Global Trade Management: who are the leaders in international trade management?

While much attention is often focused on the consolidation of the Enterprise Resource Planning (ERP) market, we have recently seen acquisitions by the two major players in the Global Trade Management (GTM) market to streamline the entire global trade lifecycle and make cross-border transactions more efficient. Providing solutions that integrate physical and financial supply chains by more holistically optimising the procure-to-pay and collect-to-pay process cycles for global companies seems to be more than just buzzwords and concepts.

The two largest acquisitions were JP Morgan Chase Bank, N.A. (NYSE: JPM) and Vastera (NASDAQ: VAST), and TradeBeam Holdings, Inc. and Open Harbour.

JPMorgan Chase Bank acquires Vastera, a leader in Global Trade Management

On January 7, JP Morgan Chase Bank, NA (NYSE: JPM), a global leader in the financial services industry with $1.1 billion in assets and a presence in more than 50 countries, signed a Merger Plan with Vastera (NASDAQ: VAST), the only publicly traded software company focused on global trade. With services including software, managed services, global trade content, training and high-end consulting services, Vastera was seen as the ideal partner for JP Morgan Chase's Treasury Services division.

The Treasury Services Division is a leading full-service provider serving the needs of corporations, financial services institutions, mid-sized businesses, small businesses, governments and municipalities worldwide. The division offers innovative payment, collection, liquidity and investment management, trade finance, commercial card and information solutions. With more than 50,000 customers and a presence in 36 countries, the division is the world's largest provider of cash management services. Under the Plan of Merger, Vastera shareholders will receive $3.00 (USD) for each outstanding share of Vastera common stock they own, for a total consideration of approximately $129 million (USD), representing a premium of approximately 50% over Vastera's annual revenue.

Vastera's solutions automate the trade management processes associated with the physical movement of goods internationally. The acquisition is expected to provide JP Morgan Chase customers with a 'one-stop shop' for the growing challenges and risks associated with international trade. JP Morgan Chase's solution currently facilitates the seamless management of information and processes to simplify the physical movement of goods and financial settlements in international trade. With Vastera's services, JP Morgan Chase will become the first global financial institution to offer a complete and integrated financial, trade and logistics solution for both physical and financial supply chains, maximising benefits for its customers.

Prior to the acquisition, Vastera worked closely with JP Morgan Chase, providing Global Trade Management (GTM) solutions. Now, the two companies boast that they will be able to consolidate this relationship as part of the same business, within a wider GTM infrastructure, and bring tangible benefits to the customers of both formerly independent businesses. As a result of the acquisition, existing JP Morgan Chase clients are expected to enjoy the benefits of deeper GTM solutions. Vastera customers will receive the benefits of JP Morgan Chase's comprehensive financial services platform and product suite. Vastera will continue to market its software and services independently, but many more growth opportunities are expected to result from the combination of Vastera's software and services with JP Morgan Chase's offerings.

Completion of the merger is subject to the approval of Vastera's shareholders and other banking and regulatory institutions. The transaction has been approved by Vastera's Board of Directors, which has recommended that its shareholders vote in favour of the transaction. Two major shareholders representing approximately 28% of the outstanding shares - Ford Motor Company and Technology Crossover Ventures - have committed to vote in favour of the transaction under the voting agreements.

With approximately 650 professionals in 14 countries and more than 400 clients worldwide, Vastera is the world leader in GTM solutions. It serves an international customer base, including companies such as Alcatel, Dell, Ford, General Electric (GE), Lucent, Fonterra, Goodyear, Nortel Networks and Seagate. Vastera's customers use its solutions and services to manage their worldwide trade by administering the information flows associated with cross-border import and export components. The vendor's solutions and services enable customers to manage the complexities and inefficiencies inherent in global trade in a way that allows them to capitalise on the significant, highly fragmented and rapidly growing opportunities that exist in the international marketplace. These clients have reportedly been able to significantly reduce the costs of managing their international operations and improve compliance with government regulations and service levels.

Vastera considers its commercial experts to be the company's most valuable asset and believes they were a key factor in JP Morgan Chase's decision to acquire the company. There appears to be a strong global demand for business consultants as companies seek to understand the impact of ever-changing regulation on their business strategy, network design, operations and financial performance. As a result, Vastera sells its products and services through its offices in the US and its subsidiaries and branches in the UK, Europe, Mexico, Canada, Brazil and Japan. Its key strengths include comprehensive regulatory content, world-class customers and its ability to merge technology with managed services. Vastera has a strong presence in the automotive and high-tech industries, with in-depth expertise in Brazil, Canada and Mexico, and is currently targeting China. As the only GTM vendor with dedicated staff and facilities in 14 countries, Vastera continues to be recognised for its advanced management systems and B2B best practices around the world, resulting in a service focused on compliance, effectiveness and efficiency.

