The path to success in international commerce is oft-times a bumpy one. Companies embarking upon global sourcing must contend with myriad pitfalls, including numerous and changing governmental regulations and the normal vagaries of transportation and delivery systems.

Logistics and distribution issues are the underlying concerns that can mean success or failure in the international marketplace. "Between security and the usual government regulation issues, anyone thinking about sourcing globally really needs to know the rules of the road," asserts Robert Leo, partner, Meeks & Sheppard, a New York law firm focusing on U.S. law and regulations affecting exports and imports. "The 'devil is in the details' and it is better to meet the devil head on.

"The 'devil is in the details' and it is better to meet the devil head on." Robert Leo, partner, Meeks & Sheppard

"Companies must be aware of all the regulations affecting their products," Leo continues. "Customs requirements, labeling, toxics in packaging, potential flammability regulations, and protecting intellectual property are the main areas affecting home textiles. Ensuring that your product complies with existing regulations and staying on top of proposed regulations is a best practice. Companies can use inside experts, outside attorneys or consultants and trade associations to help them cope with the myriad requirements."

Isabelle Vermeersch, president of Centipid, a consulting firm specializing in international and domestic transportation and trade issues, points out that areas of concern include cost, compliance, lead times, origin and destination country rules and regulations, and having a reliable transportation company.

"Knowing the total cost of ownership (TCO) will help companies keep control of their spending." Isabelle Vermeersch, president , Centipid

"Knowing the total cost of ownership (TCO) will help companies keep control of their spending," Vermeersch explains. "A compliance manual will assist the importer with the requirements as 'importer of record' in the U.S. Knowing lead times and services/routing will help companies manage their sales and production, as will having a transportation company that specializes in the areas where they are sourcing their goods."

Acting in accordance with all relevant governmental regulations can be a big challenge, stresses Bill Armbruster, editor of Shipping Digest. "I think that complying with documentation requirements, particularly as they relate to security, may be the most challenging," he says. "That is because the rules seem to be changing constantly."

"I think the most common pitfall is that manufacturers don't pay close enough attention to regulatory changes." Bill Armbruster, editor, Shipping Digest

Armbruster cites the proposed "10 + 2" rule by U.S. Customs and Border Protection as an example. This new rule requires 10 additional data elements from U.S. importers prior to a vessel loading at non-U.S. ports, and two new sets of data from carriers. "I think the most common pitfall is that manufacturers don't pay close enough attention to regulatory changes, whether they're imposed by national governments or whether they are international standards, such as the revised Harmonized Tariff Schedules," he remarks. "As a result, manufacturers could find themselves facing some nasty surprises. Another example would proposed changes by the Census Bureau, which could lead to higher penalties for exporters that are not in compliance."

Phil Hobson, president of Phoenix International Business Logistics, based in Elizabeth, N.J., points out, "Many U.S. buyers are entering the foreign sourcing business without the knowledge or experience required to develop a successful inbound supply chain. The learning curve can prove to be lengthy, expensive and highly ineffective.

"The learning curve can prove to be lengthy, expensive and highly ineffective." Phil Hobson, president, Phoenix International Business Logistics

"Both overseas and domestic manufactures have the same challenges, including underestimating shipping expenses, underestimating U.S. Customs duty, and underestimating manufacturing lead time and the amount of time required for shipping from origin to destination," Hobson continues. "Importers should be researching all facets of the logistics process and obtaining quotes for the services needed. This information is crucial in budgeting and determining a sales price for the product."

In spite of the challenges, there are many ways to deal with the issues and attain success in global sourcing. First and foremost, companies constantly must be aware of changes in governmental requirements.

"Companies must pay close attention to changes in regulations," Armbruster asserts. "They also must have service providers, whether they're forwarders, brokers, or carriers, who are fully up to speed on regulatory changes. In addition, when and where possible, companies should participate in business and trade associations that are in frequent communication with government agencies.

"Close coordination with service providers is essential," Armbruster continues. "Manufacturers have to be clear in setting forth their expectations and hold the service providers to those requirements. But this is a two-way street. Manufacturers must be willing to make clear commitments – and to fulfill them. In case either side is not able to live up to its commitments, it should inform the other party as quickly as possible."

Vermeersch points out, "Most manufacturers are frustrated with the lack of control and visibility of goods during the transportation process. Putting a standard operating procedure (SOP) in place will clearly define the instructions to be followed, and open lines of communication with transportation providers. Manufacturers should analyze their total cost of ownership, transport cost and research the HTS code for their product."

Hobson recommends, "At a minimum, U.S. buyers should be taking the following issues into consideration: the relationship between the U.S. and the country in which the U.S. buyer is sourcing product; currency exchange rates; quality control; costs of international shipping; cost advantages of shipping sea freight compared to air freight; U.S. Customs duty; and distribution within the U.S."

Leo comments, "The U.S. is one of the most open markets in the world, and while there is less regulation for importing and transporting goods into the U.S., there are still regulations. Many suppliers are factoring the cost of compliance with these regulations into their pricing.

"Most manufacturers that we deal with are doing the due diligence ahead of time to discover and become familiar with the logistics issues areas that might affect them," Leo adds. "That is the optimum way so there are no surprises."