Podcast: Trade Compliance in the 21st Century with Amy Morgan

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In this episode:

Amy Morgan, VP, Head of Trade Compliance at Altana Technologies, joins Host Brian Glick, CEO of Chain.io, to discuss:

• Amy’s journey in the supply chain industry
• The definition of trade compliance and recent paradigm shifts
• How data elevates trade compliance
• The evolution of supply chain compliance
• Altana’s compliance work with customs

As the VP, Head of Trade Compliance at Altana Technologies, Amy leads the development and implementation of innovative solutions for the global supply chain. Amy leverages over 20 years of experience in international trade, compliance, leadership, and strategy to help governments and the private sector build safe, resilient, and sustainable supply chains. She is a licensed U.S. Customs Broker and a member of the Trade Support Network.

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Episode Transcript

Brian Glick  00:04

Welcome to supply chain connections. I'm Brian Glick, founder and CEO of Chain.io. In this episode, you're gonna get to hear two nerds really nerd out because we have Amy Morgan from Altana. And Amy and I are both old school customs and trade compliance nerds. So we're going to talk about the application of AI in that space and some of the cool things autonomous doing and some of the cultural changes that we've seen across the trade compliance side. So for all of you supply chain people, Here's a peek behind the curtain on the trade compliance world. Hope you enjoy the episode. Amy, welcome to the show. Thanks, Brian. So why don't we start with the basics, tell us a little bit about how you got into the industry and how that led to Altana?

Amy Morgan  00:55

Yeah, so that's a fun, very exciting story. But to tell it, I have to go back to the 90s to tell how I got into this. So one of your previous guests said something that triggered something in me like I can't remember who it was, but they refer to themselves as like the Kevin Bacon of the global supply chain. And that inspired me to think that I'm kind of like the Forrest Gump of trade compliance, because trade compliance really wasn't a thing until the mid 90s, with the Moto 293. And I got into trade compliance in the 90s. And I've written about that wave since then. So I was, you know, imagine, it's 1996. You've got Amy and college, studying political science with big political ambitions, took one political econ class that had to do with globalization, like a chapter on globalization. And it was a hot buzz term because Thomas Friedman's book had just come out. And I was hooked from that moment, like the whole concept that businesses could be connected around the world in the spirit of producing one good. And then that diversity by sharing that production process was actually less expensive and more economic than producing something yourself, just for some reason blew my mind. So I just pulled that thread. I ended up interning with the World Trade Organization. When they came to Seattle in 99. interned at the Port of Seattle, I did some work at the Seattle World Trade Center. I got my first.com experience in late 99, with an online transportation management company. So I just kind of kept going from thing to thing to thing, writing, the moment where globalization was super hot. And the new technology, the new technology was always coming out. It's just, I've just continued to walk through all those doors. So I got my first real trade Compliance Job at Nordstrom, where I assigned tariff codes to apparel and footwear, that was my job. That was it. And I'm really good at it now, thanks to that experience, but it was Nordstrom that took me to like, oh my god, this is super fun. But I want more. I go to Costco Wholesale also in the Seattle area. Costco is great. It got me exposure to more products, it got me exposure to Canada and Mexico. This is amazing. I need more. But then I went to Amazon, Amazon in 2009 2010 was not the Amazon of today. But it was everything. If I wanted the world, I got the world, I got every product you can imagine in every country, you can imagine. I got to create import operations in India into Brazil. I mean, this was crazy. This experience was wild. But it was rough, as you can imagine. So let's fast forward to 2014 when all that stuff I saw at Amazon, like the rise of cross border, ecommerce, and more small merchants wanting to do international trade activity. And I had my own idea. So I had to start up on my own for a second, I took this crazy geeky idea about how to automate trade compliance for everybody, how to democratize it, and I took it to a Startup Weekend, you know, those incubator events where you just kind of hack something out over weekend. And I ended up winning first place with my geeky little trade compliance idea, but I couldn't raise any money. So any co-founders that have built companies and have successfully raised money, I have complete respect for you, because that is so soul crushing to hear that your amazing idea is not in fact, a great idea to them. But through that experience of trying to raise money, I found out that right in my backyard was this tech company. Avalara. Some of your folks may know them. They're a tax software company, and their focus at the time was on sales tax, but they wanted to do international sales taxes. So they wanted to support that rise in cross border ecommerce as well. So I went to Avalara to build their cross border business unit to create a landed cost calculator. And there's a whole bunch in that. But that 's where I first built, I got to be the real CEO of that business unit and really create that product, sell that product, and push the envelope of trade compliance further on that EECOM wave. And then I left there for reasons we can discuss some other time. But, and I wasn't going to do another trade thing, you and I, we weren't going to cross paths, I was going to go teach Pilates. Fun fact, when I left Avalara, I got certified in this very intense form of Pilates. And I was just gonna go teach it, I said, I'm done. I'm hanging up my Tariff Schedule, and I'm gonna go do this for a while. The pandemic had other plans for everybody, right? And during that time, I came across Evan Smith at Altana. With this really wild and incredibly progressive approach to how we can start thinking about trade compliance from an entirely different perspective. And not just trade compliance. It was a global supply chain all up. But I was completely amazed. And it blew my mind, I'd never heard anything like it. So much, in fact that I had to be a part of it. I said, You're crazy. This is never going to work. But if it does, we will change the entire way people do international business. Wait, we can change how companies make choices about what suppliers they work with, and what products they trade. And I'm leaving trade compliance better than it found me. So I had to do it. I had to join. And it's been three years. And I'm so glad I walked through that door. So I kind of took you on a journey, right? I started in your niche. Retail row, the Econ wave, and now I'm in artificial intelligence and spray. Awesome.

