According to an SCM World survey, 55 percent of respondents had an increase in international sales and 54 percent an increase in imports over the past 10 years, with one third selling into or sourcing from more than 100 countries. Forty percent imported more than half of their products and materials.
Minimizing duties, taxes and tariffs is one of the fastest and easiest ways to squeeze significant financial returns out of a company’s global supply chain. Yet most companies interviewed by SCM World “only became aware of the opportunity as a result of problems that emerged as their companies increased international sales and found new sources of supply.” The result is few companies use these tactics in making supply chain design decisions.
Any size importer or exporter can take advantage of a preferential trade program. However, many companies are unaware of how much money they could save by investing in their global trade operations and taking advantage of free trade zones, duty deferral, free trade agreements, and other preferential trade programs.
Utilizing these programs can significantly reduce costs from customs duties, taxes and tariffs; improve global market competitiveness; and minimize bureaucratic regulations. Further, standardized cross-border operations promotes a proactive approach to global supply chain operations, increases speed to market capabilities, enhances performance metrics and savings reports analysis, reduces manually intensive processes, and lowers supply chain risk. Reducing merchandise processing fees alone can save a company a substantial amount of money.
Below are four best practices for maximizing a company’s revenues by using a preferential trade program.
1. Assign accountability
Without a person or department in charge of determining and tracking duty, tariff and tax costs, a company may struggle with determining what these costs are and their impact on margins. Maximizing benefits from these programs also requires a process and system to compile the information and analyze it.
2. Simplify customs and cross-border operational processes
Often simplify is synonymous with standardize. In SCM World’s July Global Trade Management report, Tim Santo, executive global process leader for the customs shared services operation at GE, one of the world’s most diverse and profitable companies, highlighted how the company is leveraging its global scale to improve its market responsiveness, increase revenues and globally expand its business. It streamlined its cross-border operations by creating one single, global standard and process using a common architecture supported by technology and data. Having a single, complete data repository allows GE easily run reports and track its savings, spend and risk.
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