Vastera's ISO certifications

At the end of 2004, Vastera announced that its eleven service management operations in Mexico and its site in Bydgoszcz, Poland, had been certified to the International Organization for Standardization ( ISO) 9001:2000 and ISO 9001:2001 standards, respectively. Founded in 1947, ISO facilitates the international co-ordination and unification of industrial standards. It has a network of national standards institutes in 148 countries, working in partnership with international organisations, governments, industry and consumer representatives. ISO 9001:2000 and 9001:2001 certified organisations improve customer satisfaction by not only meeting customer needs and regulatory requirements, but also by continuing to improve performance. The certification process includes a rigorous examination of operational processes, documents, work practices, data and records by an independent auditor. Certification indicates that these sites have an exemplary quality management system. In addition to participating in these reviews, Vastera employees have been interviewed and inspections of its sites in Mexico and Poland have taken place. To date, Vastera has received ISO certification for 14 service management operations, including those in Mexico, Poland, the United States and Canada.

In addition to its ISO 9001:2000 and ISO 9001:2001 certifications, Vastera holds the following certifications:

• US Customs-Trade Partnership Against Terrorism (C-TPAT) programme, which has helped to speed up customs clearance by simplifying physical examinations at US customs checkpoints. The C-TPAT programme is designed to ensure that appropriate security procedures are in place to protect the flow of global trade into the United States.
• Canada's Partners in Protection (PIP) program, which recognizes Vastera's commitment to strengthening border security in North America. In mid-2004, Vastera becomes a member of PEP, a joint government-business initiative aimed at strengthening border security, combating terrorism and organised crime, raising awareness of compliance issues, and detecting and preventing illicit trafficking. Available to importers, carriers, brokers, warehouse managers and associations involved in international trade, the PEP programme brings together the private sector and the Canada Border Services Agency (CBSA). To be admitted to the programme, companies must sign a memorandum of understanding, conduct a thorough self-assessment of their supply chain security procedures, and meet periodically with CBSA representatives to exchange information and participate in awareness sessions to detect illegal activities. By working with the CBSA, Vastera is establishing a working relationship with the Canadian government to protect the health, safety and economic prosperity of Canadians. In return, Vastera will provide support to its own clients throughout the application process. Once integrated into the PEP program, Vastera's customers can then consider participating in the Free and Secure Trade (FAST) program, a joint cross-border program between the United States and Canada in which pre-approved carriers, importers and drivers can benefit from expedited customs clearance between the two countries, turning compliance into a means of streamlining the supply chain. In addition, Vastera is a certified customs broker and an approved Electronic Data Interchange (EDI) software supplier.
• UK Simpler Trade Procedures (SITPRO) programme, under which Vastera is an approved document provider. The company can generate and supply around seventy standard SITPRO documents for customers operating in the UK and Europe.
• Polish Wewntrzny System Kontroli (WSK) programme, which recognises Vastera's exemplary quality and compliance management systems. WSK is the certification of the Polish internal control system. Vastera's operations managed in Poland have received WSK certification from the Polish Testing and Certification Centre. The supplier is also IQNet certified in Poland, which recognises that its operations have implemented and guarantee a management system that meets the requirements of ISO 9001:2001.

In addition to these certifications, at the end of January Vastera announced the extension of its business management consultancy services to the European Union (EU). Its management consultancy practices complement the software and outsourced trade management solutions already offered by Vastera in Europe. Vastera's trade management consultancy services in the EU include assessments of import/export compliance programmes, advice on project design and implementation, and consultancy in areas such as supply chain management (SCM ) and trade network redesign. Vastera hopes to leverage its strong presence in the region as it seeks new consulting opportunities in Europe. The group currently provides business management solutions and operational software to companies such as Dell, Ford, Logica, Lucent, Nestlé, Nortel Networks, Schenectady International and Seagate Technology.

JP Morgan hopes to benefit from Vastera's certifications and reputation in the international trade sector. However, it should be noted that while Vastera has achieved considerable scale and JP Morgan has significant reach, Vastera is more focused on cross-border trade rules and regulations imposed by numerous government agencies (including product harmonisation, customs formalities, customs duties and other taxes). Ultimately, the merger with JP Morgan will not bring to Vastera what the group has always lacked, i.e. the technologies needed to automate and manage the tracking of global supply chains, the movement of goods and the improvement of supply chain visibility. JP Morgan Chase will therefore need to continue its search for solutions to complement its GTM product portfolio, so that it can move with confidence within the international trade sector, placing orders, sending and receiving shipments and settling invoices anywhere in the world.

