As we have seen in recent weeks, sanctions and trade restrictions can change — literally overnight. In this 3 Minute Explainer, we explain why shippers should automate compliance processes.
Global trade comes with a host of rules. Import and export compliance cannot be ignored. Violating trade laws and regulations puts a company at the risk of fines.
In recent weeks, governments around the world have responded to the Russian-Ukrainian conflict by imposing sanctions on Russian individuals and businesses. Furthermore, certain goods now face enhanced restrictions.
Companies engaged in international trade are obliged to abide by new restrictions as they come into force. However, this can be a significant challenge for companies that need to manually check groups, entities and individuals against sanctioned party lists.
Irrespective of the current conflict, depending on where they ship from, and to, companies have a huge number of rules and regulations that they must follow.
In 2021, the US Treasury Department’s Office of Foreign Assets Control (OFAC) issued over $20 million in fines for sanctions violations. Last year was a slow one for OFAC. In 2019, the organization issues $1.3 billion in monetary penalties.
Many companies outside the US are also subject to OFAC regulations. Any company that issues or receives payments in US dollars must abide by OFAC rules.
The European Union has similar laws restricting or prohibiting goods. Under Article 267 of the Union Customs Code (UCC), the EU can restrict goods to protect human health, the environment, public security and so forth.
Shippers need to be aware of, and abide by, all the national and international trade compliance that apply across the supply chain.
Furthermore, shippers must correctly classify their goods. Customs authorities around the world issue fines if companies fail to use the correct commodity codes.
In addition to fines, incomplete compliance procedures can result in missed delivery deadlines, lost shipments and other supply disruptions.
Repeat offenders may have their export privileges revoked. All of this can impact a company’s customer relationships, reputation and ultimately, its bottom line. Global shippers that automate trade compliance mitigate these risks, and remove costly time- and labor-intensive processes.
Automation removes the guesswork out of trade compliance processes. Automated trade compliance solutions offer:
Access to international HS codes, country-specific commodity codes, and any changes made to these
Up-to date international and government lists of denied or restricted parties
The ability to automatically run background checks on customers and prospective trading partners
The ability to identify and complete license requirements with minimal manual research
Audit trails and compliance metrics for ongoing improvements
With an automated trade compliance solution, shippers proactively mitigate risk, as well as remove time and labor intensive manual processes. We will now look at these in more detail.
A manual process, such as a restricted party screening or a sanctioned party list screening check, that would have taken hours can be done automatically. Automatic screening has a minimal risk of errors, reducing the possibility of fines and penalties.
Automated compliance tools combine historical data, with real-time regulatory information, plus previously stored customer and partner profiles. Therefore, a trade compliance solution creates a holistic compliance workflow.
For effective trade compliance, every process, workflow and report must be tracked and documented. These must also be stored for future reference. This is known as the compliance audit trail.
The audit trail is critical to ensuring compliance with international regulations. Therefore, an automated solution must be able to cross-reference a compliance audit trail with various international regulations and customs requirements.
Global trade compliance solutions help export teams to ensure that they are not sending goods to embargoed countries or restricted individuals.
International and government lists of denied parties are subject to frequent changes. As a result, manually checking these lists is a daunting task.
Automated trade compliance solutions give shippers access to the latest trade content data. This allows personnel to identify denied parties, controlled products, embargoes and sanctioned countries.
Automated trade compliance solutions allow you to run a compliance check whenever you need. This could be at the beginning of a customer relationship, at shipment, or any time in between. As a result, trade compliance automation makes it easy for companies to perform due diligence.
This allows shippers to significantly, along with penalties, fines or shipping errors.
By automating trade compliance, shippers streamline internal processes, mitigate the risk of violations, and improve customer experience. Automation is not simply about avoiding fines — it offers a competitive advantage.
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