Brian Glick  06:45

So I really, as a fellow trade compliance nerd, really just want to ask you about your opinions on some of the vagaries of IFRS footwear invoices, but instead, because I feel like that might not be great for the rest of our listeners. Let's go through some basics first, because, you know, in supply chain, trade compliance as a topic is deeply misunderstood. And I know if you walk into some companies whose trade compliance means how do we figure out the lowest duty rate? In others, they think it's part of ESG. And, you know, it's all sorts of things to different people, right? Like, how do you define trade compliance?

Amy Morgan  07:25

I used to refer to it as the business of doing international trade activity, like, is it really generic, but it's interesting the way you put it. So the way I would define it now is how do I keep my company safe, and make the world a better place? Now, that might be a little controversial. I've never actually said that out loud to anybody. But if the last couple of years have proven anything, to us, it's that tree compliance is more than just being an enforcer of the regulations themselves. Now we're seeing humanitarian and environmental policies make their way into those regulations. So we have to enforce them. So it is regulatory. But in doing that, we are helping make the world a better place, we are doing our part to use trade as a vehicle for good rather than a vehicle for, you know, it's bad for the earth. And it's terrible for humans, and it's just become this really ugly concept out in the world. And it doesn't have to be that.

Brian Glick  08:29

So that view of trade compliance, right and of attendees compliance, right. So it does have this kind of regulatory function to it, you know, which I think day to day, you know, you think about how do I classify products, you think about? Am I doing my vendor audits? You know, am I dealing with the right people? And I know, that's a lot of what Altana focuses on, kind of, how does that interact with the general supply chain functions that your customers like? How are those two things that used to be sometimes supply chain would report to the COO and Compliance would come forward to the CFO, and never the two shall meet? That's not the world anymore. How has that changed across you know, since when you were at Nordstroms?

