Latest / Rittener Reflections / EP28: Part One: The New Rollercoaster Moment
Transcript
- Bruce Jackson (00:00) And I would say we're on a roller coaster. What do you do when you're on a roller coaster? You don't jump off because there's been a tendency to want to make decisions. change supply chain, what do we have to do, all these changes. And particularly if you look at the IEPA tariffs, you could argue, well, okay, if we made a whole bunch of supply chain changes and then the Supreme Court tosses them out, tosses out the tariffs, yes, you've got a potential reclaim, you've got to go and get the money back. But all in all, if you've been made a bunch of supply chain changes, that was kind of potentially wasted effort. And so you don't want to be making these decisions in a, just a reactive. And that's probably the main thing is I think there's a tendency in this environment to be very reactive. And yes, you need to do that to a degree, but you also need to try to be proactive and think about, okay, if this is the new reality, what are we going to do? manage that going forward because we can't swing with every move of the pendulum. We're going to have to just step away so we don't get bonked by it and try to find a way to manage through. that's, know, don't overreact. Jr (01:34) Welcome back to Ritner Reflections. Today we're talking about the most consequential shift the trade profession has seen in decades. A shift driven not by technology alone, but by geopolitics. For nearly 30 years, global supply chains were built for efficiency, predictability, and low cost. The world rewarded scale, speed, and optimization. But that era is over. Karen Murphy (01:51) You you Jr (02:03) We've moved into a world where supply chains are strategic assets, where resilience and agility matter as much as price, and where every cross-border decision carries more geopolitical weight than ever before. Companies are being forced to rethink assumptions that they held true for an entire generation. Layer onto that, the acceleration of regulatory change, the rise of AI, and data-driven decision-making, and the growing expectation that trade professionals operate comfortably in the gray. And you have a profession that's being reshaped in real time. And all of this means the expectations of trade professionals are changing as quickly as the world around them. This moment deserves a conversation with people who have navigated the world of trade for decades. Karen Murphy (02:32) Thank you ⁓ Jr (02:59) So I brought back two voices who helped shape Written Reflections from the beginning. Karen, who joined me all the way back in episode three, where we spoke about being the Department of NO, K-N-O-W, that is. And Bruce, who anchored our three-part export control series last fall. They've each seen the profession evolve through multiple eras, and they're both storytellers, leaders, and straight shooters. Karen Murphy (03:13) Yeah. Jr (03:28) And as Bruce puts it, we're in a new roller coaster moment. A period where the ground keeps shifting, the pendulum keeps swinging, and the real risk is reacting too fast or in the wrong direction. That framing sets up exactly where we're headed. We're going to record one long conversation and let it unfold naturally, but break it into two parts. First, we will focus our discussion on diagnosing the moment. And in the second half, we will focus on what leaders should do next. So let's get into it. Karen and Bruce, welcome back and thank you for joining me once again to talk trade. Bruce Jackson (04:14) Happy to be here. Karen Murphy (04:15) Thank you, Jeff. Jr (04:17) For the first question, I will start with you, Karen, and then over to you, Bruce. Karen, when you look at the world today, What's the most consequential shift you are seeing in global trade? Karen Murphy (04:33) that things used to be pretty stable and you could rely on the regulatory landscape. Now what is definitely a shift is be ready for change. It's constant and it's not what trade professionals had necessarily expected. Jr (04:51) Yep, is, there's no doubt change is the new almost daily norm. about you Bruce, what are you saying? Bruce Jackson (04:58) concur with what Karen had to say there. At the same time, it you know, we don't I'm not necessarily giving up on a little more reliability in a few years. OK, you know, in terms of of the regulatory landscape and how we deal with rules and how we implement things and how we have to adapt, I'm not saying changes. it's constant, but it doesn't mean we can't get back to more stability in how things occur. I think it's important to realize I think the trade role is expanding. I mean, the areas that we're getting into, it's amazing how often I'm saying, well, this isn't really a trade compliance issue, but there's no one else to really take it. So. That is something I think is really changing the trade role, is we have to be open to other things. And it's infused by technology and the way we're using things in this world and the way geopolitics is influencing things. the constant is that that will always evolve. But I think