What Is Global Trade Management? An Expert Guide

In an increasingly interconnected world, businesses need to develop best practices to navigate the complexities and minimize the costs of their international trade operations. Such practices fall under the umbrella of global trade management. This article delves into the essential components of global trade management, as well as key challenges and technological advancements in this area.

What Is Global Trade Management?

Global trade management is a set of processes and practices, often supported by advanced software, that help companies manage their international trade operations.

There are three main types of international trade: importing, the act of buying goods from outside a given country for resale within that country; exporting, which is the act of selling goods made inside a country to resellers outside that country; and entrepôt trade (also known as transshipments), which is the act of shipping goods abroad to an intermediate location and then on to their final destination.

Global trade management requires a nuanced understanding of international regulations, supply chain logistics, and ever-changing market dynamics. Read more about those nuances below.

Key Takeaways

• Global trade management processes help companies streamline and rationalize the interwoven puzzle pieces of global regulations, logistical considerations for multiple trading partners and carriers, and unexpected disruptions caused by natural disasters, extreme weather, wars, pandemics, and other events.
• Global trade management applications help automate document gathering and filing, reducing time-wasting errors and, often, the accompanying fines or other financial penalties levied by governments or trading partners.
• Global trade management can also help companies recover excess or undue tariffs when, for instance, duties are paid on goods that are ultimately re-exported to another country or those that have been destroyed or shipped back to their country of origin due to defects.
• AI and process automation technologies are crucial tools in helping companies navigate these complex issues.

Global Trade Management Explained

Global trade has exploded over the past century, particularly in the aftermath of World War II and the establishment of increasingly open trade policies worldwide. As globalization increased in the 1990s and 2000s, many countries found that important domestic industries, particularly agriculture and manufacturing, were threatened by foreign competitors.

Countries and trading blocs have reacted by enacting protectionist laws and regulations. Those measures have included tariffs on certain classes of imported goods, in part to counteract what some authorities saw as unfair government subsidies awarded to foreign competitors by their home nations. Some countries have set quotas to limit the number of products in a particular industry that could be imported over a designated period. The aforementioned government subsidizing of a country’s big exporter companies and industries is another form of protectionism.

These types of constraints on trade are nothing new, but they have become more complex with the emergence of new types of trade, such as digital trade and cross-border cryptocurrency trade. As a result, businesses need systems to help manage these challenges.

Among the capabilities of the best global trade management applications, which often are modules of supply chain management suites, is export screening. This capability helps shipments clear customs more quickly and helps exporters spot compliance issues before they stop shipments in their tracks. This, in turn, helps reduce order-to-cash cycle times and minimizes the impact on revenue.

Another key feature of a global trade management application is the ability to provide clear visibility into all-in costs, including transportation fees, duties, and insurance. These applications automate the recording of actual costs, including product pricing and discounts.

Compliance with global trade regulations is another area where global trade management systems play a key role. By automating compliance checks and centralizing information, these systems can reduce the risk of fines and other legal issues. Global trade management systems also provide visibility into supply chain disruptions and alternative sourcing options; help companies obtain trade financing, such as letters of credit; and build in data analytics to, for example, help companies monitor exchange rates and reduce their currency risk.

Why Is Global Trade Management Important?

Global trade management is crucial in helping companies reduce the complexity, cost, and risks of international trade. Technology systems supporting global trade management can streamline processes such as export screening, helping shipments clear customs more quickly and thereby reducing order-to-cash cycle times and minimizing revenue impacts. These systems also help companies avoid penalties caused by the delayed delivery of goods to their final destination.

A key feature of a global trade management systems is their ability to provide visibility into landed costs—the all-in cost of getting a shipment from its provenance to its ultimate destination. Such systems automate the recording of actual costs, including product pricing, discounts, and import duties, which helps business leaders make informed decisions and mitigate financial losses.

