The one constant in international trade is change, and it’s happening at a breakneck pace. New tariffs, shifting alliances, and renegotiated trade agreements have rocked markets and supply chains. Trade compliance was complex enough before, but now compliance teams have to be extra vigilant.
Compliance problems can hurt your bottom line and damage your company’s reputation. However, trade compliance done right can give your business a competitive advantage in crowded global markets. These three strategies will help you manage and mitigate your trade compliance risk.
1. Follow the Rules
No shortcuts allowed! Import/export requires a tremendous amount of paperwork, and there’s no room for error.
A single documentation mistake can put a shipment in customs limbo, unable to move through customs or be brought back into its home country. Worst case, the local authorities may seize the entire shipment, auction it off, and keep the money. For example, the U.S. Department of Commerce warns:
“Products held at customs in Brazil can be assessed high fees. Brazilian Customs frequently seizes shipments that appear to have inaccurate documentation.”
Consider how you would explain that situation to your customer — or rather, your former customer.
Culture Trumps Process
Following the rules could mean shifting your organization’s internal priorities and focus toward compliance. Cultivate a culture of accountability by:
- Instituting formal processes for compliance within your organization.
- Creating Export Management Compliance Program (EMCP) and Import Management Compliance Program (IMCP) teams to monitor regulatory changes.
- Tracking internal compliance through documentation and audits.
- Empowering EMCP & IMCP teams to find and correct problems before a shipment is delayed (or seized) at the border.
Avoid Doing Hard Time
Internal compliance helps mitigate risk in other ways as well. The Bureau of Industry and Security looks at a company’s commitment to trade compliance when assessing financial penalties and criminal prosecutions for export violations.
Fines and penalties add up quickly. In December 2012, Huaxing Construction pled guilty to illegally exporting high-performance epoxy coatings and paid the maximum criminal fine of $2 million. In extreme cases, violations can land company executives in prison.
With so much on the line, setting up in-house trade compliance teams can seem overwhelming — particularly to start-ups and other small-to-medium sized companies. That’s why many rely on partners like Flash Global to manage compliance. Flash Global has experts in over 80 countries who help deliver end-to-end supply chain solutions and global service supply chain management to companies of all sizes.
2. Choose Your Partners Carefully
The best internal compliance team can’t protect your company if your partners are breaking the law — even if you’re only tangentially involved.
Guilty by Association
In 2011, Federal Express paid a $370,000 civil penalty for aiding and abetting unlicensed exports. To the layperson, FedEx’s involvement might seem like collateral damage. After all, the company business model revolves around accepting packages for shipment. However, FedEx employees failed to verify that those shipments and intended destinations complied with U.S. law. Guilt by association is still guilt — and it’s expensive.
It’s important to remember you bear some responsibility for every link in your supply chain, both in-country and abroad. Make it clear that all supply chain logistics partners follow applicable laws and regulations.
Requirements vary by country and so do cultural norms. In some countries, bribery is just part of the cost of doing business. One extreme example is Brazil’s biggest construction company, Obebrecht. In 2016, the company and a subsidiary agreed to pay more than $3.5 billion in fines in what the U.S. Department of Justice called “the biggest international bribery case in history.”
Boots on the Ground Support
Brexit fractured the once-solid European Union. The venerable NAFTA trade agreement is on shaky ground. Then there’s China. But no matter what, your customers, suppliers, and partners expect you to deliver on time, manage your service level agreements, and do it with aplomb.
Even if you do everything right, political and social movements can create the type of uncertainty and instability that raises costs and disrupts supply chains.
Assembling a team fluent in both the language AND culture can better prepare you for the unexpected. This becomes an even bigger competitive advantage with in-country partners providing valuable insights and visibility into changes taking place.
3. Automating Processes & Tools
Everyone needs access to the most recent, accurate data. Take an end-to-end approach to upgrading your trade compliance and supply logistics management. Move beyond the silos of data created the past when each department kept data in individual spreadsheets or databases.
Today, nimble, compliant organizations use supply chain management systems to consolidate all data and provide transparency and end-to-end visibility.
One advantage of modern supply chain management technologies are proactive alerts and notifications sent to key personnel when action is needed to correct problems and avoid delays.
These systems also digitally organize data and create trade compliant paperwork electronically, automatically reducing trade compliance risk.
Built-in Compliance Management
Trade regulations are complex and every-changing. In 2017, the World Customs Organization (WCO) implemented 233 amendments to its Harmonized System Nomenclature. With an automated system, you can monitor and implement regulatory changes in real time. One person (or group) can manage updates to give every user access to the updated guidelines.
Holistic data systems can also give you a competitive advantage. For instance, our partners use FlashTrac to identify and manage supply chain issues. It provides a real-time view of all field inventory, orders, and third-party shipment tracking.
An end-to-end automated supply chain solution gives you the freedom to concentrate on growing internationally without devoting undue resources to compliance or risking regulatory problems.
Making Better Trade Compliance Decisions
If your organization has concerns about, or is struggling with, the import of warranty-repair-related products into foreign countries, Flash Global can help.
To discuss your situation and get more information on Flash Global trade compliance services, simply fill out the form below and one of our trade compliance experts will contact you.