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International business management

How MNCs around the world are managing global trade

Taneli Ruda  SVP and Managing Director, Thomson Reuters ONESOURCE Global Trade

Taneli Ruda  SVP and Managing Director, Thomson Reuters ONESOURCE Global Trade

Companies can exert little control over the macro conditions that impact trade, but they can use today’s low-growth trade environment as an opportunity to review and optimize their processes.

Through the first nine months of 2016, net U.S. trade fell $470 billion, according to the Census Department. Although GDP growth might not be as robust as many would like it to be, few economists would argue it is in negative territory.

The last time U.S. trade declined while its economy grew? World War II.

Companies can exert very little control over the macro conditions that either drive or impede trade. One sensible response to a low-growth environment is for companies to take a step back from the day-to-day grind of moving as many units as possible and focus on optimizing trade processes, improving compliance, and harvesting savings enabled by special programs. The increase in efficiency will pay off even if trade volumes continue to falter.

It is worthwhile to look carefully at the regional trends that are affecting the trade operations of global companies. The 2016 Global Trade Survey from Thomson Reuters and KPMG, which we first unveiled in the November issue of American Shipper, shows companies have many opportunities to improve their efficiency when it comes to trade.

First, some universal findings: free trade agreements are underutilized, and centralization is not yet ubiquitous. Just 23 percent of respondents said their company uses all FTAs available to them, and 47 percent indicated they still do not centralize the trade management process.

Ideally, companies would use all available free trade agreements to lower duty fees. And while there are certain circumstances under which decentralized trade processes are appropriate, centralization is usually the best practice.

The survey data also shows a significant number of related-company transactions occurring with little knowledge of whether a transfer pricing study has even been done for support. These transactions seem to be a global pain point for trade teams.

The survey also reveals other nuances that show the regional differences in how trade teams truly operate today.


For Asian countries, global supply chain management is the most time- and resource-intensive trade-related activity, a significant increase from the 2015 survey, when it was sixth.

Asian companies typically have mixed logistics/supply chain management and trade compliance teams. This stands in contrast with other regions, where these activities have diverged and are typically handled by specialized teams. It also explains why supply chain management is so resource-intensive for respondents from Asia.


At 26 percent, utilization of global trade management (GTM) systems is comparatively low for trade teams in Europe. Furthermore, when explaining the reasons for not utilizing a GTM system, many respondents globally cite the lack of a single enterprise resource planning (ERP) system.

With regard to how a GTM system could enhance value relative to the global community, Europe places less significance on enhanced cost savings and more emphasis on risk avoidance. Only 18 percent of respondents from Europe feel they are fully utilizing all FTAs that are available, the lowest percentage of any region included in the survey.

This may speak to the region’s preference for risk avoidance, as FTAs are potentially a source of cost savings, but the process of using them can create risks. Regardless, we are curious to see if this changes post-Brexit.

Latin America

Companies in Latin America spend most of their time and resources on import documentation. This is not surprising considering that in this region, particularly in Brazil and Argentina, there are strict customs inspection requirements aimed at import control. This may lead to more trade operators focusing on import controls rather than export controls.

Respondents from Latin America also spend less time and fewer resources on FTA compliance and restricted party screening than the average.

Companies in this region have fewer, and less useful, FTAs at their disposal. Similarly, restricted party screening requirements are not as stringent as they are in the U.S., European Union, and Japan, which explains why companies don’t feel as much pressure to spend time and resources on it.

Product import classification, import documentation and licensing, and import valuation are the top areas of perceived risk for Latin American respondents. Much of this concern is reflected in the current environment of fiscal sanctions that companies experience in Brazil. Additionally, import duties in this region are high and authorities scrutinize them closely, which is why import classification/valuation receives so much attention.

North America

In North America, on the other hand, companies are more concerned about export classifications and restricted party screening. This is logical, as the U.S. has strong export controls.

It seems that the first thing a U.S. company is likely to automate is restricted party screening, in order to reduce reputational risk borne from, for example, selling electronics to someone on a terrorist watch list.

Compared with the rest of the countries represented in the survey, U.S. and Canadian companies do not feel as strongly that they are lacking FTA expertise, perhaps because NAFTA is established and well understood. They tend to be more worried about the ability to manage the requirements and ensure compliance, which involves gathering supplier documentation and monitoring changes to the bill of materials.

The real opportunity

Companies can use today’s low-growth trade environment as an opportunity. Recent history saw global trade grow so rapidly that companies were seizing the opportunity to trade more without ensuring their trade processes were particularly efficient, or technology-based. Technology was also more primitive when global trade began to expand rapidly, and has since come a long way.

Amid slower trade growth, now is the perfect opportunity for multinational companies to review and optimize their processes to ensure they are using all available incentives to make their supply chains as cost-efficient and streamlined as possible. When the growth picks up again, they will be ready for it.

View this article as it originally appeared in American Shipper.