Regulatory compliance is another area where global trade management systems shine. By automating compliance checks, identifying missing or incorrectly completed documentation, and centralizing information, these systems help reduce the risk of fines and legal issues.

Key Components of Global Trade Management

Global trade management involves the nuts-and-bolts logistics of arranging shipments from point A to point B, as well as the management of customs and regulatory requirements. It also helps improve communication among trading partners, reducing the operational costs of delays and logistical inefficiencies. The key components of global trade management include:

• Customs documentation. Global trade management applications help companies prepare and file declarations accurately and in a timely manner.
• Duty management. Businesses can cut import costs and reduce their exposure to tariffs and other import duties by using global trade management systems to find applicable exemptions built into bilateral and multilateral free trade agreements. They can also use these systems to avail themselves of duty drawback, duty deferral programs, and other carve-outs. In addition, these applications can help businesses ensure that their supply chain partners meet the rules of origin for each trade agreement so their products can qualify for those exemptions or carve-outs.
• Regulatory compliance. Global trade management applications can provide updated information on tariffs, duty rates, and export control rules, all of which vary from country to country and can shift with changing government administrations. For example, some of these applications contain restricted party–screening features to help companies avoid engaging with governments or entities located in jurisdictions with which they’re legally barred from doing business. These systems also contain features to check that customs documents are properly filled out and duties are properly paid or excluded based on relevant regulations.

Global trade management should also address the following areas:

• Supply chain visibility: Supply chain visibility allows for real-time tracking of goods, shipments, and inventory to help companies make smarter decisions that reduce costs and improve supply chain efficiency.
• Export/import management: These applications can help businesses manage export/import licenses, classifications, and documentation.
• Trade finance: Businesses can use global trade management systems to help manage payments, obtain letters of credit, and centralize documentation necessary to finance international trade deals.
• Risk management: These systems can also help identify and mitigate risks related to trade disruptions, including the possibility of sanctions or retaliatory tariffs.
• Logistics and transportation: Businesses can use these applications to help with carrier selection and coordination of shipping and freight forwarding.
• Technology, automation, and analytics: These systems can automate document gathering, accurately describe shipment contents to avoid delays at ports, and vet the provenance of goods, while analyzing data to help business leaders understand trade costs and identify ways to improve the trade process efficiency over time.

Challenges in Global Trade Management

Global trade management involves navigating a complex web of international rules and regulations, which can vary greatly from one country to another and can change suddenly as governments rise and fall. These differences create confusion and inefficiencies in trade operations. Here are the main challenges.

• Changing regulatory environments. Trade regulations are always changing, making regulatory compliance a serious challenge. There were close to 3,000 trade restrictions in force as of 2023, compared with about 500 such regulations in 2015, according to the World Bank. These restrictions can take the form of tariffs, embargoes, import quotas, local content requirements, or simply lengthy customs procedures intended to slow trade.
• Rising trade costs. The cost of global trade is rising due to increased fees, duties, and taxes, which tend to drive up the prices of affected products. Other influencing factors include transportation costs, fluctuating exchange rates, and legal fees. Administrative expenses are also climbing due to the growing complexity of trade regulations. Meeting supplier traceability requirements adds to the burden on trade management teams, driving up operational costs as well.
• Upstream and downstream traceability. Companies involved in global trade must often be able to prove that goods or components weren’t sourced from certain countries (known as prohibited entities), or to identify the provenance of certain food ingredients that have been shown to be contaminated. Companies committed to sustainable practices also want to demonstrate that they’ve sourced components, materials, or ingredients from suppliers with fair labor practices and they produce their own goods in a fair and sustainable way. Conversely, on the downstream side, companies must be able to trace goods from the ports of arrival all the way to the end consumer so they can issue a product recall if needed and ensure the right batches are returned.

Benefits of Effective Global Trade Management

The flip side to the challenges of global trade are the benefits that accrue when companies manage those challenges well. This involves improving the efficiency and reducing the costs of managing orders, shipments, export controls, import duties, and other logistical steps, with the help of cutting-edge applications. We lay out the benefits of effective global trade management in more detail below.