from government to government as things move forward, I'm not saying that it's always gonna be like that in terms of the the, what's the analogy, the, you're on a, like the mouse or the hamster in the cage on the wheel, you know, it's not gonna always be like that, I don't think, but we have to be prepared for it as professionals. Jr (06:15) Yeah. Yeah, I would agree, Bruce. my is having done this for so long, change has always been part of the role. But I think what's really different today is the velocity. I mean, the changes are coming at us just, like I said, sometimes daily. And whereas I think in the past, it was much longer between major changes. So I think that's definitely a reality for us. So I think the other thing is, you know, the role of trade really, I always call it the scene of the crime, is crossing the border. And to your point, Bruce, about getting involved in so many other things, know, nowadays when it cross the border, people start asking questions about, you know, UFLPA issues, right? ⁓ They start asking about sustainability in the EU. You got CBAM, know now that is that something that the trade professionals need to manage and so I think we're finding more that that's the single point where I think some of sometimes these things all land right and so we have to address them Bruce Jackson (07:24) No, yeah, I would concur with that. mean, you mentioned UFLPA. I'm thinking as well, things like the ICTS actions coming out of the US Department of Commerce, connected vehicle rule, drones, you know, there's going to be other technologies. The FCC decision last week on banning, ⁓ you know, foreign routers, that kind of thing. Those aren't directly trade related, but they have significant trade impacts. Jr (07:48) Right. Karen Murphy (07:51) But I also think that trade people who traditionally had focused on their books, you know, the EAR, the customs regulations, you know, different, maybe there were four pieces that trade folks managed, now really need to be aware of a much broader collection of requirements for importing and exporting. And also bringing in other teams within the company who might have the data or really have the information to put together that package. That's a skill that I think as we talk more about the trade of the future that getting more people to join your party to solve a problem I think ⁓ is a skill that the trade folks really need to think about. Jr (08:45) Yes, absolutely. So that's a great point, Karen. It makes me think, are there other things that you're seeing that are reshaping the profession? I mean, that's a good one, Karen, you mentioned there, but are there other things that you're seeing? Karen Murphy (08:59) Well, definitely data, the ability to analyze, know, what are you seeing? What are the anomalies in what may be previous to, let's just say even three years ago were pretty stable transactions with respect to values, classifications. stacking duties, punitive duty, you know, all these different components of a customs entry has significantly changed. And then even on export controls, all these, if you're going to this specific customer in China, you do it this way. If you're going to that specific customer in China, you do it a different way. And again, having the data and have the skill to analyze where the patterns, where can I proactively Obtain licenses or documentation to support the decisions that I made I think again these this is a new way of thinking and for some teams, it's a challenge because they're just used to Bringing something in or shifting something out checking off the boxes. Well, sometimes the boxes are linear sometimes they're horizontal, but now they're more like you know squiggly Bruce are you seeing that too? Bruce Jackson (10:16) Oh yeah, it's more like it's, used to talk about the tariff rollercoasters, not just that, but there's all kinds of rollercoasters, you know, and that's your squiggly line, you know, things just, you have to be able to handle it. And it really depends where your trade team is situated too. because trade, I mean, you really, the business needs to be factoring that in and give it a voice when they're making strategic. Jr (10:22) Yes. Bruce Jackson (10:42) decisions around what they can do, what they can sell. You made your point, Karen, about two different channels, depending on how you're delivering something and who the customer is in a country, whether it's China or some other country, how do you manage that? What implications does that have? And, you know, I've said this before, I think I made this statement last fall in one of the sessions we did, Jeff, is you don't want the left hand doing something the right hand's going to pay for. And But oftentimes the only way to get that really is if you have the channel to senior levels where those decisions are being made. So they have the information so they can make the right decision or the decision with at least go in open eyes, right? So they know, okay, this could be a complication if we're not careful because you can't, these decisions increasingly cannot be done in a vacuum. The