What Is the Difference Between Global Trade Compliance Violations and Unethical Business?

Global Trade compliance is complicated when taking into account your company’s extensive supply chain. Your company needs to ensure the payment of duties, taxes, and tariffs on imports in multiple countries, and you also must consider the implications of exporting rules and regulations to these countries with products that may have been manufactured in more than one country.

You may not be legally able to export the same product to different end-users in the same country, and there may be specific restrictions on re-exports or even in-country transfers of the product that was legally exported. However, the financial gain from circumventing global trade compliance statutes can be intriguing, and while it may not violate export laws specifically, it does create ethical problems. Consequently, you need to understand the difference between trade compliance violations and unethical business practices.

What is Global Trade Compliance and Ethics?

  • Global Trade Compliance:  Global Trade compliance is the process by which goods enter/import into a country in conformance with all import laws and regulations of that country. It is also the process by which goods exit/export out of a country in conformance with all export laws and regulations.
  • Ethics: Ethics are the moral principles that govern a person’s behavior or the conducting of an activity. A particular system of values and principles of conduct, especially one held by a specified person or society.

It is evident that trade compliance and ethics work together to establish a strong foundation of integrity as well as compliance that assists the organization in making good ethical business judgments and decisions and take appropriate lawful actions.  Unethical behavior within an organization will ultimately lead to issues of non-compliance to import and export laws and regulations.

For instance, an importer’s urgency while waiting on a shipment to be released by the customs authorities.  A manufacturing line is down and the part is needed to bring the line back up.  You are losing money with each hour the line is down.  It is known in that particular country that a “facilitation fee” is an acceptable practice to expedite the customs release of a shipment.  You order a representative of your company to meet with the customs officer handling your shipment and solicit advice as to how the shipment can be expedited.  The customs officer offers to release the shipment for $50.00 USD.  Do you pay for it?  Is it ethical?  Is it legal?

Many cultures throughout the world dictate what constitutes ethical practices.  A practice in one country may be completely acceptable while not acceptable in another country.  To avoid confusion and ensure “legal” compliance it is probably best not to entertain paying a “facilitation fee.”

If you are a U.S. importer or exporter, you may certainly be in violation of the Foreign Corrupt Practices Act (FCAP). One of the biggest criminal fines since the U.S. Department of Justice began to strictly enforce ethical international business practices were paid out in 2010 by BAE Systems PLC, a corporation based in Arlington Virginia. BAE Systems was charged with a number of FCPA and other violations.  In pleading guilty to the charges brought forth by the U.S. DOJ, BAE Systems was required to pay a criminal fine in the amount of $400 million.

There is certainly a conflict between remaining compliant and unethical behavior, and in many instances, unethical behavior can lead to non-compliance and significant negative consequences.

What Is a Global Trade Compliance Violation?

There isn’t such a “one shipment/violation-fits-all countries globally” actually.  A trade compliance violation occurs when a company, person or third-party entity knowingly or unknowingly commits an act that violates aspects of a recognized and established rule or regulation governing the movement of goods across a country’s border.

U.S. rules and regulations governing international trade is a matrix made up of many agencies, including but not limited to the  Export Administration Regulations (EAR), State Department’s Directorate of Defense Trade Controls, the Treasurer’s Office of Foreign Assets Control and executive orders such as the International Emergency Economic Powers Act (IEEPA).  Where you fall in the U.S. export control matrix depends largely on the products’ jurisdiction and/or classification.

In the international arena, exporting to and from any country without an in-country experienced trade professional with local knowledge is just walking blindly through a field of land mines. In addition, recordkeeping requirements vary from country to country and failure to maintain appropriate documentation of customs clearance, licensing and denied/restricted party screening for the required time frame, in hard copy or electronic version if allowed, will result in a trade compliance violations in one or more of the countries affected by a cross-border shipment.

What Are Unethical Business Practices in International Trade?

While there may be financial, criminal or civil penalties for violations of international trade compliance, unethical business practices are those that create an unfair advantage or violate the ethical restrictions of a country, person, place or idea. Essentially, unethical business practices can be a precursor to a trade compliance violation.

What Can You Do About It?

Commit to effective corporate governance, adherence to the law, and a culture of ethics and global trade compliance throughout the organization. Enhancing the company’s practices and setting new standards should be ongoing, and the company’s corporate governance guidelines reflect this evolution.

Work closely with operating and legal teams based regionally in your business units to ensure that the company’s activities adhere to applicable laws and to company policies. The organization should offer numerous channels to educate and counsel employees, as well as confidential avenues to raise questions or report alleged violations of law and company policy. It investigates these items promptly and reports to senior management as appropriate.

Connect with us today to learn how Flash Global can help with all aspects of global trade compliance.


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