Amy Morgan  09:14

I mean, you said never the two shall meet now, I will make a quick correction that back in the day in the olden times, although they operated in silos, the supply chain needed compliance. Yes, it wasn't the other way around, right? Or well, it never was the other way around. Supply chain needed compliance because without compliance, your stuff would delay unexpectedly or costs would go up or you'd miss a particular manufacturing target. It would cause your entire process to break down the supply chain needed for compliance. So they didn't meet their Yes, I'll say though, what we've seen specially it started before the pandemic but really through the pandemic and all the things that broke down starting in late 1920 20. We've seen this convergence of Supply Chain and compliance come together where now they're working in tandem. In some cases, you see compliance is needed before supply chain, we see that with the UFL pa where now supplier or a

Brian Glick  10:11

procurement. I'm gonna pause you there, what's the UFL PA.

Amy Morgan  10:15

So the we're forced labor protection act, I apologize, I'm so used to doing these things with other compliance folks, I forget sometimes. So with this new legislation that requires that companies know who their suppliers are, and who they do business with, before they engage in activities with them requires compliance, it is a compliance function, because that law, um, that requirement is something that your trade people are having to enforce. So what I have seen in the last three weeks of customer calls, it's come up multiple times, where you have compliance departments that report up through the supply chain, I'm shaking my head. Now, for your listeners who can't see me, I can't help it. What you see happening now or back in the day, it was a conflict of interest to have a trade compliance report up through the supply chain because you're enforcing an agenda. And now that's really common, because you need trade compliance to make supply chain work, if anything, maybe supply chain should roll up in trade compliance, but that's not going to be popular. Sorry, sorry. Maybe you guys spit out their coffee just now. And that was a joke. Or was it? I don't know, was

Brian Glick  11:21

it? Well, actually, it leads to kind of an interesting hypothesis that I developed in the last five seconds. So you tell me what you think about this, I would argue that the supply chain teams we worked with 20 years ago were cowboys, right? Their job was to get the product at the lowest cost, the place it needs to be damn everything else. There was no engineering to it, there's no discipline to it, it was just making the phone calls kind of, you know, Tom Cruise at the beginning of Rain Man, for anyone who's old enough to remember that and his issue was with customs. But that was kind of the attitude. And that supply chain has grown up and matured to the point where it can be trusted with compliance, though, because it's more about advanced planning and structuring and network design that it is about, I get a free pass to fly to China six times a year.

Amy Morgan  12:12

That's an interesting hypothesis, right? Like, I haven't worked for an importer, exporter enterprise since 2013. So I'm a little rusty. But sure, I can see. And I mean, there's a lot more rules and regulations now that do impact the supply chain. But that's just as evidence to what I pointed to earlier and that with all these new rules and regulations, your trade compliance, people are the one enforcing them, which means you got to work really closely with the supply chain anyway.

Brian Glick  12:40

So tell me a little bit about AI. Not in a technical way, because that's not either of our jobs, but sort of like, what does it mean to go from a world where the way that we did trade compliance was very procedural, it was very, like, you have a decision tree and a hierarchy. And you classify the product based on an exact form that the buyer fills out. And it is very methodical and you do your vendor audits on a checklist, to moving to an AI based world where things are a little bit more emergent, or fuzzy, you know, or like you're finding things you're exploring, you know, you guys have this giant Knowledge Graph and you're exploring, you're encouraged to explore a graph and find new thoughts, instead of just following a checklist and an SOP. Like, how does that? How does that feel for you as a compliance person for your customers?

