By Michiel Kalverkamp, Chief Customer Officer at Besso.

Global trade compliance is notoriously tricky due to the plethora of regulations that businesses must navigate. Recent years have seen a proliferation of new rules in international trade; on the one hand, regulations, tariffs and sanctions as a result of geopolitical realignments have thrown barriers in the way of trade and on the other, bilateral and multilateral Free Trade Agreements (FTAs) encourage trade between participating nations.

Each agreement, such as the United States-Mexico-Canada Agreement (USMCA) or the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), comes with specific rules of origin to qualify for tariff reductions. These rules can be difficult to interpret and require businesses to meet detailed criteria, such as the origin of product components, tariff classification, and value-added thresholds.

Despite efforts to harmonize global trading rules, trade compliance today is a minefield of overlapping and sometimes conflicting regulations, making it difficult for companies to optimize their manufacturing and supply chain strategies.

Even accidental non-compliance with regulations can have severe consequences, from the delay or seizure of goods to heavy fines or even criminal charges levied against the offending businesses. For this reason, businesses are crying out for solutions that can make compliance simpler, faster and cheaper.

A missed opportunity

Due to the complexity of the different regulations and agreements, it has been estimated that up to a third of eligible exports miss out on reduced or exempted duties from which they could benefit through FTAs. This costs businesses around the world billions of dollars every year.

There are many reasons why these FTAs often go under-used. For a start, rules surrounding goods of particular types or origins often require detailed documentation and accurate calculations, production of which can be resource intensive and time consuming for businesses. In many cases, the cost of submitting the documentation to take advantage of the FTA may be greater than the sum saved by doing so.

This issue can be particularly severe in industries such as agriculture and textiles, where strong sector-specific origin requirements to limit external competition or the spread of disease add considerably to the complexity of a business’ trade and lead to lower uptake rates.

Taking advantage of FTAs and navigating regulations can be especially challenging for small businesses. Unlike larger businesses, many cannot afford to pay specialists and experts to help them navigate the complex regulatory landscape and are thus prevented from fully capitalizing on preferential trade opportunities.

The potential of AI in transforming trade compliance

To address these issues, businesses are increasingly exploring the potential of Artificial Intelligence (AI), developed by companies such as Switzerland’s Besso, to simplify trade compliance, unlock cost savings and reduce the risks associated with non-compliance.

By constantly monitoring regulatory updates around the world, AI-powered platforms can provide users with real-time insights into regulatory changes far more quickly and cheaply than human analysts, easily organizing and picking out relevant information that businesses struggle to maintain manually. 

At the same time, these platforms work to automate the processes of filling out and verifying trade documentation, calculating eligibility for FTAs and ensuring compliance with complex rules of origin. AI platforms can do this in a fraction of the time it takes a human to do it and can draw on a vast repository of information to ensure more accurate results.

How businesses can maximize AI in trade compliance

Companies using AI to stay compliant in international trading can follow four key steps to streamline compliance processes, optimize cost savings, and reduce risks. 

First, improving master data management is essential. Accurate and comprehensive data underlies any effective compliance program and by investing in robust data management, companies can improve data reliability and set a solid foundation for AI integration. 

Second, businesses should evaluate the automation solutions available to them, and opt for AI tools that offer flexibility, scalability and real automation. These capabilities will allow businesses to adapt more easily to changing trade regulations and crunch data from a large number of different data sources.

Third, it is important to cultivate a mindset that is focused on compliance. This is essential if a business is to shift away from manual processes. Businesses should provide training and development to compliance teams in order to build strategic skills and foster collaboration with data teams.

Finally, businesses can run AI pilot programmes to evaluate AI’s impact and gain valuable experience on a smaller scale, enabling a smoother transition to comprehensive AI-driven compliance when scaled up.

The future of trade compliance: AI as a competitive advantage

AI is reshaping the global trade compliance landscape, helping businesses not only manage regulatory complexity but also to capitalize on savings opportunities through FTAs. By adopting AI solutions, businesses can achieve more effective, cost-efficient compliance, gaining a competitive edge in an increasingly regulated global market.

The companies that embrace AI will find themselves better positioned to navigate the intricacies of global trade, maintain market access, and optimize their trade operations. As compliance becomes progressively automated, organizations stand to save billions in tariffs, streamline operations, and establish more resilient supply chains.

In a world where regulatory landscapes and market dynamics are in flux, AI offers a pathway to sustainable, long-term trade compliance success.

Michiel Kalverkamp is the Chief Customer Officer at Besso. To learn more about the work Besso does, please visit their website.