Taking trade to a new level

Taking trade to a new level

For all the advances in globalization to date, consider this: It is virtually impossible today to buy a DVD, food processor or any consumer product over the Internet where the merchant ships the goods from one country to another with all costs, inclusive of duties, built into the purchase price.

Many e-commerce merchants will gladly ship a product overseas, but generally a consumer won't be able to take possession without paying the duties himself. Yet in a sign that the infrastructure of international trade is reaching another level of maturity, that situation could be about to change. The reason: Technology companies that automate the process of identifying correct customs duties and other regulatory requirements may finally be reaching the point where they can be used on a mass scale, facilitating goods movements from anywhere to anywhere.

"We expect to see e-commerce take off globally in the next year or two," Darren Maynard, chief operating officer of NextLinx, said in an interview at the recent American Association of Exporters and Importers conference in New York.

The trade community has watched over the past several years as several companies have set out in search of the Holy Grail of integrating the tariff schedules, documentation and regulations of all trading nations into an electronic engine that could instantly and accurately calculate the regulatory cost impact of moving a product from one country to another. Few have succeeded, given the immense scale of the task involved. One venture, From2.com, got swallowed by Arzoon, which didn't come close to finding the Grail and whose assets were recently acquired by the enterprise software firm SSA Global.

But others in the so-called global trade management niche have stayed the course and now, it would seem, are poised to midwife the next phase of globalization. Firms including NextLinx, Open Harbor and Vastera and their investors and customers were willing to absorb the huge initial costs to build these electronic libraries. It is no coincidence that their emergence as viable players paralleled that of the global logistics provider. UPS, with its vision of greasing the wheels of global trade, owns 7 to 8 percent of NextLinx, and FedEx with similar ambitions, owns 15 percent. DHL, part of the globally ambitious Deutsche Post World Net, became a minority investor in Open Harbor in 2001. In the case of NextLinx and Open Harbor, the investments from the logistics giants spurred them on to construct software and trade content that can be applied to all but a tiny percentage of global trade. Vastera is publicly traded.

Significantly, all the firms have avoided coming under the control of the logistics giants, so their services will be available generally to importer-exporter companies and third-party logistics firms, similar to how an electricity grid is available to the public. They have also avoided, for better or worse, being joined with other technology firms in the international logistics field. A micro-industry of technology firms in the supply-chain execution sector, including G-Log, Log-Net, GT Nexus and others, offer a spectrum of functionality such as shipment visibility, contract management and procurement, but, other than the ill-fated Arzoon-From2 hookup, have not joined forces with the trade-management firms. That could someday change.

Yet the global trade management firms do not fully fit into the category of supply-chain execution, the sector involved with the movement of goods. They certainly have one foot in that world, but also reside in another - what's known as supply-chain planning, which involves the computer-aided strategizing that firms undergo before making major commitments to countries, suppliers or routings.

Understanding the customs-cost ramifications of a sourcing or investment decision is crucial when different scenarios could mean the difference between black and red ink. An example is the recently announced decision by French automaker Renault to use Open Harbor's security and compliance system as part of its decision to assemble its new LOGAN vehicle locally in Romania, Morocco and Colombia using imported and locally sourced components. The information in the Web-based Open Harbor system helped Renault plan its localized strategy, and any changes in tariffs or regulations will be reflected in an online system available 24/7 to all global suppliers and logistics vendors.

Maynard of NextLinx said his firm's data is mined regularly by companies seeking meaningful cost analysis prior to making important decisions.

Peter Tirschwell is editor of The Journal of Commerce. He can be reached at (973) 848-7158, or via e-mail at ptirschwell@joc.com.