Companies whose equipment travels across international borders need to make sure that their mobile field service logistics and service management systems are able to document all of the complex regulations in place.
Construction companies can save millions of dollars by staying up-to-date on international environmental regulations and using strategic approaches to fluctuating currency rates, according to an article on the Construction Executive Magazine website.
To manage these complex factors, companies should seek partners with expertise in customs and trade compliance, which can increase field service profitability and provide more predictability in costs and supply chain management.
In terms of environmental regulations, construction companies face increasing restrictions when shipping materials in and out of the United States. Filling out the proper forms can prevent delays and fines — even jail time. Companies also should consider how any delays would affect scheduling and service calls.
For example, when companies transport off-road construction equipment across borders, the Environmental Protection Agency (EPA) enforces emissions standards. It also restricts the import and export of materials such as chemicals and chemical substances.
Construction companies also may be affected by shipping restrictions from the Environmental Investigation Agency (EIA). For example, the Lacey Act requires companies importing wood and wood products to submit detailed declarations for such materials, and bans certain illegally sourced plants and plant products.
On the other hand, currency exchange issues typically aren’t a big concern. Products generally are brought in at a landed cost and any currency differences are built into the cost of the material.
Depending on its goals, a company can minimize currency factors through such strategies as working with a bank to lock in a currency rate. U.S. construction firms typically lock in currency rates on a monthly basis.
The Construction Executive Magazine article highlights three common options.
- Forward contract: Agree to buy or sell a certain amount of foreign currency, within a timeframe, at a predetermined rate. This eliminates currency fluctuations, but prevents taking advantage of better terms should they become available.
- Flexible products: Purchase the option to buy foreign currency, within a timeframe, at a certain rate. For a fee, businesses thus limit exposure to currency fluctuation, while retaining flexibility to take advantage of more favorable rates.
- Internal hedges: Open a foreign currency account for projects in that country. When bidding on projects internationally, large firms usually open a project in the local currency. When it’s finished, they close the project and move on. That way they can gear all of their accounting around that project.
Source: Construction Executive Magazine, December 2012