Amy Morgan  13:39

Yeah. So for me, when I first met Alton, and I first was exposed to this concept, my first reaction as a compliance person, as a licensed broker was to say, no, that's not how you do this, a machine can't do this, right. But to be honest, and to be very, very clear, I have built other types of models that have automated pieces of compliance before like classification and such. But AI wasn't really a part of any of those solutions. Alternative approach to AI, this blew my mind, what blew my mind was that we can use a machine we can teach a machine how to think like a compliance person. And I'm not saying replace a compliance person, but to think in the same way as a compliance person. And not only that, but we can use these machines to pull together billions of data points that a human can't keep in their head and the machine can consume all of those data points, and identify patterns, identify signal things that we may not pick up on with our checklists, right. An example and I know that your listeners don't know all about the things that I'll turn it into. But we've built this Knowledge Graph. And what that means is we've taken public non public private data, trade data billions of data points. So we've pulled it all together into a map, we like to call it the Google Maps of the global supply chain. And what that means is I can see all the different parties in the world that are trading with each other, what they're trading when they're trading. And with a knowledge graph like that, if I know that I'm buying a particular product from a particular company, I can see not only the description, and all the stuff on my checklist, just like normal, but I can also see what business, that company that I'm buying something from, or selling something to what business they're in. And that can help inform a classification or prediction. So all that context, takes my checklist and like and blows it up, right? No longer am I just subject to what you tell me on a piece of paper, I can go look up a particular company, and learn all the things that aren't on that checklist, I can see beyond the description, I can see what kind of components go into a product like that, to help make a better choice to help make a better compliance decision. So if I'm talking about classification, or if I'm doing a country of origin verification, or I need to audit something, I can use all that information to tell me what I should be auditing, to tell me if my product truly does qualify for a particular trade program, or if it doesn't, I'm working on something in my head right now about how to use that same data to help inform tariff engineering. So for those supply chain managers out there who do want to get the lowest possible duty rate at all costs, how can I enable you to do that using data as well. So it just opens up this whole new way for train compliance people to think beyond just what they're told. And what I say when I talk to folks is the role here, the way that we designed this and are using this AI is not to replace a compliance person, it's to elevate the role of a trade compliance person so they can do more strategic work within their companies. And they can be that partner that the supply chain team needs them to be. And that's what's most important to me. So I don't know, I hope I answered your question. I don't know, Africa did

Brian Glick  17:03

say that, you know, I, as a tech founder, and not, let's say, Change averse or risk averse. And when I saw, you know, Tata and Evan showed me some very, very early things that you guys are doing this is four years plus ago, it really did open up to me, I was like, this is cool. And this is very powerful, right? But I wonder or I'm curious kind of when you're out there on the front lines now with trade compliance, people who have been trained for their entire careers to be risk averse, right? Like, that's literally the job is to be risk averse, and keep those cowboys are in supply chain from doing stupid things that are going to get the company in the washer journal, what's the reaction to asking them to rethink their job or their responsibilities a

Amy Morgan  17:52

It's been a mixed bag, there are a lot of very forward thinking freight forwarders and customs brokers and service providers out there who are desperate for automation, they are dealing with more volume, more countries than they've ever touched before. There aren't enough humans, they can't hire enough people to do what's necessary to not only comply with the laws, but to also facilitate the movement of these things. So they are looking for solutions that will help them enterprise yes and no, like they're going to hire people. And then they're going to rely on their service providers. And I'm seeing more and more reliance on their service providers. So that's why I focus kind of on the service providers in this case. And when it comes to being risk averse, I would go so far as to say that AI could actually help you be more risk averse. So if you can train a machine to get a highly accurate result on something, and you trust that result to a certain degree, like say, you know, any HS classification prediction over 80%, let's just go with it. Anything less than that I want my people to look at. So now your people can spend more time on the things that are likely to be risky than on what's not. And I use classification as an example. But you can plug in any, you know, favorite compliance activity there. That's the whole idea is to give compliance and give supply chain folks a co pilot so that they can do more without just throwing bodies or money or consultants at the problem, right AI doesn't sleep machines don't sleep so they can continue to watch and they can look and they can seek out patterns and they can evolve as the supply chain changes or as new rules get passed. Or as you know, companies move they change their name, whatever the technology can see it and watch it, track it, monitor it over and over and over again, continuously showing you what you need to look at versus, you know, having to go classify the same product 20 times because it's a different color or something like that.

