We’ve all done it. You start a small home project like hanging a new picture in your living room. Once it’s up on the wall, the piece looks beautiful but it makes the painted wall look dirty and faded. You paint the wall, but it emphasizes the carpet wear. You replace the carpet but now the sofa looks dingy in comparison. By the time you’ve finished, the simple act of hanging a picture has resulted in a completely redecorated living room. It wasn’t something you anticipated, but the end result is a more beautiful interior space that you can enjoy with friends and family.
So it is with many companies that opt to create a foreign trade zone (FTZ) to help lower tariffs, duties and taxes. They obtain approval, select an FTZ technology vendor and set up an FTZ. After a while, the savings start to mount and everyone is more than pleased. However, this realization makes company officials aware that the importing/exporting operations conducted via the FTZ are just one small part of the overall trade it conducts. How about the distribution centers located on the West Coast? Or what about the importing/exporting another corporate division conducts globally on a daily basis? Are we leaving savings on the table? Are there opportunities to strengthen trade compliance elsewhere? Are there ways to improve other business processes, just like the FTZ technology helped the company do?
The original FTZ footprint is about to yield a larger footprint, trade management compliance on a more expansive scale. Think about all the opportunities for greater efficiency and economy that automating importing/exporting processes and managing by exception can hold. Think, too, about what global visibility will mean to your supply chain.
This “snowball effect” is most definitely a positive thing unless, of course, you did not contemplate expanding compliance beyond a single FTZ when you obtained your technology. It could resemble the home decorating scenario described earlier if your company selected a vendor that only offers an FTZ solution. You’ll need to acquire the technology in a piecemeal fashion, likely through a variety of vendors and potentially facing costly integration issues. Worse, the final result might not be the beautiful new living room. It could be a variety of systems that never really “talk to one another” in the proper way. Interoperability can be a huge challenge.
In our experience, many companies do just that. They start with an FTZ and the benefits experienced cause them to expand their vision and contemplate the possibilities across all their importing and exporting activities. Or, taking a severe hit for noncompliance from U.S. Customs and Border Protection (CBP) elsewhere in the organization might be the catalyst to expand compliance concerns beyond the FTZ and move from spreadsheets to global trade management technology.
That is why at the beginning of the FTZ technology sales cycle, we counsel prospects to be mindful of trade compliance beyond the FTZ, even though the focus today is establishing a CBP-compliant FTZ. We recommend that they select a vendor that offers a suite of global trade compliance solutions that can build on the initial FTZ solution. We know it is entirely possible – and very likely – they will want to introduce automated trade compliance to all their importing/exporting activities eventually.
In the QuestaWeb world, if you have the compliance database that lies at the heart of our FTZ solution, then this “next world of compliance” is open to you. You posses the database with all your products, vendors and more that lays the groundwork for global trade compliance activity elsewhere in your firm.
The number one thing: No matter where you start – FTZ, import/export or self-filing – always look for a provider that can satisfy that next step in your global trade management vision. If you do, it will be easier and less expensive and the final result will be even better than you imagined.