Trade compliance has changed immensely over the years and has risen in importance. In the past, it was broadly perceived as a manual, back-office risk management function. However, thanks to the complex global trade landscape we now live in, it has evolved into a strategic business necessity. At the same time, and alongside this, organisations face a plethora of challenges to deal with.

The regulatory environment is changing. There is constant supply chain disruption. Geopolitical uncertainty is rife. Environmental and ethical sourcing is essential. Businesses and their trade compliance teams are stretched for time and resources.

Additionally, within today’s business landscape, achieving compliance isn’t just about avoiding penalties. Trade compliance can enable organisations to become more strategic, resilient and support growth.

Jackson Wood, Director, Industry Strategy, Global Trade Intelligence, Descartes says organisations that invest in their trade compliance teams are more capable of improving their efficiency, strengthening their compliance, and remaining competitive.

Manual processes outpaced by regulatory complexity

In July 2024, Descartes and Sapio surveyed over 800 corporate decision makers in international trade compliance and / or supply chain intelligence, across 13 geographies including Argentina, Benelux, Brazil, Canada, China, Nordics, France, Germany, India, Japan, Mexico, UK and USA. The 2024 Descartes Benchmark Survey revealed some of the key challenges that organisations are up against. These include: tariffs and trade barriers (50%), ESG compliance requirements (43%), geopolitical instability (42%), and supply chain disruption (42%). Notably, the demands placed on global trade organisations today continue to grow.

On a practical level, and from a regulatory landscape perspective, consider how these challenges might play out and have to be dealt with when an organisation has to manage compliance with the Uyghur Forced Labor Prevention Act (UFLPA), for example. In this case, organisations are expected to clearly map out their supply chains beyond the standard, expected Tier-1 suppliers and to demonstrate traceability. Depending on manual processes alone here to carry out the due diligence required to demonstrate compliance is likely to cost businesses a lot time; result in poorly-spent resources; result in errors, delays and – most likely – penalties for failing to demonstrate compliance fast enough and accurately.

Herein lies some of the problem. Spreadsheets, disconnected systems, and manual processes and reviews cannot keep up with the requirements set out by many regulators. The compliance tasks that are typically hindered by manual processes today include export classification, denied party screening and export license management. Executing this kind of work manually is prone to errors and slowing down business operations.

Within this current environment, large enterprises and mid-sized organisations are feeling the pinch. The exception here is that mid-sized organisations face additional pressures in this space. Although they face the same regulatory demands as larger enterprises when managing issues, they have fewer internal resources and less external support too. This is where technology can help organisations of all sizes keep pace with compliance obligations.

Closing the compliance gap

Additionally, it’s no secret that technology has been used through the decades to automate various business processes, and to improve productivity and efficiency. But what is important to note is that Descartes’ survey reveals a clear and obvious trend: technology investment directly correlates with organisational growth, and that 75% of organisations believe technology drives aspects of their growth strategy.

Within organisations, automated trade compliance solutions are streamlining many important business processes. For instance, export classification, denied party screening, trade data management, and export license administration are all functions that are being improved by technology. Using technology here can reduce a lot of the manual effort required to execute this kind of work. Further, it can speed up customer and supplier onboarding, and provide better analytics. All of which helps teams make better strategic decisions.

Artificial intelligence (AI) is another capability that trade compliance teams must continue to consider as part of the automation process too.  AI offers powerful capabilities when it comes to analysing product attributes, supporting classification decisions, and identifying licensing requirements. It can improve accuracy and consistency, and speeds up processing times too.

Supply chain mapping is increasingly important for organisations to demonstrate. Many regulations are driving this requirement. Some focus on forced labour prevention and environmental stewardship. The type of information that often needs to be provided includes product components, raw material origin and packaging sources. Documenting this information manually at scale is extremely time consuming and prone to error. This is where technology, automation and AI enable organisations to meet due diligence requirements.

Conclusion

Many organisations are increasingly appreciating trade compliance teams. They now see them as more than just a risk-management function. The survey points out that 32% perceive trade compliance as a competitive asset; 32% see it as a customer service differentiator.

Those organisations that can demonstrate due diligence at pace, and who can respond with agility to regulatory changes while keeping on top of accurate trade data, will be better placed to support growth. This will also enable them to reduce their operational risk.

Today, investing in compliance technology is a strategic investment that supports growth and protects organisations. Global trade will continue to change. But it’s the organisations that embrace automation and AI to support comprehensive supply chain visibility and traceability that will be equipped to manage future complexity, maintain compliance and drive growth.