How Do You Mitigate Risk of Global Supply Chain Non-Compliance?
Historically, trade practices have been between few parties across minimal distances. However, the rise of modernity has created an increasingly complex and regulation-laden supply chain. As a result, the potential implications from unethical, illegal, or poorly defined trade practices have grown concurrently. For businesses and entities in the supply chain, from electronic manufacturers to parts’ retailers, failure to maintain compliance with all applicable statutes can result in total ruin for a company. Furthermore, some penalties may extend beyond financial punishments and include imprisonment and civil penalties.
(Read on for more about the problems, or to learn more about Flash Global’s trade compliance solutions, contact us today)
Fortunately, businesses can mitigate risk of global supply chain non-compliance through a few different measures.
Strong Policies For All Imports and Exports
Policies form the foundation of all ethical, legitimate business practices, and this fact proves true in international trade as well. Depending on the origination and destination of a given shipment, in addition to the mode of transport, differing countries have specific laws and regulations to govern how merchandize crosses borders. Therefore, shippers in these respective countries will have enacted internal policies to ensure compliance with such laws. However, policies alone cannot guarantee the compliance of exports and imports.
Export and Import Management Compliance Programs
An Export Management Compliance Program (EMCP) works to reduce the risk for violations of regulatory measures by actively ensuring all appropriate exportation policies are followed. Essentially, the EMCP is comparable to an insurance policy for a shipper’s business practices. If the shipper is routinely following appropriate regulations, which includes environmental regulations, the EMCP will serve only as an additional line of security for all exports. Similar to the EMCP, an Import Management Compliance Program (IMCP) mitigates risk of global supply chain non-compliance in relation to imports. As a result, the potential costs and penalties for shippers who use these programs is greatly reduced. When costs and penalties are reduced, consumers can reap the benefits of savings across the scope of the company.
Common Practices in EMCPs and IMCPs
Holding of Shipment Until Compliant
Although held shipments may seem costly, waiting until all appropriate compliance measures have been fulfilled will save time when compared to the potential implications from a violation. A compliance program must ensure all license requirements, classification measures, and proper vetting of purchasers are completed fully prior to shipment.
Thorough Analysis of Origination and Destination
As it pertains to US laws, the origination of some imports and the destination of exports may be subject to restrictions. For example, military equipment may not be shipped to unauthorized parties, and some imports are subject to quantity limitations. Furthermore, the actual purchaser must be determined before any import or export has crossed borders, i.e. the purchaser must be fully disclosed to Customs and Border Protection. This helps to avoid illegal transit of goods to irresponsible parties, as well as preventing violations of certain embargoes.
Experts at Each Destination
Obviously, adhering to international trade laws can be complicated. Laws for country A to country B may be simple, but if the package moves from country A to country C to country B, countries A and C may not have a problem. Unfortunately, this could be a violation of laws in country B, so the shipper must ensure the appropriate laws for each destination and origination are followed. In compliance programs, this is achieved through the placement of in-region and local experts to reduce the incidence of problems.
Incoterms and Audits of Processes
As discussed previously, Incoterms eliminate cultural differences from the equation of if business practices in one area will correspond to the expectations of another area. However, Incoterms are not capable of rational thought, so an additional measure must be enacted as part of a compliance program. Audits of processes of a regular, recurring, and frequent basis will help all parties in the reduce risk of global supply chain non-compliance with all appropriate statutes and regulations.
Realistically, violations of compliance laws may occur in international trade. The sheer volume of trade makes small to mid-sized businesses practically incapable of mitigating risk effectively. However, using a reputable, established, and extensive network of partners, such as a holistic service supply chain solutions provider, includes the benefits of an Import and Export Management Compliance Program. By taking on these measures, shippers and entities in the global supply chain can maintain adherence to global trade policies and avoid the costly effects of violations. The global supply chain is only growing; can your organization afford to continue operating under the illusion of yesteryear’s trade practices and compliance measures?
To learn more about Flash Global’s trade compliance solutions, contact us today
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