communications that are available today, everything's. almost instantaneous. So it's not like, we can ship this, it won't be a problem. No one's gonna care about it and that's wrong. I mean, it could very well blow up in your face. You gotta be careful about those things and get, know, executives need to be to know, you know, what the potential complications are. So, yeah. Jr (11:54) Yeah, that makes total sense. Bruce, when I think about the expectations on the trade professional, one of them, I think, is the ability to interact with the C-suite. I think in days past, if I happen to see the CEO in the elevator, was like just, my gosh, the rock star, the CEO. Today, I need to be having conversations every week. I I need to be able to communicate. need to be able to. comfortable in operating in that sort of C suite. I think that's one of the expectations that's completely changed for trade professionals. Karen Murphy (12:28) And that's another skill, to be able to quickly and be articulate in what the problem statement is and how you're going to mitigate it. You've got, you know, most CEOs or C-level folks have less than a 15-minute attention span. And again, in global trade, I see a lot of people that go on more about the wall. and less about the how. So we've really got to change that and even coach folks that are in these situations where they need to be able to articulate the problem and how we're going to mitigate it quickly. Jr (13:05) Absolutely. I used to have the rule, it was the scrolling rule. Because every C-suite person I knew read all their messages on their phone. And so if they have to scroll more than two finger pushes, it's too much. Right? mean, every C-suite has his phone in the meeting and they're looking at it. So that was always kind of my take. Let me ask you this. ⁓ I'm just kind of curious. Where do you think people might be overreacting or kind of misreading this moment in time. Karen Murphy (13:35) Okay, I can start. I think there is a panic because of these huge numbers with respect to percentages for duties especially. typically in high tech with which all three of us have played in primarily ⁓ in our careers, duties were zero. And now, you you see 25 % on top of 10 % on top of, know, and I think that is a huge change. And so that's where people are kind of panicking for their cost of goods sold because contrary to some beliefs, it's still is embedded in the cost and then the margins are shrinking as companies try to absorb these. extra costs that they hadn't planned for. Also transportation. mean, I've been seeing a lot of articles and information around, you know, again, the cost of gasoline, whether it's diesel, whether it's regular, and all I just keep saying to people, I got electric car. Bruce, anything on your side? Bruce Jackson (14:45) Yeah, so one of the things that I've my mantra has been we're on it when it comes to the tariffs. That's a great example because that's something that's had a significant impact since last year and a half at this point, almost a year and a half. And I would say we're on a roller coaster. What do you do when you're on a roller coaster? You don't jump off because there's been a tendency to want to make decisions. change supply chain, what do we have to do, all these changes. And particularly if you look at the IEPA tariffs, you could argue, well, okay, if we made a whole bunch of supply chain changes and then the Supreme Court tosses them out, tosses out the tariffs, yes, you've got a potential reclaim, you've got to go and get the money back. But all in all, if you've been made a bunch of supply chain changes, that was kind of potentially wasted effort. And so you don't want to be making these decisions in a, just a reactive. And that's probably the main thing is I think there's a tendency in this environment to be very reactive. And yes, you need to do that to a degree, but you also need to try to be proactive and think about, okay, if this is the new reality, what are we going to do? manage that going forward because we can't swing with every move of the pendulum. We're going to have to just step away so we don't get bonked by it and try to find a way to manage through. that's, know, don't Things happen, you know. You can have, I remember back in 1990, just my first day of vacation and Iraq had invaded Kuwait, you know, and I'm like, okay, all of a sudden you've got a a whole, you're looking at embargoes, you're looking at all kinds of things, trade actions taking place. The employer I had at the time had people in Iraq, they were trying to get out. That was the priority number one is protect your people. So at the same time, you're trying to manage, who has orders on their way? Who has people on the ground working on a project? mean, all those things come, you have to manage that. You can't anticipate everything, but you need a plan for how do we react to things more than we do the actual solution for every problem. I mean, I think we need to be a little bit more measured in how we react to some of this stuff. Jr (17:03) Yeah, Bruce, my experience whenever I've been on a roller