic laws and enforcement of those laws.
In many countries, both criminal and civil law enforcement agencies have the authority to investigate and enforce domestic trade compliance matters. For example, in the U.S., the Department of Homeland Security has the authority to enforce the Federal Trade Commission Act, which deals with unfair competition and false advertising in interstate commerce.
Global Trade Management is not a substitute for the private sector in managing cross-border supply chains. Global Trade Management is about improving and optimizing global trade flows and empowering trade business processes in the face of globalizing business and competition for business.
The key to these processes is Trade Business Intelligence, which ties together information from all areas of the organization for risk analysis, process understanding, decision support, and information sharing to enable faster decisions.
What Is Global Trade?
Global Trade is the movement of goods, components or services across international borders. Global trade includes all aspects of importing and exporting, including compliance with customs laws at the border (cross-border shipments) and compliance with export controls (outbound shipments).
The global trade process begins when a buyer submits an order to a seller through an online store or direct account because they are located overseas.
What Are the Challenges of Global Trade?
Global Trade is more complicated than domestic trade because it involves more variables. Many of the variables are controlled by countries across the globe, however, some are controlled within your company.
- Economic Influence: The shifts in the world’s economy have led nations to become more interdependent. As a result, global trade is central to the world’s economy and is a major economic factor for nations across the globe. A nation’s size, structure and geographic location can influence its potential for success in global trade.
- Geo-Politicization: If a government decides to boycott the goods of a foreign nation, your products and services may be included in the boycott.
- Differing Laws: Before even attempting to export to another country, it is important that you research the laws of that country. Laws differ from country to country and sometimes from state to state within a country. In order to stay within the law, it is essential that you know what those laws are.
- Leadership Issues: Lack of qualified management and leadership with the ability to function in a global workplace will often lead to trade compliance and risk issues.
- Power Dynamics: Power struggles can arise due to cultural differences and historical perspectives. These power struggles reduce the effectiveness of global trade strategies. For example, some countries don’t speak favorably of imports that compete with local products or services.
- Natural Resource Price Fluctuations: The price fluctuations in natural resources have a direct effect on the cost of the product. This price fluctuation is an important factor to consider when deciding whether or not to export goods overseas. The demand for natural resources can change rapidly because it is largely dependent on human need.
Who Needs Global Trade Management?
Companies operating in a global economy rely on a supply chain with several components located in different countries. Since the supply chain crosses borders, it requires a method of tracking and controlling the movement of goods, components and services through multiple channels.
In addition to knowing how to control the movement of goods from one country to another, it is equally important that companies understand how to manage exports which can be difficult under select circumstances.
Companies that work in a global economy must integrate the management of trade compliance risks into their overall approach to doing business globally.
What Is GTM Compliance?
GTM Compliance is the application of policies, procedures and practices (PPPs) to mitigate the risk of non-compliance in the global trade process.
The purpose of GTM compliance is to enhance the efficiency of global trade management. It also ensures that cross-border trading decisions are consistent with the local laws, regulations, customs requirements and export control policies of all governments.
What to Consider with GTM
Global Trade Management Management consists of several components. Some of these components are:
Trade Compliance
Trade Compliance is the process of ensuring that your company complies with all trade laws and regulations (e.g., export controls, customs, intellectual property rights (IPR), import licensing, etc.) that apply to cross-border trade.
Import & Export Management
Import & Export Management is a function that interfaces with a company’s supply chain to enable the company to successfully trade internationally. It involves many functions, which includes:
- Importing and exporting
- Tracking
- International finance
- Global compliance
- Managing risk
- Internal audit
Global Trade Agreements
Global trade agreements are instruments that set standards for international commerce and provide for the facilitation of trade. They also establish rules of interpretation in cases of disputes between countries regarding trade regulations, and promote the development of international trade.
Examples of Global Agreements include: World Trade Organization (WTO), North American Free Trade Agreement (NAFTA), negotiations surrounding the Free Trade Area of the Americas (FTAA).
Performance & Metric Management
This consists of the measurement of performance metrics in order to evaluate the effectiveness of your company’s global trade policies and strategies. Effective trade management requires that you measure your company’s performance according to standards that are consistent with government regulations.
New standards are being developed all the time. So it is essential that companies establish their own measurement systems to ensure they can measure their performance according to these standards.
Global Trade Management Compliance Strategies
There are many strategies one can use to manage global trade compliance. Some of these strategies include:
- Implement a Global Trade Strategy Plan: decide what your company wants to achieve globally, and how you want to approach global trade tasks for this business unit or region.
- Monitor the Cross-Border Movement of Goods: tracking goods going into and out of each country as well as cross border movement is a crucial part in preventing non-compliance issues from arising during international trade.
- Develop Governance & Compliance Policies & Procedures: policies and procedures need to be developed at all levels within an organization, from top leadership down to the individual trading unit manager, in order to ensure that all employees are aware of their responsibilities in relation to trade compliance.
- Address Security Risks: control your security risks by implementing the appropriate PPPs, training employees, and properly securing assets.
- Implement an Export Compliance Management Plan: look at things like how goods are exported, what type of goods are being sold, where they are being sold, do you need to apply for export licenses?
- Use Export Management Systems: implement appropriate ERP or other systems that allow you to manage export compliance.
Global Trade vs International Trade
International trade occurs across the borders of two or more countries. It may involve the exchange of money, goods, services or a combination of the three.
Global trade is a part of international trade that requires a higher degree of management and collaboration between companies that don’t share a border. Goods being shipped from one country to another must be controlled and tracked as they move through various channels throughout different geographic regions.
Stay Up to Date on Global Trade
GTM is a process by which organizations can mitigate the risk of non-compliance. Utilizing global trade management strategies and policies will enhance your company’s overall effectiveness in international trade.
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