by Chong Kok Keong, Chief Executive Officer, Global eTrade Services
Globalisation, advancements made in communications, transportation, logistics and supply chain technologies have changed the way trade occurs. Businesses across the globe are exporting to an average of 30 to 40 different economies as compared to just three to four economies in the past. Today’s connected entrepreneur buys raw materials from one corner of the globe, manufactures a final product out of another, and then sells it off to consumers scattered all over the world. This is the new model of e-commerce; a far cry from just 50 years ago where many parts of the trade, logistics and supply chain were located in one country.
As e-commerce continues to grow, industry experts estimate that Southeast Asia’s e-commerce market will surpass US$25bn in revenue by 2020, more than double the total revenue in 2015. While moving goods across borders has never been easier, businesses may still find it a challenge to navigate the complex regulatory and compliance landscape across multiple countries. Businesses will need the right infrastructure to ensure reliable, efficient and speedy customs clearance, while ensuring compliance with various regulatory requirements.
Here are three reasons why businesses must take tradition out of trade and embrace digital platforms and solutions that further accelerate trade to save time and cost.
Varying from country to country, the complexity of customs and trade rules form the biggest inhibitors to global e-commerce. “Trade complexity” can be defined by factors such as the number of products and countries involved in a business’ international network, trade regulations and tariffs involved in moving goods from country to country, or the time taken to clear goods through customs regimes.
Businesses today need to manage documentation and regulatory requirements for many different countries, all which may have different policies on what kind of goods can be traded, tariffs and regulations. In the past where businesses can only trade with a few countries, a manual approach to completing these regulatory requirements may have been viable. Today, a technology-based approach is needed.
A digital trade solution can harness a multi-node connection and enables firms to automate a majority of processes that would otherwise be conducted manually. For example, manually sourcing for and attaching the right Harmonised System Codes (HS Code, also known as The Harmonised Commodity Description and Coding System, a tariff nomenclature) for goods, filling up import/export, and other customs or compliance paperwork can be time-consuming and prone to errors. A Single Window platform ensures these processes are automated, allowing organisations to focus on the business of trade rather than the operations. The information can then also be transmitted seamlessly to multiple countries where the goods are heading.
More delays, more cost
There are many different cost factors along the entire trade chain. These factors can be non-tariff regulatory measures, market access restrictions, trade finance availability and costs, and general impediments on doing business; crossing the border such as documentation and customs compliance requirements, lengthy administrative procedures and other delays; and across all stages of the international trade chain, such as transport infrastructure and logistics. The Organisation for Economic Co-operation and Development (OECD) has found that administrative delays can increase transaction costs by an estimated two to 24 per cent of the value of traded goods, a risk that can erode a firms’ competitive edge.
Often, larger firms are able to hire expert teams to ensure trade compliance, while smaller firms find themselves delayed by the overall process of meeting compliance regulations around cross-border trade. A global trade platform that can automate these routine compliance processes to reduce the overall reliance on human input, would certainly be a boon to the trading sector.
Maintaining proper systems of record to ease regulatory compliance
The free movement of people and goods across economies gives rise to increasing concern around safety and security. Governments around the world are growing more sensitive to what is being brought in and out of their country, and are leaving no stone unturned when it comes to their nations’ security. To conduct trade in this new state of heightened alert within the global economy, firms need to ensure transparency and accountability in their trade practices. While the fulfilment of trade compliance requirements is a crucial first step in building accountability, firms need to be answerable to the authorities at a moment’s notice.
A lapse in keeping proper records of goods moving between borders could result in catastrophes such as the Tianjin port explosions, which killed 173 people and led to almost 800 injuries. Improper records of the chemicals being stored in the Tianjin warehouse also meant that emergency responders did not know what they were dealing with, and actually caused a chain of severe and explosive chemical reactions as they tried to douse the fire with water, which reacted violently with the highly volatile chemical being stored.
While digital trade solutions enable easier trade across borders, it also acts as a system of record to ensure full accountability and transparency with concerned authorities. This system moves firms away from “ledger-style” systems of accounting, and moves them into current day where records can be accessed anywhere in the world, in a matter of seconds.
Digital trade, a case of cost versus opportunity cost
Without a doubt, going digital for trade is the way to go. Today’s digital trade solutions can operate on a subscription-based Software-as-a-Service (SaaS) operation model, and are able to deliver services over the cloud. This makes it easy to upgrade systems, install patches and update rules and regulations to the latest. To the user/shipper, it makes trade more accessible, predictable and easier to take on today’s complex trade challenges. The accelerated pace of trade promised by digital trade solutions represent a win-win situation for all, and ushers in an era of hyper-connected, hyper-efficient, hyper-productive global trade. Digital trade represents the next era of e-commerce, where the location of the new silk route might actually start with “www.”.
About the Author
As CEO of GeTS (a subsidiary of CrimsonLogic), Kok Keong is responsible for all business operations, including setting the direction and strategy of the company. He also double-hats as CrimsonLogic ACEO. Kok Keong joined CrimsonLogic in 2006 as Vice President of the eGovernment Business Division. During this tour of duty, the company experienced strong growth especially in overseas business, with major project wins such as eJudiciary project in the United Arab Emirates and Qatar Customs Clearance Single Window.