Global trade hasn’t gotten any less complicated in the last 10 years. Consider the highly publicized case involving ITT Corp: In March of 2007, ITT Corporation became the first major defense contractor to be convicted for criminal violation of the Arms Export Control Act. The fines resulted from the company’s outsourcing program, in which they transferred night vision goggles and classified information about countermeasures against laser weapons, including light interference filters to engineers in Singapore, China, and the United Kingdom. They were fined $100 million U.S. dollars, although they were also given the option of spending half of that sum on research and development of new night vision technology.

What could have been done differently to avoid this problem? A Global Trade Management (GTM) solution is one possible answer. For years, GTMs have helped companies automate various aspects of global trade, performing restricted party screenings and embargo checks; assigning export and import licenses; creating and filing trade documents; communicating electronically with legal authorities; determining total landed costs; facilitating product classification; managing documentary payments; managing customs processes and transit procedures; and determining preferential trade eligibility.

Had ITT been using a comprehensive GTM system, says Beth Enslow, vice president of enterprise research at Boston-based Aberdeen Group, it could have probably avoided the steep fines and/or felony charges.

“That case reinforces just how serious the government is about making sure export compliance is done correctly,” says Enslow, who points out that GTM’s restricted party screening function would have been especially vital for ITT. “The software automates order management and fulfillment checking to ensure that goods are not being sent to countries without the proper documentation and permission.”

The need for a robust GTM solution extends to less visible corporations, many of which would benefit significantly from using automated trade compliance system. Let’s take a look at how your company can tap the resources of a GTM to work smarter and faster in the global economy.

As more shippers are taking the leap forward, it’s imperative they know the lay of the land. Enslow breaks the GTM space down into three categories: import compliance, export compliance, and origin/free trade management. The first two monitor the movement of goods in or out of the country, while the latter helps companies cut costs and increase efficiencies when dealing with free trade zones and agreements.

The systems are currently provided by a wide range of vendors. Management Dynamics, Integration Point, JPMorgan Chase Vastera, Kewill Systems, and TradeBeam, for example, have played in the space for a while and are considered specialists in the trade compliance arena. Logistics Service Providers (LSPs) like UPS, FedEx, and DHL, as well as various third-party logistics providers (3PLs) offer their own GTM solutions to customers.

Most recently, ERP vendors Oracle, Infor, and QAD (Precision Software) have thrown their hats into the ring, following the success SAP is having in the GTM space. “The ERPs smell opportunity and are being asked by their customers to step up to the plate,” says Enslow, who sees the GTM space growing for many reasons, not the least of which is the fact that companies are seeing the value in leveraging trade information throughout the organization.

In many cases, trade compliance systems—and the data they generate—are integrating tightly with other systems, and providing greater visibility solutions and/or inventory management that crosses borders.

“GTM is no longer on the outskirts,” says Enslow, who expects the pure-play providers to use their expertise and consulting capabilities to compete against players like SAP and Oracle, the latter of which promises a GTM solution by mid-2008. “The best-of-breed companies (like Integration Point and Kewill Systems) will have to differentiate themselves either through content or through managed services.”

With more shippers looking at their enterprises as global trade platforms, Adrian Gonzalez, director of Dedham, Mass.-based ARC’s Logistics Executive Council, says ERPs are a natural fit for folding international flavor into their solutions. “Compliance information can be leveraged in many different processes, including procurement, product development, and on the financial side,” he says. “The ERP companies realize that the value of GTM goes beyond just the trade function, and that a lot of that information can bring value to many other functional groups within the company.”

Just how the ERPs’ efforts affect companies like Integration Point, JPMorgan Chase Vastera, and TradeBeam remains to be seen, although John Fontanella, VP of research at AMR Research in Boston, says there could be room for both types of providers. “The shipper that is buying and selling to many different countries, for example, would probably want to stick with a best-of-breed provider that develops and manages its own content, such as Management Dynamics or TradeBeam,” says Fontanella.

Gonzalez urges companies to consider two key aspects of every GTM solution: The content, or all of the information regarding product classification codes, restricted party screening and related data; and the actual software itself, which enables the actual business flow.

“Examine, for example, whether the solution up for consideration can provide the content for the countries and/or shipping lanes in question,” says Gonzalez, “and just how effective the software is at determining qualification for free trade agreements, NAFTA ,and the support of free trade zones.” Look first at how complex your global trade operations are, adds Gonzalez, and make sure that the technology you acquire can support them.

Fontanella urges shippers to evaluate carefully the GTM solution’s capabilities, to make sure it matches the firm’s individual needs. Larger (or growing) firms should also look at the scalability of the solution, factoring in the growing global economy and the expectation that more destination countries may be added to the export lineup at any given time.

“Ideally, you want a content source that automatically implements changes, such as an increase in taxes or tariffs brought on by a new concession between the U.S. and a country like China, for example,” says Fontanella. “You don’t want a bunch of people in the middle interpreting information from your content provider and manually updating the system.”

With the ERPs moving into the GTM space, the logistics providers continuing to serve their customers effectively, and best-of-breed players further honing and differentiating their systems, Gonzalez sees expanded choices ahead for shippers looking for the best possible solutions to their global trade compliance and free trade issues.

Shippers need to factor in the added benefits, such as boosts in profitability that GTM solutions are providing to companies, says Gonzalez. And it only makes sense, he adds, that this sector will grow right along with the global economy over the next few years.

“The rules and regulations continue to change, so shippers have to make sure that their content is continuously updated and accurate in the countries where they operate,” says Gonzalez. “And as they establish operations in new regions, or setup business in new trade lanes, they need GTM providers that will give them the content they need to power that business.”