Start-ups automate global trade functions

Aerospace company Pratt & Whitney last month agreed to pay a $150,000 penalty to settle charges that it exported controlled items to various countries without obtaining the required licenses from the U.S. Department of Commerce.

A few months before, Morton International, based in Chicago, agreed to pay a federal fine of $647,500 for shipping protected chemicals to Mexico, Singapore and Taiwan. And in December, Sun took a $291,000 hit for charges involving illegal exports of computers to military end users in China and Egypt.

It's not hard for companies like these to find themselves astray of federal global trade regulations. In the U.S., multiple government agencies oversee pieces of the regulatory puzzle, determining how and with whom companies may conduct business. Additionally, buying and selling goods overseas requires staying on top of foreign countries' myriad trade rules and tariff structures.

These days, a handful of small software companies are angling to capitalize on the complexities of cross-border commerce and automate what are traditionally time-consuming manual processes - such as identifying shipments according to international product classification conventions, making sure trades comply with foreign import and export rules, and providing proper shipment documentation.

Vendors with so-called global trade management wares include specialists GT Nexus, NextLinx, Open Harbor, TradeBeam and Vastera, and business software giant SAP.

For the most part, the processes these vendors are working to automate involve three-ring binders full of pricing information and disparate spreadsheet applications. Not only are these manual processes time-consuming and error-prone, but they make it hard for companies to analyze data and share it with partners such as international shipping companies and customs brokers.

Plenty of opportunity

There's plenty of opportunity to streamline global transactions, says Beth Peterson, vice president of product solutions at Open Harbor, which specializes in trade compliance and documentation services. According to industry estimates, a single shipment can require about 35 documents, be touched by 15 parties and require 200 data elements to be keyed in multiple times, Peterson says. Automation can eliminate some of that redundancy.

Backed by $49 million in venture funding, Open Harbor tackles trade management with a team of 25 experts who track more than 60 countries' trade policies and feed a database of more than 8,000 rules.

Open Harbor customers subscribe to a service, which ties into their ERP systems. For example, when the ERP system receives a purchase order, it feeds customer and product information to Open Harbor, which analyzes the content before validating, warning against or blocking the transaction.

Peace of mind is a key benefit, says Stan Yamamoto, president of AMAC in Cypress, Calif. The Panasonic subsidiary started using Open Harbor's restricted party screening and trade compliance services a year ago when keeping up with international trade rules became too much for one full-time person to handle.