Tax & Accounting Blog

How Foreign Trade Impacts the Corporate World

Blog, Global Trade, ONESOURCE January 19, 2018

Day by day we are witness to the changes that technology and globalization impose on us. Trying to compare how we conducted our activities 20 or 30 years ago to how it is done today is meaningless, as the enormity of change is incomprehensive. Particularly in foreign trade, the changes have caused a very deep impact.

Foreign Trade in the world has increased almost 10 times in the last 30 years. Political openness and globalization have allowed emerging markets to grow in their participation, in a space that was previously centralized among the markets of the most developed countries. Additionally, technology has been an instrument that is being promoted to simplify processes and communications, thus allowing an acceleration of the operative times to keep up with the speed of international commerce.

In this context, foreign trade departments in multinational companies are being provided an opportunity to move from being a support area to becoming part of the core business. These groups find themselves in an environment where they are supporting a scenario where goods need to arrive on time with an initiative to reduce a fraction of the logistics costs through special programs, or duty savings opportunities. This would imply the trade team is becoming influential in supporting their company in a competitive market.

Investing in human resources is one of the vital factors to achieve this type of positioning in Foreign Trade Departments. Related to this point, Alejandro Terzian, Head of Foreign Trade for Southern Cone of Bayer, stated that “One of the most important achievements, was how they organized a University of Foreign Trade degree ‘in company’ for all department’s employees and from other areas of the company linked to foreign trade affairs. We also include personnel of our strategic partners, such as customs brokers, freight forwarders, port terminals, suppliers, customers, chambers and other key players. Having created new area positions like ‘Customs Valuation’ has been another way to prioritize the department.”

This investment has led to positive results in different aspects at Bayer. First to achieve greater satisfaction and commitment of the team, and to foster an environment that supports the company in having professionals that make better decisions in a dynamic area where a timely correct decision can mean significant economic or time savings because of that decision is just good business.

Terzian also highlights that “this effort has not made us self-sufficient, but independent at the time of making some decisions. On very specific issues we continue to call on external specialists.”

Despite this, the reality indicates that this concept for Foreign Trade Departments with highly specialized resources to address different issues inherent in the activity is not usual. Sabrina Maiorano, a Manager of Foreign Trade practice at EY, mentions that “in general, the companies have a small foreign trade team that depends on another sector, such as finance management, for example. There are also cases that the Foreign Trade Department is not a small team, but it is a bit dismembered, with sectors that work without interrelation.”

This scenario adds complexity because “when you try to analyze specific points or see a process from a more global point of view, there are so many interlocutors that you do not know who is responsible,” she says.

For those companies that prefer to possess the knowledge inside the company, or for those that seek to fill their deficiencies through consulting services, there is a common factor that must be considered. This is an inherent need for technology, which provides predictability to the processes and results. Knowing the status of events in the supply chain and the expected results is what all operational teams strive for.

Another aspect that technology enables is the “change of ownership of information.” Previously the operator felt ownership for the operation and the information that was generated from it. With automation, traceability of the processes in corporate tools allows greater control and visibility of operations for multiple parties in the process.

“Automation is the basis,” emphasizes Alejandro Terzian. “This generates a cultural change and for that it is necessary to work with our teams, because the first thing that arises when processes are automated or simplified is the fear of losing the job. The information in the companies is democratized. Today, keeping the ownership of the information is not related to having the power, we are a link in the supply chain.”

Specifically, those Foreign Trade Professionals who understand that the current scenario as a space of great opportunity to improve their profession and transform a clearly operative area into a strong strategic area, will provide them with the clearest advantage in demonstrating value to their company.

On this strategic vision, Terzian points out that “the only reason why organizations hire us is to add value. Everything else is secondary. As professionals, there is always something we can do better.”

According to Maiorano, good practices indicate that to achieve a Foreign Trade Department focused on adding value, it is necessary to know the company in which one works, that is, to have a macro picture of their situation, the practices that they influence, and how they interrelate with each other at the time in making the appropriate decisions. As a supporting outlier, this team should establish procedure manuals for the most important processes with assigned roles and responsibilities and recovery plans against deviations that may occur.

As a last point, but no less important to take into account, is the commitment to stay updated. “You have to be always ready for changes. Surely in these moments are elaborating rules that are going to affect you in the immediate and for that reason it is necessary to be ready for these changes,” maintains Terzian.