• Reduced risks. Global trade management practices supported by specialized applications help minimize the risks of international trade by improving and sometimes automating certain tasks. These include validating every order against current regulations; providing customs valuations (this is the basis for the duty paid, and includes the invoice price, transport, insurance, and other payments for the goods); and digitizing shipment and transaction data to reduce errors and avoid related fines and penalties. Data analytics built into global trade management applications can also help companies identify potential compliance issues, such as the inclusion of components from prohibited countries and entities, before they turn into an enforcement action. These systems also provide comprehensive risk management capabilities, such as broker management and security programs, to help ensure that companies aren’t inadvertently breaking local laws.
• Improved operational efficiency and reduced costs. Global trade management also helps automate trade operations, including order-taking, logistics, electronic filing of required documentation, and settlement activities, leading to significant operational and cash flow improvements. By enabling enhanced visibility and control over supply chains, global trade management systems also help companies optimize their procurement processes, inventory levels, and transportation routes. Real-time data and analytics can also support informed decision-making and cost-saving strategies.
• Gained competitive advantage. Global trade management systems can help businesses coordinate activities among their supply chain partners. This includes helping track sourcing from multiple suppliers, reducing delays and errors, and making their activities more profitable.
• Improved planning and forecasting. Global trade management is rapidly evolving with the adoption of AI, blockchain, and other emerging technologies. AI helps decision-makers analyze large data sets to identify patterns in the market, allowing businesses to anticipate changes. Blockchain, meanwhile, can help trading partners avoid the hassle of manual record entries and reduce the need for intermediaries by creating a tamper-proof record of crucial steps in a transaction. Such records include receipts of goods and even sensor readings to prove that goods were shipped under specified conditions. Blockchains can also help companies meet their sustainability goals by providing transparency into the provenance of goods.

The table below summarizes the key features and benefits of global trade management in these areas:

Technology in Global Trade Management

Given the complexity of global trade management, it’s crucial to implement technologies that automate and improve the efficiency of its processes, and that can collect and analyze data to inform decision-making. More details below.

• Intelligent automation. Intelligent automation can simplify document filing and regulatory compliance checks (such as screening for trade restrictions) while reducing manual errors and labor costs and minimizing delays. Automation also allows trade operations staff to focus on higher-value activities such as connecting with supply chain partners and customers to ensure they’re satisfied with the goods received.
• Data analytics in a complex world. The data analytics capabilities built into global trade management solutions can provide insights into supply chain patterns, emerging trends, and potential trouble spots around the world. Analyzing real-time data can also help businesses reduce costs, while sharing it with trading partners can improve collaboration and joint problem-solving. Data analytics can also help companies identify regulatory compliance issues.

Best Practices for Global Trade

In general, companies involved in international trade should digitize as much of the paperwork and partner interactions as possible in order to track and analyze ongoing trade practices and facilitate compliance with global trade regulations. Here are several best practices to keep in mind.

