In the late 1980s, the company's global trade management group consisted of three people primarily focused on troubleshooting. They worked with brokers to locate missing material, or determine why goods were having difficulty crossing the Canadian border. The team did not have an in-depth importing and exporting background.
In 2000, as globalization for automotive manufacturers became the norm, preferential trade programs such as NAFTA were taking off. The company's catalog of finished goods consisted of more than 300,000 components. The classification of these components and qualifying finished products for NAFTA was becoming too much for ITEC to handle internally. ITEC realized that its small team was not equipped to handle the complexities of the new global trade environment. It was faced with the question of whether to build its global trade team internally, or outsource its operations.
In 2001, ITEC hired JPMorgan Chase Vastera (New York) to manage its North American trade operations, including the ongoing management of its NAFTA duty minimization and harmonized trade schedule (HTS) of classification programs.
"What we saw from [third-party provider] Vastera was a real value proposition," says Ben Bauman, global logistics and corporate trade compliance manager. "As we looked at our global trade requirements, ITEC factored in what it would cost to get the right headcount to support operations, how much it would cost to lease the right software and the amount of time it would take to get up our people and systems up to speed. ITEC was able to build the business case for a third party without even having to factor in compliance risk."
He adds that there was enough efficiency to be gained by hiring an expert third party because the third party had already made the investments in education, training, getting the right group of people together and the right systems.
ITEC uses JPMorgan Chase Vastera's personnel and TradeSphere technology to help it realize the potential duty savings for which it is eligible, while complying with country-specific trade regulations. The solution identifies the specific preferential trade programs for which goods qualify, helps classify products accurately, automatically generates and files the appropriate documentation with governmental agencies, tracks the country of origin for all parts, identifies and reports on U.S. goods manufactured abroad, and automatically performs the country-specific compliance checks associated with all shipments.
As a result of more efficient NAFTA qualification of products, ITEC sees savings of tens of millions of dollars, says Bauman. Harmonized trade schedule code assignment is critical. It determines how a product is taxed when shipped across borders. The third-party team reviewed for accuracy the existing classifications assigned to the 300,000 parts in ITEC's component database. In addition, JPMorgan Chase Vastera continues to classify and qualify new parts, sometimes totaling up to 5,000 additional components per month. Accurate classification results in greater savings for ITEC. The firm also helps ITEC maintain its internal global trade compliance manual, fully documenting and creating an audit trail of all the processes and procedures ITEC and its brokers uphold to remain compliant with international regulations.
As a result, applying for post-9/11 securityrelated trade programs has been an easier process. ITEC's has become C-TPAT ( Customs and Border Protection's Trade Partnership Against Terrorism Program) certified, enabling expedited clearance and reduced physical examinations through customs' checkpoints.
"As we looked at our global trade requirements, ITEC was able to
build the business case for a third party without even having to factor in compliance risk."
—Ben Bauman, ITEC