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

While many eyes are often on the consolidation of the ERP (Enterprise Resource Planning) market, we have recently seen acquisitions by the two major players in the GTM (Global Trade Management) market to streamline the entire global trade lifecycle and make cross-border transactions more efficient. Providing solutions that integrate physical and financial supply chains, optimizing more holistically 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 involved JP Morgan Chase Bank, N.A. (NYSE: JPM) and Vastera (NASDAQ: VAST), on the one hand, and TradeBeam Holdings, Inc. and Open Harbour, on the other.

JPMorgan Chase Bank acquires Vastera, 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 over 50 countries, signed a Plan of Merger 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 Division's Logistics and Trade Services.

The Treasury Services division is one of the world's leading full-service providers, serving the needs of corporations, financial services institutions, mid-sized companies, small businesses, governments and municipalities worldwide. The division offers innovative payment, collection, liquidity and investment management, trade finance, commercial card and information solutions. With over 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 revenues.

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, integrated financial, trade and logistics solution for physical and financial supply chains, maximizing benefits for its customers.

Prior to the acquisition, Vastera worked closely with JP Morgan Chase, providing GTM (Global Trade Management) solutions. Now, the two companies boast that they can consolidate this relationship within a single company, as part of a wider GTM infrastructure, and bring tangible benefits to the customers of both formerly independent companies. As a result of this acquisition, existing JP Morgan Chase customers should enjoy the benefits of more in-depth 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 approval by Vastera 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 favor of the transaction. Two major shareholders representing approximately 28% of outstanding shares - Ford Motor Company and Technology Crossover Ventures - have committed to vote in favor of the transaction under voting agreements.

With around 650 professionals in 14 countries and over 400 customers 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 enables them to capitalize on the significant, highly fragmented and rapidly growing opportunities that exist in the international marketplace. These customers have reportedly managed to significantly reduce the costs of managing their international operations, and improve compliance with government regulations and service levels.

Vastera considers its sales 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 seems to be a strong global demand for commercial consultants, as companies want to understand the impact of ever-changing regulations on their business strategy, network design, operations and financial performance. As a result, Vastera sells its products and services through its offices in the USA 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 publisher with dedicated staff and facilities in 14 countries, Vastera continues to be recognized for its advanced management systems and B2B best practices worldwide, 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 coordination and unification of industrial standards. It has a network of national standards institutes in 148 countries, working in partnership with international organizations, governments, industry and consumer representatives. ISO 9001:2000 and 9001:2001 certified organizations enhance 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, working practices, data and records by an independent auditor. Such certification indicates that these sites have an exemplary quality management system. In addition to participating in these reviews, Vastera employees were interviewed and inspections of its sites in Mexico and Poland were carried out. To date, Vastera has received ISO certification for 14 service management operations, including those in Mexico, Poland, the USA and Canada.

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

• U.S. Customs-Trade Partnership Against Terrorism (C-TPAT) program, which has accelerated customs clearance by simplifying physical examinations at U.S. customs checkpoints. The C-TPAT program is designed to ensure that appropriate security procedures are in place to protect the flow of global trade into the United States.
• Canadian 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 organized crime, raising awareness of compliance issues, and detecting and preventing illicit traffic. Available to importers, carriers, brokers, warehouse managers and associations involved in international trade, the PEP program brings together the private sector and the Canada Border Services Agency (CBSA). To be admitted to the program, 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 that help detect illegal activities. By collaborating with the CBSA, Vastera establishes a working relationship with the Canadian government in protecting the health, safety and economic prosperity of Canadians. In return, Vastera will support its own clients throughout the application process. Once integrated into the PEP program, Vastera customers can then consider participating in the Free and Secure Trade (FAST) program, a joint cross-border program between the U.S. and Canada in which pre-approved carriers, importers and drivers can take advantage of expedited customs clearance between the two countries, transforming the obligation of 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) program, under which Vastera is an approved document supplier. The company can generate and supply around seventy standard SITPRO documents for customers operating in the UK and Europe.
• Polish Wewntrzny System Kontroli (WSK) program, which recognizes 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 Center for Testing and Certification. The supplier is also IQNet certified in Poland, which recognizes that its operations have implemented and guarantee a management system that meets the requirements of ISO 9001:2001.

In addition to these certifications, Vastera announced in late January the extension of its business management consulting services to the European Union (EU). Its management consulting 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 programs, 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 supplies 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 reached a considerable size and JP Morgan a notable reach, Vastera is more focused on cross-border trade rules and regulations imposed by numerous government agencies (particularly with regard to product harmonization, 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 GTM product range

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. also strives 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 over 3,000 customers and users in more than 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). Terms of the transaction were not disclosed.

Founded in 1999, Open Harbour had extensive expertise in trade compliance, including a centralized repository of global trade content. This harmonization tool contains millions of trade rules applied to business relations by over 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 precise prices for their international orders. These prices were calculated on the basis of the total cost of the product, shipping costs and fees charged by 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 trade 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 logically emerged as a partner of choice for TradeBeam, and the acquisition offer 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 strategy, 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 airfreight leaders FedEx and DHL offer similar services and in-depth access to technology and trade experts. FedEx, for example, recognized that many customers simply wanted to be relieved of the tedious burden of compliance issues and, in 2002, the group created a specialized division, FedEx Trade Networks, to deal with these aspects. At the same time, the company became the largest customs broker in the USA. Some of its compliance services are free of charge or, to be more precise, are available on its website as part of its shipping services. Other services, such as customs tariff harmonization (HTS), are available electronically for a fee. The company also offers the services of its consultants, experts in trade and compliance ambiguities, to categorize 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 programs for nearly 120 countries.

Smaller shippers can now use import/export software via third parties. Specialized 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 classifications 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 almost 20,000 HTS product classifications and over 40 landed price components for 100 countries, and represents 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. Thus, FedEx and G-Log are considered process-oriented providers, while specific content providers, who compile, maintain and sell access to data relating to tariffs, embargoes and unauthorized 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 conduct business 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 version of SAP Global Trade Services (SAP GTS), a composite application that enables companies to standardize 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, are said to have improved the efficiency of their trade processes and legal compliance thanks to SAP GTS.