TradeBeam continues to refine its range of GTM products

Together, JP Morgan and Vastera promise to deliver a holistic approach to global trade management. However, this is not the only option for global traders. TradeBeam Holding Inc. is also working to create an integrated physical and financial supply chain. Its solutions aim to streamline international trade processes for companies and their partners, including import/export compliance guarantees and trade finance solutions such as current account and letter of credit (LC) management. The group also offers inventory management, shipment tracking and electronic supply chain management (SCEM) solutions, and has more than 3,000 customers and users in over 100 countries worldwide. At the end of 2004, TradeBeam announced the acquisition of the assets of Open Harbour, a leading provider of logistics solutions for international trade (ITL). The terms of the deal were not disclosed.

Founded in 1999, Open Harbour had extensive expertise in trade compliance, including a centralised repository of global trade content. This harmonisation tool contains millions of trade rules applied to business relationships by more than sixty countries. The company was also considered a leading player in landed price management. Its customers took advantage of its technology and experience to obtain accurate prices for their international orders. These prices were calculated on the basis of the total cost of the product, shipping costs and charges levied by the exporting and importing countries. However, given its product offering and market demand, Open Harbour did not achieve the success it had hoped for, a failure mainly due to poor management.

Conversely, TradeBeam focused more on practical business management applications, such as shipment tracking, insurance, event management, and other applications essential to the actual movement of goods. With the market showing strong demand for experts in the interpretation and application of trade regulations, Open Harbor was the logical choice for TradeBeam, and the offer to acquire the company was accepted.

TradeBeam believes that Open Harbor will provide a logical extension to its current offering, as customers will now have access to the latest global trade content and landed prices from over 60 countries. The acquisition is in line with TradeBeams' strategic development plan, which covers the entire international trade cycle, from orders to logistics and settlement. A new vertical axis is also expected to emerge, as Open Harbour has developed solutions and attracted customers in the high-tech and automotive sectors.

FedEx, DHL, SAP: other potential GTM suppliers

Since many import/export manufacturers rely on the shipper to manage compliance and regulatory issues, logistics service providers such as air cargo leaders FedEx and DHL offer similar services and in-depth access to technology and trade experts. FedEx, for example, recognised that many customers simply wanted to be relieved of the time-consuming burden of compliance issues and, in 2002, created a specialist division, FedEx Trade Networks, to deal with these aspects. At the same time, the company became the largest customs broker in the US. Some of its compliance services are free or, to be more precise, are available on its website as part of its shipping services. Other services, such as tariff harmonisation (HTS), are available electronically for a fee. The company also offers the services of its consultants, experts in trade and compliance ambiguities, to categorise a manufacturer's entire inventory. To this end, FedEx absorbed former content provider WorldTariff a few years ago, which covers tariffs, taxes, duties and preferential trade programmes for nearly 120 countries.

Smaller shippers can now use import/export software via third parties. Specialist software and managed service providers work behind the scenes, enabling carriers and freight forwarders to offer selected services to their customers, such as landed price calculators, product classification and document preparation services, often on a commission per transaction basis. To this end, DHL has in the past partnered with Open Harbour and FedEx Trade Networks with NextLinx, whose database contains nearly 20,000 HTS product classifications and more than 40 landed price components for 100 countries, representing around 95% of all world trade.

In addition to FedEx and DHL, other companies offer compliance services. For example, ocean freight company APL and global logistics software specialist G-Log offer such services. In the trade compliance sector, there can be a distinction between providers of specific content and providers of specific processes. For example, FedEx and G-Log are considered process-oriented providers, while specific content providers, which compile, maintain and sell access to data relating to tariffs, embargoes and unauthorised partners, include Vastera, NextLinx and Open Harbor, among others.

Enterprise applications giant SAP has also entered the international trade sphere. In February, SAP launched an updated trade solution that should make it easier for companies to operate under the North American Free Trade Agreement (NAFTA) and EU trade agreements, while benefiting from lower costs and more flexible regulatory compliance. New trade preference processing capabilities have been added to the latest release of SAP Global Trade Services (SAP GTS), a composite application that enables companies to standardise and streamline import and export processes to accelerate their global supply chains. More than 125 companies, including Advanced Micro Devices (AMD) - a leading designer and creator of innovative microprocessors, ASML - a semiconductor manufacturer, and Teekanne Group - a tea trading company, have reportedly improved the efficiency of their trade processes and legal compliance using SAP GTS.