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Integrated Trade Compliance Strategy Presentation October 2010
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Integrated Trade Compliance Strategy Presentation October 2010

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The case for an Integrated Trade Compliance Strategy presentation including the visual silo based model and integrated trade compliance strategy model.

The case for an Integrated Trade Compliance Strategy presentation including the visual silo based model and integrated trade compliance strategy model.

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  • Thank you for the introduction and the invitation to speak on this topic today We are active supporters of IE Canada and appreciate what the organization is doing to equip and train Canada’s international traders. Borders and Customs are increasingly important factors for traders to deal with, and we know IE Canada really gets that. Simply put, compliance is an enabler of trade; non-compliance is a barrier to trade. Hopefully this session will help shed some light on a strategic approach to addressing compliance as a business priority.
  • We want to to address 3 basic questions today: 1. Why is there trade compliance risk? 2. What constitutes risk? 3. How can I mitigate these risks. We will start with the Regulatory perspective – what is the “Rule Maker’s” end game? The objective is to know their game plan, processes they use, and outcomes they are working toward. It then becomes easier to design, build, and maintain a plan that is sustainable-- not a flavor of the day type of exercise which will ultimately fail. My Intention is to build the case for why a proactive compliance plan makes commercial sense, and an essential component of a solid international supply chain strategy. My thesis today has 5 components: Globalization of trade and regulatory complexity are both increasing rapidly so compliance issues will continue to intensify. Regulators in Canada and the US are harmonizing their efforts to monitor and enforce compliance, increasing risk of detection. Non-compliant trade practices have far-reaching commercial implications beyond penalties and sanctions. An intelligent trade risk strategy anticipates outcomes and consequences and addresses proactively. A compliance strategy must be robust and viable for the long term, and have full corporate visibility.
  • This slide indicates the growth in Canadian trade from 1989 to the present. There will be downward blip for 2009 and possibly 2010. But the long-term trajectory is expected to grow significantly through 2020 and beyond. You can see that global supply chains and expansion of global markets is still in its early stages. In fact David Fung, Chairman of the CME, suggests we are now seeing about 5% of the Canadian/Asian trade that will develop over the coming decades.
  • In 2006, for every $100 dollars of merchandise imported into Manitoba, there was $88.4 exported. Imports grew by 25.5% over the 2001 – 2006 period. Leading imports for 2006 includes: excavation/construction equipment, tractors, motor vehicles, motor vehicle parts, trucks, harvesting equipment. In 2006, top six leading country of origin for imports were : U.S., China/HK, Germany, Mexico, Japan and U.K. Second leading country of origin for imports is China/HK at $466.5 million. There are 7 U.S. states whose imports into Manitoba exceed China/Hong Kong imports: Illinois ($1.3 billion), Minnesota ($942 million), Wisconsin ($674 million), Texas ($644 million), Iowa ($561 million) Ohio ($558 million), Indiana ($544 million).
  • External markets are critical to Manitoba's economy. Foreign merchandise and service exports are a growing percentage of provincial GDP: 20.2% in 1992 30.2% in 2006 Nine Year Trend: 1998 – 2006: Manitoba exports have increased by 34.7%, while Canada’s increase was 38.2%. 1998 – 2006: Manitoba exports to the U.S. grew 39.8%, exports to non-U.S. countries grew by 19.2% 1998 – 2006 : Manitoba exports to Pacific rim countries (led by China, South Korea and Australia) increased by 17.2% 2005 – 2006: Manitoba's foreign exports increased by 12.3% while Canada’s foreign exports increased by 0.7% There are 3 U.S. state destinations for Manitoba exports which exceed China/Hong Kong exports: Minnesota ($1,334 million), Illinois ($559 million), Michigan ($535 million).
  • This is a more typical North American supply chain. As noted earlier 70-80% of Canadian trade is with the US. But, increasingly offshore inputs are being sourced to incorporate into finished products. And that goes for US products being shipped to Canada as well. This can have significant ramifications for NAFTA eligibility and must be considered at the exploratory stages in addition to the usual factors of fob factory cost, foreign exchange, freight costs, and import duties. Customs regimes will be focusing on bills of material to identify foreign content, and make determinations regarding substantial transformation, regional content, or embargoed components.
  • This graph identifies the introduction of AMPS in 2002 at the far left, and the desired improvement CBSA is moving toward enforcing. You can consider this to be the type of graph CBSA views as to measure their progress. Note that base line established in 2002 for error rates: 31% tariff classification, 50% NAFTA declarations, 27% valuation The “compliance gap” noted is the target that CBSA is working toward closing systematically.
  • Transcript

    • 1. The Case For An Integrated Trade Compliance Strategy Reynold Martens Executive Vice President GHY International President, GHY USA
    • 2. Context
      • “ Manufacturing not what it used to be”
      • Global forces intensifying competition
      • Supply chain/markets diversifying beyond US
      • Complex new mix
      • Origins, manufacturing locations, destinations
      • Importers and exporters under surveillance 24/7
      • Compliance = price of admission to global trade
      • Non compliance increasingly costly
      • Lost opportunities, margins, penalties, reputation
    • 3. Our Thesis
      • Are international traders adapting to new trade reality?
      • Compliance outsourced or compartmentalized
      • Import and export functions internally are often “silos”
      • Trade related financials have limited corporate visibility
      • Regulatory interventions force executive focus
      • End result is clear audit trails and accountability
      • Integrated cross-functional approach reduces exposure
      • End game: reduce risks & maximize opportunities
      • Cost of reacting is more than a taking a proactive stance
    • 4. Outline
      • Overview Canada’s shifting trade dynamics
      • Canadian compliance landscape
      • The problem with “silos”
      • The solution: An integrated approach
      • Building an integrated trade model
      • Overview a sample plan
      • Summary
    • 5. Canada: Trade Volume Index
    • 6. Canada’s International Import Sources 2009 Imports: $365.2 billion Data Source: Industry Canada, Trade Data Online , June 2010
    • 7. Canada’s International Export Destinations 2009 Foreign Merchandise Exports: $334.6 billion Data Source: Industry Canada, Trade Data Online , June 2010
    • 8. North American Supply Chain
    • 9. Trade/Compliance Intersections
      • Global perspective: flow model from 30000 feet
      • Regulatory intersections create compliance implications
      • Global sourcing and marketing increases risk
      • Customs regimes enforce all trade-related laws
      • Tariff, value, origin just the beginning
      • Other government departments piggyback Customs
      • Product design-performance standards,
      • Consumer Safety
      • Quota Management,Permits, Licenses
      • Security Screening, Patents, Labeling-Packaging
    • 10. CBSA Compliance Objectives
    • 11. CBSA Audit Trend
    • 12. Current Model
    • 13. Current Model
    • 14. Current Model
    • 15. Product Design Production/Manufacturing Global Sourcing Supply Chain/Logistics Shipping Human Resources Information Technology Assets & Liabilities Cash Flow Management Regulatory Compliance Risk Management Financial Report Administration Domestic Sales International Sales New Export Markets Contract Negotiations Contract Management Sales Administration Marketing CDN Customs Broker US Customs Broker Trade Services CDN Auditors US Auditors Legal Services Finance Services Current Model
    • 16. Minimize Risk Optimize Opportunity Integrated International Trade Strategy Predictable Compliant Sustainable Service Providers ·Legal ·Financial ·Trade ·Customs Integrated Model
    • 17. Minimize Risk Optimize Opportunity Integrated International Trade Strategy Predictable Compliant Sustainable Service Providers ·Legal ·Financial ·Trade ·Customs Integrated Model enterprise performance enterprise expansion enterprise risk/liability accountability framework
    • 18. Minimize Risk Optimize Opportunity Integrated International Trade Strategy Predictable Compliant Sustainable Service Providers ·Legal ·Financial ·Trade ·Customs Integrated Model key performance indicators KPI strategic planning expansion assessment partnerships, acquisitions enterprise risk assessments  executive team leadership budgets, revenue projections
    • 19. Minimize Risk Optimize Opportunity Integrated International Trade Strategy Predictable Compliant Sustainable Service Providers ·Legal ·Financial ·Trade ·Customs Integrated Model business plan execution P & L --financial performance risk management and reporting strategic plan execution management team leadership
    • 20. Minimize Risk Optimize Opportunity Integrated International Trade Strategy Predictable Compliant Sustainable Service Providers ·Legal ·Financial ·Trade ·Customs Integrated Model
    • 21. Minimize Risk Optimize Opportunity Integrated International Trade Strategy Predictable Compliant Sustainable Service Providers ·Legal ·Financial ·Trade ·Customs Integrated Model
    • 22. Minimize Risk Optimize Opportunity Integrated International Trade Strategy Predictable Compliant Sustainable Service Providers ·Legal ·Financial ·Trade ·Customs Integrated Model
      • client qualification and negotiation
      • contracts/purchase orders
      • product design, packaging, labelling
      • product licensing, patents, trademark rights
      • related/unrelated parties valuation
      • importer of record  determination
      • currency of settlement
      • financial terms, instruments
      • global tariff classification, origin
      • logistics-supply chain management
      • supply chain security reporting protocols
      • customs clearance and reporting
      • OGD special requirements
      • regulatory intervention management
    • 23. Minimize Risk Optimize Opportunity Integrated International Trade Strategy Predictable Compliant Sustainable Integrated Model Service Providers ·Legal ·Financial ·Trade ·Customs
      • client-lawyer privilege situation
      • client-vendor disputes
      • regulatory interventions/audits
      • intellectual property/licenses, trademarks 
      • proprietary information breaches
      • appeals
      • lawsuit- pursuit/response
      • international financing
      • international credit instruments
      • insurance in transit, cargo, receivables
      • foreign currency exchange facilitation
      • foreign currency exchange hedging/contracts
      • regulatory bonds and sureties
      • domestic/foreign tax strategies
      • domestic/foreign tax preparation
      • international/domestic tax representation
      • internal audit corporation, branches, subs
      • valuation formulae and transfer pricing
      • international /domestic trade audit trails
      • regulatory interventions/audits
      • regulatory appeals and tax rulings
      • global sourcing assessments-regulatory impact
      • global market assessment-regulatory impact
      • free trade agreement assessments/application
      • landed cost assessment imports/exports
      • importer of record representation to regulators/OGD's
      • import database creation by product-tariff, valuation,origin
      • customs clearance, reporting, financial settlement
      • importer of record bonding, surety
      • regulatory interventions/audits
      • Customs/OGD appeals and rulings
    • 24. Minimize Risk Optimize Opportunity Integrated International Trade Strategy Predictable Compliant Sustainable Service Providers ·Legal ·Financial ·Trade ·Customs Integrated Model
    • 25. Summary
      • Intensifying trade complexity –supply chains & markets
      • Increasing regulatory surveillance and intervention
      • Compliance is a competitive weapon
      • Integrated approach addresses gaps presented by silos
      • Increased visibility and shared ownership reduces risk
      • Maximize commercial opportunity and profitability
      • Minimize downside risk that erodes margins
      • Grow your business!
    • 26. More Information
      • Reynold Martens
      • Executive Vice President
      • GHY International
      • 204 947 6700, ext 286
      • [email_address]
      • White Paper: “Why Trade Compliance Matters”
      • Sample Compliance Responsibility Matrix
      • Sample Compliance Manual