Saving Money in Importing and Global Trade: Lessons for Procurement

global trade

It is rare to find procurement organizations with generalized, significant, hands-on experience in global trade. The vast majority of procurement teams abdicate responsibility for global trade duties – no pun intended – to import, customs and compliance teams. These groups typically handle the tactical aspects of the inbound global supply chain.

But not getting smart on trade is a recipe for adding both cost and risk into the global procurement equation. A recent article by J. Anthony Hardenburgh over on Supply Chain Digest does a solid job highlighting a number of the items that procurement may wish to get involved with – or at the least get smart on – regarding import and global trade support.

This includes fully understanding product classifications, which can have a significant effect on make or buy decisions, as well as supplier localization and geographic considerations when combined with duties and trade considerations, among other items.

As Hardenburgh notes, correct product classifications are essential for complying with country-specific regulatory policies, as well as for clearing customs. Errors in this area mean delays, penalties and loss of preferential duty rates. And if the products fail to meet admissibility standards, they can be excluded from entry, seized or even recalled.

From a total sourcing cost standpoint, Hardenburgh also recommends exploring prevailing duties, tariffs and free trade agreements. This can cut or add millions to the bottom line. Additional free trade zone benefits can include reduced shipment delays and operating costs as well as optimized total landed costing. Free trade agreements, duty drawback and other strategies to avoid duties can be used as part of cost reduction efforts.

Hardenburgh also recommends the auditing of operations to probe on such areas as security, social, financial and quality risks, as well as both pre- and post-shipment considerations.

Technology can play an important role in global trade considerations as well – an item we’ll consider in the next installment of this post.

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