Brian Glick  19:56

Back to a higher level for a second, you guys recently announced, you know, work that you're doing directly with US Customs. Alright, big announcement, very important for your company. This is the first time in my career that I can remember a company bringing the same or a similar technology solution to both the enforcement agency and the parties that are being enforced, right, that you're bringing this graph to everyone, which theoretically is a win win. But how do you guys think about it? Or how do your customers think about it? Or what's the conversation in the office,

Amy Morgan  20:36

That's a win win, it's a win win win. And actually, like, it's good for the Enforcer, it's good for the enforcee, and it's great for, you know, all time having the right technology, the right time for the right problem. And that's what we talk about with the enterprise folks as well. A lot of the events I've been to lately have to do with forced labor and that UFL pays the weaker forced labor protection act and companies, there's a lot of anxiety around how to comply with it. One of the things they're most anxious about is not knowing what customs sees, and what customs is doing when they detain incoming shipments. So when we talked to an enterprise, or we talked to you, the service providers, if everybody's working off of the same graph, now you know what customers are looking at, you have a good idea of what flags they're seeing. So if you see any of those flags in your multitier network of suppliers, maybe you can take steps to mitigate or get ahead of it before something bad happens. You both like it, everyone's very sensitive like, Oh, my God, don't share my data, though. That's a whole different conversation about data security, but it's been really positive, it's seen as a good thing.

Brian Glick  21:46

So one of the precursors to that happening that I know you and I have talked about, kind of on the sidelines at some shows and things, is a real change in culture at customs over the course of our careers. Right, and this idea that, you know, in the 90s, and into the early 2000s, there was this attitude, I would say before September 11, especially of customs is the boogeyman, like the IRS, right, their job is to just jump out of the bushes and find you and they behaved that way. They did not engage like we saved a trade now that I don't even think people use that word. Right, in that sense of, you know, there wasn't this outward reach for customs to participate in, you know, trade facilitation. They were an enforcement body. And I know you have some thoughts on that. But can you describe what the difference maybe is, since we got into this and how customs behave without dragging customs?

Amy Morgan  22:41

Right. It's not negative. So I started my career in trade compliance, just as customers were finding their footing about what this means to them as well. So I will agree that, yes, they started an enforcement agency, that's their job, it was revenue protection, keeping the homeland safe, all these things in Yes. And then 911 happened. So then you've got revenue, now security on top of revenue, so now they're enforcing security things they're enforcing for revenue protection. And then the pendulum has kind of swung back and forth a little bit after 9/11 and swung back towards enforcement, we saw that with the China tariffs in the US where CBP had to go right back into revenue enforcement mode to make sure that those taxes were being collected appropriately. In recent years, we've heard about the 21 CCF. I don't know if the supply chain listeners on the phone are talking about the 21st century customs framework or their trade compliance people probably not. But this whole idea of modernizing customs to facilitate trade. Now, they can be an enforcement agency that enforces revenue protection and homeland security, but they can also help facilitate trade activity. So how, you know, they're looking at technologies that help them make better use of their resources that help them target and make better risk based decisions. So it's really been this public private partnership, really, since I'd say the very first customs private sector partnership was the mod act right when they shifted the responsibility onto the companies. And then with CT, Pat, and all of these security related programs, again, those are partnerships with the trade for data to keep the homeland safe. And we're feeling it again, this time in the spirit of trade facilitation. So I see these things as all good things. I see customs, they're trying their government agencies stuff moves a little bit slowly, but I do see them try.

Brian Glick  24:29

What in particular, are you excited about, you know, that's coming up or that you see on the radar.

Amy Morgan  24:35

So what I'm excited about when it comes to trade compliance stuff. I'm excited that I'm seeing and I'm a part of a narrative change. I'm excited that trade compliance is now working with supply chain folks. I'm excited that the business of international trade is now considered a strategic advantage and has a seat in the boardroom. I'm excited that the trade people are no longer nerds they keep under the stairs, and only bring out when they need to try to engineer something. And I, you know, I was that person. And you know, that's okay. But I'm excited that this whole entire narrative around compliance around trade around global trade in general is changing. And I'm inspired by the new attention, or maybe at least the concentrated attention on environmental and social issues, and how we can in fact, use global trade as a vehicle for good rather than see it as a way to import cheap stuff, and exploit people and our earth and all of that. So these are things that I find incredibly inspiring. And with more use of technology, and using more technology in our planning of our supply chains, and who our suppliers are, I have to believe, Brian, that companies will ultimately embrace this technology, and use it to make better choices. That is why I do this every day, because I have to believe that that will happen.

