In hisrecent articleinEmbedded Computer Designmagazine, QAD's Ian Berman explains why modern trade management is critical to 21stcentury commerce and describes the pitfalls of manual screening. Entitled "Why Trade Compliance Screening Matters," the article lays out the reasons why global enterprises need global automation solutions.

More Than a Cost of Doing Business

Perhaps the more compelling reason to comply with governmental regulations regarding exports is the cost. Sanction violations in 2019 resulted in nearly $1.3 billion in fines issued by the U.S. Treasury Department's Office of Foreign Assets Control alone. Over the years, the U.S. government has increased fines for unintentional missteps violating export controls, sometimes as high as $300,000 or twice the value of a transaction - but will reduce penalties if companies admit to the missteps. Willful violations have steeper monetary penalties and custodial sentences, which also damage customer trust and revenue.

The bottom line is:all orders should undergo a corporate screening process and the due diligence process should be automated.

Customs/Document Screening Failures

The incidence of screening failure duringglobal trade management- customs activities and documents which move goods across borders - and their attendant potential for monetary penalties most frequently arise from decentralized and outmoded processes. Manual screening tops the list of screening failures - it's expensive and time-consuming. Other screening failures relate to:

  • Poorly defined authorization and control assignments
  • Potential false positives which require time and resources to research
  • Incomplete restricted lists
  • Inconsistent enterprise-wide approaches to compliance screening regarding processes, risk assessment, decision-making and role expertise
  • Ever changing list of restricted or embargoed groups, entities and countries

To this last point, Ian writes that "The US and European Union sanctions regulations are not limited only to those directly named in sanctions programs. These regulations extend to entities that are majority-owned by a sanctioned party in the EU, and 50% or more owned parties sanctioned by the US. In the US, this is known as theOFAC 50% rule".

Global Trade Management

As we describe in anotherrecent blog, global trade management is the practice of streamlining the entire lifecycle of global trade - across order, logistics and settlement activities - to significantly improve operating efficiencies and cash flow. This includes everything from production planning and order management to order settlement within your supply chain.

Smart global trade management also includes identifying weak links, turning regulatory trade compliance into a competitive advantage, utilizing trade optimization strategies and best practices, and leveraging free trade agreements. Implementing automated global trade management strategies can result in increased efficiencies, better operational visibility, reduced cycle times and improved profit margins. Enterprises are also better able to respond to geopolitical shifts and supply chain disruptions while mitigating risks.

The Solution: Automated Best-in-Class Screening

The benefits of automated screening processes in global trade management solutions are many. Failed screenings are reviewed by authorized subject matter experts to ensure corrective action and create an audit trail. Only compliance personnel review screening exceptions, freeing up staff resources for other value-add tasks. Audit reports are directly tied to shipping transactions and their related customs documentation.

The benefits far outweigh the costs.

QAD Precision Solutions Ensure Ongoing Compliance

QAD Precisionoffers anautomated global trade and transportation execution solution. Among the many ways the solution streamlines compliance, QAD Precision automatically verifies that a trading partner has passed denied party list (DPL) screening, determines the End Use of the item, validates that the country of destination has been approved and ensures that any special documentation - including import and export licenses and permits - or actions are included to support reporting to authorities. It automates the required due diligence and promotes preparedness across operations.

QAD Precision has created aglobal trade benchmarking toolthat measures global trade and transportation operations against best-in-class processes. It delivers insights into operational efficiencies and a detailed analysis of compliance risks and logistics.

Read more about the benefits of automating the global trade process in thefull article inEmbedded Computer Design magazine.

Attachments

  • Original document
  • Permalink

Disclaimer

QAD Inc. published this content on 23 September 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 September 2021 17:41:06 UTC.