If your company has a global supply chain, a trade compliance program is vital for that supply chain to function effectively. A trade compliance program is a framework that defines what a company needs to do to ensure its imports and exports are compliant with all applicable laws and regulations and mitigate regulatory risks. Its main components are processes and written procedures that describe the company’s activities with regard to key trade areas, including how it classifies and values goods, determines their country of origin, utilizes special trade programs, keeps records, manages its customs brokers and export filers, and determines export controls.
A trade compliance program has many benefits. Here are five reasons to implement a robust program at your company.
- Promote an Agile Supply Chain
Supply chains need to move materials and products around the world quickly and efficiently. When import and export declarations contain incomplete or incorrect data, shipments can be detained while customs and export authorities clarify issues or request missing information or documentation. Entry of goods or export of goods can even be denied. This can lead to bottlenecks at international borders, slowing down the movement of your products that need to be at the right location at the right time. A trade compliance program supports a company’s ability to determine the right data and generate the right documentation to ensure import and export declarations are complete, accurate, and compliant, and can be quickly processed by authorities. The result is an agile supply chain that allows goods to reach production sites, warehouses, and customers as quickly as possible while being compliant at the same time.
- Manage Regulatory Requirements
In addition to customs and export authorities, many other government agencies regulate traded goods. Each agency has specific import and export requirements, which means traders must present data and documentation, such as permits or licenses, at the border to show the requirements have been met. For example, pharmaceutical products and medical devices are regulated by the Food and Drug Administration (FDA). Food is regulated by U.S. Department of Agriculture (USDA). Chemicals are regulated by the Environmental Protection Agency (EPA). Exports to sanctioned countries fall under the Office of Foreign Assess Control (OFAC), and the Department of Defense (DOD) has jurisdiction over many defense related articles. Some products are subject to more than one agency. A trade compliance program identifies these requirements and ensures processes in are in place to collect and submit the right data and apply for needed permits or licenses well in advance of arrival at the border. Managing these requirements provides the agencies with the information they need to process shipments quickly, preventing delays in the supply chain.
- Protect against Fines and Penalties
Customs and export authorities conduct regular audits of traders to verify their compliance. These authorities can and do issue fines and penalties when a company violates import and export laws and regulations. A trade compliance program can protect a company against the risk of fines and penalties by providing written procedures for employees to follow that ensure their actions are compliant. A program also assures auditors that a company takes compliance seriously. When an audit occurs, it will be less intrusive and less likely to result in unfavorable findings or violations if a company has a solid trade compliance program in place. And when something does go wrong, a trade compliance program can serve as a mitigating factor to minimize the amount of any fines and penalties.
- Streamline Workflows
A company with trade compliance processes and procedures provides employees responsible for trade-related activities with the instructions they need to complete tasks quickly and accurately while at the same satisfying import and export regulations. They know what the import or export requirements are for a certain material, where to get the right data, and what documents to create and how. For example, a logistics employee trained to use an export control procedure is able to complete a shipper’s letter of instruction quickly and accurately with the right data without a trade compliance team member having to double check it. She doesn’t spin her wheels guessing, waste time searching for information, or risk doing the wrong thing. There is a clear process to follow that minimizes the time spent processing international shipments while maximizing compliance.
- Identify Savings
While going through the exercise of implementing a trade compliance program, may traders discover missed opportunities for savings. For example, establishing processes to correctly determine classification and country of origin can bring to light opportunities to save duties. A company may determine a more accurate classification for a product that has a lower duty rate. Correctly determining the country of origin may allow it to take advantage of a free trade agreement that previously didn’t appear to apply.
The time, effort and resources needed to establish a trade compliance program for your company is well worth it when you consider the benefits. The advantages are not just short-term, rather long term. Your company will continue reap these rewards for years to come.