1. Centralize regulatory compliance. Automate global trade operations and compliance to help ensure that corporate policies are in line with global trade regulations whenever possible. Actively communicate the importance of centralizing data and not keeping it in silos so the concept is understood across the organization.
2. Screen for restricted parties. Screen trade transactions for restricted parties, sanctions, and embargos to reduce the risk of financial penalties and the potential seizure of goods at the border due to noncompliance.
3. Screen for tariff-savings opportunities. Identify opportunities to leverage regional trade agreements or other customs programs. Once identified, flag these programs for future exports of a similar nature.
4. Manage trade incentive programs. Take advantage of programs such as duty drawback, bonded warehouses, and foreign trade zones. Look into inward or outward processing programs that allow your business to offset some or all import or export duties in order to capitalize on a country’s unique processing capabilities, less expensive labor, or some other reason for a temporary stay. For example, watches imported into an EU member country for the sole purpose of being expertly repaired are exempt from some or all import duties so long as they’re subsequently re-exported for sale elsewhere.
5. Build customs declarations. Use invoice and shipment data to prepare customs documentation, automatically enriching it with available global trade master data.
6. Manage export licenses and import permits. For goods that require import licenses, such as food or agricultural products coming into the US, create a repeatable process for providing all the information specified by the terms of the license. As an extension of this process, make sure that licenses have been properly assigned to relevant shipments, and track usage of your licenses and permits to help expedite the processing and release of shipments.
7. Monitor metrics against business targets. Use configurable dashboards to review customs clearance times, actual versus estimated landed costs, duty and tax accuracy, and other metrics against business targets, benchmarks, and forecasts.
8. Facilitate partner and customer collaboration. Collaborate and share documents with your forwarders, customers, brokers, and customs authorities.

Choosing a Global Trade Management System

The global trade management market is littered with vendors that claim their software and services can take you to the promised land. Here are a few common-sense ways to cut through the…clutter.

1. Find a comprehensive tool. Don’t try to piece together a global trade management system from a bunch of disparate parts. Find a best-in-class integrated application suite that can perform all the necessary functions described above—one that’s updated regularly so you get the latest features and don’t miss important regulatory changes.
2. Make sure it’s standards-based. Your global trade management system should be able to integrate with your ERP, transportation management, and supply chain management systems. Otherwise, you’ll either find yourself with redundant (or inconsistent) data or you’ll create extra work, negating many of the efficiencies gained from implementing a global trade management system in the first place.
3. Look for a system that includes compliance and decision-support features. There are plenty of tools that support the logistical aspect of global trade. To reap the greatest rewards from this technology, make sure the system you adopt can aid with regulatory compliance issues, such as prohibitions on trading with certain countries and entities. Your system should also be able to aggregate information to make it easier to file customs and other declarations.
4. Be market-specific. Given the complexities and nuances of global trade, you need a system that’s equipped to manage the right trading practices within the right regions. Make sure that the global trade management application you select can support your company’s activities in the countries in which you trade.
5. Demand an excellent end-user experience. With all the advancements in UX design, any comprehensive application of this sort should be easy for everyone to use, from knowledge workers to stevedores. Don’t settle for less-than-optimal UX for your global management system. It should also be accessible from any location, whether at a desk or in a warehouse on a mobile device. Think cloud application.
6. Don’t adopt a budget-buster. Even something as comprehensive as a global trade management system can be modular and priced according to scale—in line with your growing business requirements. You shouldn’t have to purchase a whole new supply chain management system, for instance.

Gain Unparalleled Visibility and Control Over Orders and Shipments with Oracle

Oracle Global Trade Management, part of Oracle Fusion Cloud Supply Chain & Manufacturing, helps companies take advantage of provisions in trade agreements and other customs programs and assign appropriate programs for future imports, while supporting compliance with regulations and exclusionary policies such as prohibited entities. The application also helps companies identify and make use of trade incentive programs, such as duty drawbacks, bonded warehouses, foreign trade zones, and inward/outward processing (defined above). In addition, Oracle Global Trade Management helps companies accurately estimate total landed costs, giving them visibility into their extended supply chain costs, including transportation, handling fees, insurance, duties, and taxes.

Global Trade Management FAQs

How big is the global trade management software market?
The market for global trade management software was valued at $1.1 billion in 2023, according to Fortune Business Insights. The market is projected to grow at an 8.6% CAGR between 2024 and 2032, increasing from $1.18 billion to $2.27 billion.

What is a global trade management system?
A global trade management system helps companies comply with international import and export controls and ensure that the goods they’re trading get where they’re intended at a predictable and affordable cost.

What is the role of a global trade management strategy?
At its core, global trade management is designed to help ensure that businesses can profitably export goods to other countries without incurring undue duties, taxes, or other fees or fines.