What Midmarket Companies Need to Know About Trade Compliance
Q: What is the status of midmarket companies in the global trade arena?
A: Global trade has become increasingly attractive to the midmarket—defined as companies with revenues between $5 million and $1 billion—because of lower sourcing and production costs in some developing countries, as well as rising consumption in some overseas markets.
Between 2012 and 2013, the number of companies that export to more than 20 countries increased by 90 percent. The largest increase was in the number of companies shipping to 21 to 50 countries.
Q: What obstacles are midmarket companies facing with global trade?
A: Doing business abroad is more complex than trading within a country's borders because of longer supply chains, added trading partners, and more compliance rules and regulations. These issues necessitate a fresh approach to global opportunities.
Additionally, the rising volume of exports and number of destinations exponentially increases trade compliance complexity. Unfortunately, nearly half of respondents to a recent Amber Road survey say senior management is either not aware of or not involved in trade compliance.
Q: How is the midmarket addressing compliance today?
A: Of the 361 midmarket exporters surveyed, 53 percent have a documented export compliance process—a significant rise from the 41 percent in 2012. Unfortunately, these numbers indicate there are many companies with partial or no compliance practices. On the positive side, the numbers reflect an increasing awareness of the need to address these issues.
Q: What are some core elements of an effective compliance program?
A: Getting management's commitment will increase the likelihood that these issues will be taken seriously and addressed in the near term. Other key components include establishing a continuous risk assessment process; creating a formal written export management and compliance program; and maintaining ongoing compliance training and awareness.
Q: What are some benefits of using automation to create a strategic export compliance program?
A: Automation is a key requirement for companies engaged in global trade. Most companies have long surpassed the point where manual practices can scale, are affordable, or come close to meeting the need to exercise reasonable care.
Further, through automation, companies can expect to grow revenues; decrease costs; and realize higher margins and improved customer retention.
In short, creating an integrated, cross-functional team with access to automation to quickly and easily make sourcing and routing decisions will help midmarket companies fully take advantage of the benefits of growing their business overseas.