Brian Glick  26:04

And I do agree with you, because one of the kinds of paradigm shifts that I remember going through when I had my customs compliance software company, you know, this was around sort of the rise of Facebook in the very beginning of Twitter. But you know, sort of explaining to companies that a trade compliance issue was a brand issue. And certainly the social media has been around long enough, this is probably just obvious now, but it wasn't obvious at a certain point in time that, you know, having a factory that was non compliant, or getting hit with, you know, a multimillion dollar penalty in a foreign country for something that never touched the US whatsoever. You know, you brought something, you know, from China, to Saudi Arabia, and something happened, or whatever the case may be, that that was going to be globally impactful to your company, you know, was a new concept, you know, and it's why a lot of brands bought their licensees back to get more control over that, because it used to be and a lot of people didn't know this at the time, but a lot of us brands, if you bought their products in foreign countries, you were not buying a product from that company, you were just buying a licensed product. And it was manufactured separately, and it was produced separately under different circumstances with different compliance activities. And the industry has sort of snapped back from that that's not as common a practice anymore, let's say everything was that way. So

Amy Morgan  27:32

On that note, I would venture a little bit to that. Some of that is probably because of rule changes, new regulations and things but also just brand protection. Now, I'm not an expert in brand protection. But if I buy my running shoes here in the US, I have a particular brand I like and then I go by that same brand in Canada or somewhere else. And it's like a different quality, you've kind of lost me as a customer, right? So now that everybody in the world likes your market, I can shop from anywhere right? there was so much selection, you needed to take that brand control back just to maintain your integrity.

Brian Glick  28:06

And I always used to say it as you know, I'll try to not pick on any particular country here. But you know, Mr. X is licensing the CO of the country buys a product that has a consumer safety issue and four people die. If your brand's on that nobody at the Wall Street Journal is going to reference Mr. X's company. Why? In the article that is not the headline, right? The headline is the logo. That's right. You know, if that country was a world away, that logo never hit US shores before now it's there before you know it happened. And that's trade compliance in the 21st century, right? Yeah. Cool. Where can people learn more about Altana? What do you guys have coming up?

Amy Morgan  28:49

It'll be a busy fall. For us. We'll be out in the world a lot. I mean, everyone can go to our website, altana.ai I'm headed to G tech next week. So we're gonna meet with more trade compliance friends. I will be at the CSCMP edge conference coming up. I think that's October, actually, I know a lot of your supply chain folks may be there. I pitched this idea for an AI panel about how Supply Chain Leaders can use AI in practical ways. And I hope your folks come see us there. And we're starting to get involved in some of the Gartner supply chain conferences. So we're getting out there. And of course, you can always find me on LinkedIn. I have an opinion on everything. So I'm out there making comments. So

Brian Glick  29:29

Well, thank you for sharing some of those opinions today. And it was great having you on this was a long time coming. Amy and I are kindred spirits of the industry. So again, yeah. Thanks for being on the show.

Amy Morgan  29:39

Indeed. Thank you.

Brian Glick  29:42

Thank you so much, Amy, for what was just an awesome conversation. Always great for me personally, to get to dive back into my roots and trade compliance and I hope everybody else enjoyed it as well. It's always really cool to hear about companies that are using exciting new technology like AI in a very practical way to solve real world problems. Be sure to check out Alatana’s information. We'll have the link in the show notes. And as always, check out the Chain.io blog when you get a chance, lots of stuff in there including some stuff about emerging technology and AI for you to check out. So I'm Brian Glick, founder and CEO of Chain.io and I will talk to you next time

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