coaster, one of the things that people do a lot is scream. We hear a lot of scream. Exactly. But I like your point. And I think we spoke about this back in the fall. I talked about the concept of percolation. Sometimes you need to let things percolate rather than, like you said, just jumping to everything that comes your way because otherwise you're running around like Bruce Jackson (17:09) Yeah, yeah, yeah. And we're seeing that. Yeah, yeah, yeah. Jr (17:31) What's the phrase? A chicken with his head cut off? Yeah. The hamster in the wheel. Yeah, exactly. Karen Murphy (17:33) this. Bruce Jackson (17:34) Right, no. Karen Murphy (17:34) or a squirrel in a, or a hamster in the wheel. Yeah. But yeah, yeah. But also just slow down. Don't panic. You know, what did the British say? Keep calm. ⁓ This too shall pass, but it's just a new reality. You just have to factor it in. But the cost of moving supply chain, doing some of these activities that people were panicking about, the scream, Jr (17:46) Then carry on. Yes. Karen Murphy (18:00) that is it really worth it? You you've got to figure it out. Yeah. And again, people are inherently, I would say, I'll use the word lazy, especially the senior guys, they just want a quick fix and make it go away. And that may or may not be the best way to operate in this roller coaster environment that we're in. Bruce Jackson (18:02) Exactly. They want to know how to respond to shareholders and, pardon me, they want to know how to respond to shareholders and media analysts questions and things like that. So sound bites are good. Yeah. Jr (18:24) Yeah, and I think that's what. Karen Murphy (18:34) Yep. Jr (18:34) I think that's the value that the two of you really bring is you guys have been working in this area for so long that you have this sense of when to move quickly and do something and when not to. And I think that's something that is learned over time through experience. I we've all been through that. I remember myself running around doing things, but over time you learn what really matters and what doesn't and where you need to be proactive and have a plan and where you need to. to react to something quickly. I think those are, yeah. Karen Murphy (19:03) And then one more tiny comment. At one point in my career, my CFO said, Karen, you're always so positive. What if, and I go, okay, I'll have a plan B, but if I, if I plan for plan B, then you'll be mad at me. If I, if I am a gloom and doom. So I'm really trying to have a plan to mitigate what's going on. And if it doesn't work, then okay, I'll be back. with gloom and doom but for now I'm gonna tell you how we're gonna do it and he but what is I got no I'm not talking like that because you won't listen to me because they don't they shut off when you start saying no and Jr (19:45) know, one of the, I think, misconceptions or panic, I don't know if it's panic, but just seems to dominate a lot of our minds and thoughts these days is the role of AI in trade. And so let's talk a little bit about AI. What's a misconception that you're seeing about AI in trade today? Bruce Jackson (20:06) I mean, I will say this, that early on, you may recall, was a couple of years ago now, there was a case, a situation where there was a company that had put some code out into an AI tool. And there was concerns whether they had shared customer data and whether they had proprietary information they'd put out there or even export controlled information. And this was a case, there was some press around it. And so internally within my team at the time, we were like, okay, what does this mean? You know, and then we had a lot of questions coming up from the legal side of things and from other parts of the business engineering communities. want to be able to use these tools, but we need to have some guidelines around it. So I think initially it was concerned, are we violating any export control laws or sanctions laws or whatever by using these things to begin with and what the parameters are. And that has shifted some as companies have worked with the providers of these tools to have custom versions that are within their own little, under their own little umbrella, their own little bubble, so they can protect their data and those kinds of things to seeing how we can leverage that. know, trusting it, those who've used these tools understand that if you trust it too much, you find out, oh, it's a hallucinating a ton. they do have a significant ability to deliver support to your function. And I think there's a lot of value there. But I do think you can't just trust these things. And the promises over, yeah, these things are just gonna take care of all your trade compliance needs or any functions needs is, I don't think that's a reality. I think we have to be careful about how we use these things, but also embrace. the new technologies and find ways in which we can leverage them. mean, me personally, I used to be a consultant and wrote a lot of procedures and process documentation and things. you know, philosophically, while those things are still important, I feel sometimes they burden an organization. And if you get too consumed with that, it can just put a bit of drag. Is someone going to read it? Is someone not going to read it? mean, You need to find effective ways to convey their requirements, but you can leverage AI to help you come up with documentation so you don't have to burn a lot of time doing that. You still have to check it, that's one practical way. Also, when these things break that you see in the press, some big change, you can do a quick, you can use these tools if you know how to ask the questions correctly. to get you a response you can use quickly with the C-suite to give answers if they are desiring that. Jr (22:48) Right, right, What say you, Karen? Karen Murphy (22:51) I recently got back from participating in a three-day International Compliance Professional Association conference in San Antonio, and probably two-thirds of the agenda items were around AI and the use of tools for trade compliance processes. Most of the vendors of the sessions I went to were not saying it's a lights out process. In the beginning of AI probably when I got it was first doing consulting six years ago, we were saying for certain, come on. So the number one piece of trade processes that take a lot of time and a lot of efforts, classification. And so back then, people were advertising lights out recommendations from an algorithm of over 90 % or a certain number of confidence. You should just let it go. But now people are coming up with other processes like sanction parties and things like that. But there's a lot of limits. It's very good if you have a list. But if you don't have a list, it's not going to be able to tell you. So these were things that a lot of us have been taught. talking about and it all sounds cool that to be able to use your trade professionals for more complex activities, but you have to be very cautious that you don't go lights out on certain processes without supervision. But then how much supervision and then can you teach the algorithm or the agent to get better? at predictions, it's tough, especially with this roller coaster. And even recently, Customs issued some guidance around the use of AI tools in executing Customs business. if a company is relying on that instead of a person or a licensed Customs broker, et cetera, you will probably... fail an audit or be under audit. So I think that's where we have to really balance and pick the processes that these tools can really help us. Like Bruce was saying, documenting policies and procedures, but actually making decisions is something that everyone should tread cautiously on. Jr (25:09) Yeah, what I'm hearing from both of you is that AI is a wonderful tool, but it's that, a tool, and you have to use the tool in the appropriate ways, right? And rather than just handing over your compliance program. So I think that makes total sense. And I've spent a little bit of time this last month exploring AI and its features. You know, up until now, we've been really kind of diagnosing the change in our environment and really trying to understand what has changed and what does that mean for trade professionals? You know, before we move on to more of the prescription and exactly what leaders and professionals should do, let me ask you one last question in this section. And that is, and I'll start with you Bruce this time and then go to Karen, but what part of the trade role is changing the fastest and what part isn't changing fast enough? Bruce Jackson (25:56) What's changing the fastest? Well, that one's tough. I I started out as an export control guy for many years, right? And then I got into some of the imports and sanctions things later. what's changing the fastest in my view is simply the need to expand what the definition of trade is. I alluded to that earlier, right? It's not just There are things that impact the supply chain that, you know, security around data, security around the products that we buy and that we sell and how they function because electronics particularly not to over, I mean, overemphasize microelectronics, but they are pervasive. They're finding their way into everything. And the risk that some of those could be compromised is a big impact. And then of course you have a lot of initiatives from different governments that don't on their surface look like they're trade related, but they ultimately become that. If you put a restriction on what you can use in a certain country, well, those things, where are they coming from? If they cross borders physically or virtually, they pose issues. So understanding those impacts. So I would say that's the big thing. And the second half, repeat the second half for the questions because I went long. Jr (27:14) A second I have the question, is, what's actually not changing fast enough? Bruce Jackson (27:19) Yeah, well, in the field, I think we do need to become more dynamic and recognize the broader scope. And I think the mindset is not changing quick enough necessarily. I think it depends on your organization and the maturity of your trade team within companies and how connected you are across the enterprise as well as vertically. And if you're in a small company, You know, you're kind of it if you're probably and I've been in that role too. I've not just worked in large corporate enterprise, but also startups, smaller companies. And so you're very dependent on, on building rapport with those in your greater sphere of influence or those that you need to work with. So they take some ownership as well, since you're only one or two people, maybe in your team. So broadening your scope, I think is important and understanding the impacts and getting your leadership to understand. the trades important to have at the table. Karen Murphy (28:16) So I was writing notes down as Bruce was talking and I'm like, wait a minute, I was going to say that. you know, there's two pieces. One is the revenue component, which is exports. And that gets a ton of attention. If there's a risk to being able to sell something, or you can't rely upon being able to get something to a customer who wants it. And then the other is customs or. Bruce Jackson (28:22) Sorry about that, Karen Murphy (28:40) imports, which impacts the margin. It doesn't get as much attention because it's really up to the company how they play that one. So what I'm seeing that's moving too slow is strategic thinking. We have a lot of really good trade analysts out there in the marketplace that know how to keep the trains rolling or the ships moving or the planes full of stuff. but it's thinking beyond the day-to-day that is moving too slow. But then people will argue, but we can't do anything until it happens. I disagree. And so I think that that is something that's happening too slowly in our organizations. But what's moving too fast, we talked about it earlier, is the transactions, the actual work that has to be done to export something or import something. is way too fast. And even when I talk to folks about, you know, doing post... Import audits to make sure everything's correct or doing a pre shipment review before you file your exports Sometimes you have time sometimes you don't so people are moving, you know back to more Sampling and things like that. But if you pick the wrong samples, so ⁓ That's kind of my vision or view of what's going on right now strategy is too slow and complexity in the transactions and the way we manage the transactions is really really fast and no one has any time to let you slow down those transactions either. Jr (30:21) Yeah, that's really well put. I love that sort of dichotomy of the slow and the strategy, which needs to be much quicker, and then the pace of the transactions. And for me, I'll just say, I remember back in the days, early days, that supply chain decisions were made all the time and trade was never involved. was just, we'd discover something, we're shipping over here now, or we, you know, we discover, I remember the same with &A, I used to frustrate me no end because they'd have a deal all done. It's like you didn't consider the trade issues. I think what's shifting today is the trade is becoming a critical part of those decisions, right? And that goes to your point, Bruce, of why trade is involved in so many things now, because we have to be at the center of those strategic decisions to your point, Karen, about strategy. And so I just think, I think what's happening slowly is I think it's slow for us to come to grips with that and then change our actions and our behavior. And instead we focus on what's happening fast, which is all the transactions. And somehow there's gotta be a way to balance that and to get more in front of these things. So anyway, just my thoughts, Karen. Karen Murphy (31:31) Yeah, just, ⁓ when we did our podcast, talked about the department that people reported into and most companies when they're focusing, especially on and a or doing something new in a new location, it's all about tax. They don't want to overpay tax. So tax has always had a big seat at the table. Well, now they want to make sure that they can execute the transaction timely and quickly if they do things and. Jr (31:41) Mm-hmm. Yes. Karen Murphy (32:00) there's no risks. And so that's why trade's been invited to the table. But some of the groups have moved to other departments that may not have the seat at the table that tax or finance did. And so that's where I think some companies might be at risk for not getting the right trade people in these discussions early to avoid a mistake or a slowdown in those famous speedy transactions. Jr (32:28) Thank you, Karen. That's an excellent point. Well, we've run out of time. And so we're going to wrap up here. Thank you again, Karen and Bruce, for your great comments. This is Jeff Ritner, and you've been listening to Ritner Reflections, a forum for exploring the dynamic, complex, and essential nature of cross-border trade, and a space to reflect on the deeper questions that shape how we live, lead, and move through uncertainty. For part two of this episode, we will dig deeper into these new realities that are shaping the trade profession, and we will look at the path forward. Thank you again for listening, and we'll talk real soon.