The need to manage cargo movements worldwide is driving the adoption of the combination of global TMS technology and managed services. Freight professionals appreciate the operational advantages of a transportation management system (TMS) with an international reach, but there are important benefits in an area they are often less familiar with: trade compliance and taxation. We explained these benefits in the World Trade 100 webinar The Global Control Tower – Managing Your Global Supply Chain.
As we have discussed before (see Five Features that Define a Global TMS), a Global Control Tower enables shippers to manage transportation globally and locally. The same principle applies when it comes to complying with customs regulations and tax policies worldwide.
Increasingly, shippers are looking to create a global infrastructure for import and export compliance that also allows them to meet local requirements. They are writing procedures that are published in all the countries which they operate, with addenda that take account of local variations. And this compliance effort is being managed centrally, to make sure that there is proper oversight.
Increasingly, shippers are looking to create a global infrastructure for import and export compliance that also allows them to meet local requirements.
This is possible because of the basic agreement between customs regulatory codes across countries, and a guiding hand from bodies such as the World Customs Organization.
A similar approach is being taken on the payment of tax and duties, although these issues can be more complex. Unlike many other countries the United States does not have a value added tax system, for example. Understanding, say, how Brazil levies taxes at the state, provincial, and local levels can be quite a challenge. These national and regional payments can also impact a company’s global tax planning strategy.
A third area of compliance that benefits greatly from the global/local approach is corruption. This is a major issue for companies that do business internationally, as governments tighten their oversight of corrupt trade practices. Legislation such as the Foreign Corrupt Practices Act in the United States is putting trade transactions under more scrutiny and raising the cost of fines for transgressors.
Why do these compliance issues matter from an operational standpoint? Even the most efficient, well designed supply chain network can be severely disrupted by customs-related delays and official investigations (for more on customs investigations and how to deal with them download the white paper Get Ready for a Customs Audit: Why Shipper Audits Are Increasing, and How You Can Prepare). A network that makes sense operationally may not be viable from a taxation perspective. It is more important than ever that the two sides are in synch at the transportation planning and execution stages.
This is where a Global Control Tower comes in. International trade is as much about compliance, regulatory risk, and finance, as it is about the efficiency of supply chain operations. A Global Control Tower marries compliance with supply chain efficiency. It also provides the window on global operations that multinational shippers need to comply with increasingly complex customs and tax regulations at the international and national levels.