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Reducing Non-Compliance Risks in Global Trade

by Viktoriya Sadlovska, Research Analyst, Global Trade Management/Supply Chain Finance and Melissa Spinks, Research Associate, Supply Chain Management, Aberdeen Group

Domestic or international supply chain redesign in 2008 is being driven by the need to reduce costs. How can your company’s global trade compliance (GTC) process help to alleviate this pressure? A number of GTC costs could be targeted, including taxes and duties, transaction/document processing costs and potential government fines for non-compliance (e.g. as a result of product misclassification, inadequate export or import licenses or doing business with denied parties/ countries). The latter costs pose significant corporate risk, not only because they can bring about unanticipated, sometimes very high, fines, but also because they can lead to reputation damage and the ensuing loss of customers. In an Aberdeen Group’s study of 340 global importers and exporters, 74% of surveyed companies reported that they were currently in the process of improving their GTC, which indicated that global corporations today place a high priority on trade compliance and reducing associated costs.

Figure 1 shows the top three strategic actions targeted at improving GTC: