Retailers know what catches a savvy shopper’s attention: Give them a discount, reward dollars, rewards points or even a rebate. Discounts are attractive to companies too. Minimizing international trade duties is one of the fastest and easiest ways to achieve better margins through global supply chain savings. A dollar, yen, pound or euro saved in duties goes straight to a company’s bottom line.
Duties and other regulatory fees can make up a surprisingly high percentage of the cost of goods sold. Companies that leverage duty savings programs are more proactive and cost-efficient in their global trade management (GTM) strategies. Historically, companies have only considered trade compliance as an import/export function to ensure adherence to regulatory requirements when crossing borders. However, as the saying goes, “A penny saved is a penny earned.” This is especially true when margins are already slim.
Leveraging Duty Programs
Duty savings opportunities come in many forms, including preferential trade programs, customs warehousing programs (known as Foreign-Trade Zones in the United States) and Duty Drawback. Unfortunately, many companies fail to take advantage of these programs due to the perceived difficulties of qualifying for them and managing the administrative tasks involved. For most of the programs, you must prove that goods qualify for duty preference, and you must generate and maintain supporting records to prove eligibility. At times you must also file for refunds from customs agencies. Most companies prefer to hire a professional customs broker to execute these processes to ensure accuracy. However, outsourcing means additional costs plus a loss of visibility over these key, complex processes and greater difficulty maintaining the required records.
For example, the U.S. Duty Drawback program essentially provides a refund of duties, fees and taxes paid on goods imported into, and subsequently exported out of, the country. There are several different scenarios where Duty Drawback is utilized, but the most common are manufacturing and unused merchandise. Let’s start with the latter because it’s more straightforward:
E2open’s duty management solution integrates data from multiple sources to simplify and automate duty trade program qualification and administration processes, including the management of customs warehouses and Foreign-Trade Zones.
Our duty management solution helps you take advantage of cost savings by making critical activities easy:
Optimizing Margins with Automation
Effective duty management requires a shift in methodology and software automation to ease the burden of detailed product qualification. With technology, the comparison of regulatory tariffs and product bills of materials (BOMs) can not only help you establish a more cost-efficient supply chain through better program management, but it can also help you identify global sourcing options in the early stages of product design and development to determine if duty savings opportunities can be leveraged.
To learn more about duty management programs and how to tap into their savings potential, visit https://www.e2open.com/intelligent-applications/global-trade-management/.