So, I’m guilty as charged. I have an M.B.A. (Masters of Business Administration) and to get one of those things you must learn oh so many acronyms. Else what point is the degree if you can’t talk in code and confuse others? But an MBA is not the same as MBWA. No, my friend, MBWA is far more important. And, even better, accessible to all! The term MBWA was famously codified in the seminal business book by Tom Peters and Bob Waterman, “In Search of Excellence: Lessons from America’s Best-Run Companies”, 1982. But the concept is nothing new to business. Check on what’s going on. Check on what’s going on not only when you’re expected, but sometimes more importantly, when you’re not expected: Management by Walking (or Wandering) Around. The whole purpose of creating and implementing a Trade Compliance Program is to keep an eye on things.
MBWA and Internal Controls
To first identify how things should be managed (your Policies, Programs, and Procedures) and then to make sure they being managed in that way. All the factors of a good internal control program are there to mitigate risks by keeping an eye on things. And what better way to keep your eye on various business-critical issues than seeing them with your own two eyes! So often, we sit in our chairs at our desks and look solely at information, data, facts, figures and documents. This is absolutely essential. But… But the information presented via our computer screens is merely a representation of an underlying tangible physical reality. How do we know that the information and data presented to us ‘on screen’ matches the underlying Truth? There’s only one way to be really sure: verify that the document matches the physical merchandise.
What to Look For
So when you get up out of your chair, and actually venture into the dark, mysterious recesses of the warehouse, what should you be looking for to support the myriad of requirements that comprise “trade compliance”?
Origin Marking & Labeling
All goods of foreign origin, or their containers, must be marked with their factual (non-preferential) country of origin. See Title 19 Code of Federal Regulations (CFR) §134 at https://www.gpo.gov/fdsys/granule/CFR-2012-title19-vol1/CFR-2012-title19-vol1-part134/content-detail.html So are your goods properly marked and labeled? Does any origin marking or labeling match the origin that’s been captured in your ERP system when you look at only information and data? Does the origin marking and labeling match the origin(s) declared to the Government on your export declaration and import entry documents? Does is match any preferential determinations your company has made for import or export transactions? Does the marking or labeling meet the 19 CFR criteria of being conspicuous, legible, indelible, permanent, and in English? Are there other potentially confusing country marks that have to be considered when determining ‘close proximity’ of your markings? Is the labeling sufficient for the destinations for your exports? Does it meet any domestic (Federal Trade Commission) requirements?
Solid Wood Packaging
The food and Agriculture Organization (FAO), an agency of the United Nations (“UN”), established the International Plant Protection Convention (IPPC) and its corresponding International Standards for Phytosanitary Measures (ISPM) Brochure No. 15 to prevent the spread of wood-borne pests around the globe. Virtually every country on Earth has adopted the measures as these pests harm native wood and other essential commodities. Each country has adopted the standards into their own regulatory framework. In the U.S., these are codified under the Solid Wood Packing Materials (“SWPM”) under the APHIS division of the U.S. Department of Agriculture, and administered at the borders by U.S. Customs. If your imports are on solid wood pallets, or in crates that have any solid wood, or have any other solid wood packing, these wood packing articles must meet the USDA requirements: they have to have been sufficiently treated for pests and they must bear the mark that proves that the treatment took place. If your imported articles are on or in such materials, look for this symbol to make sure they are conforming. Similarly, make sure that your solid wood export packaging conforms to avoid difficulties at destination, In each case, goods can be seized, destroyed, barred from admission, required to be returned to the shipper and/or subjected to fines and penalties.
Export Control Licensing
Especially if you trade in military goods, but in all cases, how do you segregate and/or distinguish licensable from non-licensable goods? Most companies that have goods that are subject to export control licenses have a fairly robust system for managing the electronic transaction of these goods. They have the goods classified with their proper Export Control Classification Number (ECCN) or U.S. Military License (USML). They have export licensing software to intersect the classification with a transactional destination; end-use and end-user profiles for potential buyers; and a system to seek and properly decrement any received export licenses. But how can someone in the warehouse picking and packing a shipment be aware and cognizant of these requirements? A simple system of segregating goods is useful. Adding some type of easily recognized mark or label is even better. Think about adding a bright green, orange, yellow or red sticker to any product that requires or may require an export license to prevent inadvertent unauthorized exports of such controlled articles.
Deemed Export Requirements
Does your company have any overt (or perhaps covert) controlled technology? Does any of your equipment rely on controlled technology that would require a license if shared with a non-U.S. person, a foreign national? What about tours of your facility to foreign nationals? What can they see from the aisles? Are you aware of your plant machinery and equipment the nationality of the machine operators who have access to them? Are any licenses required for potential deemed exports? Have you created a “wide-aisle” tour template and ensured that anyone giving a tour knows what areas are to be restricted? Have you physically segregated or properly concealed potentially licensable goods to prevent unauthorized deemed exports within your four walls? A caged area with limited access may be important for your business and products.
While having information at your fingertips is essential, really taking a look at what’s going on with your physical products is also essential, Not only must you exercise reasonable care/due diligence to meet your legal obligations, you also have to document what you should be doing and what actions you’ve actually taken. Turning a blind eye is a violation of law: under Title 15 of Code of Federal Regulations, you are require to meet a “knowledge” standard wherein you “know or should have known that a violation has or is about to occur.” See https://www.gpo.gov/fdsys/pkg/CFR-2012-title15-vol2/pdf/CFR-2012-title15-vol2-part732-appNo-.pdf et seq. Do you have documented policies and procedures that support your internal controls for these issues? Can you prove that you did your due diligence and implemented corrective measures where you may have found deficiencies? If you don’t have a detailed Trade Compliance Program (policies, statements, procedures, audits, and so on), you may be at risk. Risks invite violations and violations invite fines, penalties or even imprisonment.