Global enterprises still rely on spreadsheets and manual processes to manage their global trade and supply chain operations. Unfortunately, that leaves these companies vulnerable to compliance violations. If you consider your business within this group, a lack of version control, typos and other unwitting mistakes means that critical processes are not met and your business is open to greater risk.
Then there is the data itself. Any organization that uses decentralized data risks redundancy and duplication of efforts when different teams work from different and potentially outdated data — thus undermining corporate oversight. If the data is sensitive and shared, such as by email or USB, the risks are even greater in the event of a security breach. Decentralized data and lack of trade secret security can lead to legal vulnerability.
Globalization, international business and the trend towards world markets introduces complexity for business. In addition, geopolitical tensions and increasingly complex laws and regulations make ongoing trade compliance a serious challenge. Having said that, no matter how difficult compliance may be, companies must abide by international trade regulations and various laws.
Let’s look at how companies can meet the demands of global trade compliance and avoid missteps.
Establish an Enterprise-Wide Global Trade Compliance Program
A critical step to ensure ongoing compliance is to establish a compliance program for your entire enterprise. What does your business look like, and what is needed based on where your company operates around the world? Just a few questions to consider follow:
- Correctly classify imports to ensure your payment of duties is no more or less than it should be?
- Ensure ongoing compliance with free trade agreements, including FTA determination?
- Screen trading partners against restricted party lists and other governmental or international watch lists?
- Export controls to ensure that all export licenses, permits and customs documentation are correct?
Establishing a compliance program is necessary for two reasons. Firstly, it helps to mitigate the risk of a violation. Secondly, and equally importantly, it shows due diligence. If a company has taken reasonable steps to ensure compliance, authorities are likely to view any compliance issues or missteps as “negligence” instead of willful non-compliance.
Your compliance program also needs to take into account the depth and breadth of your organization. If you trade in high-risk geographies, your compliance program must reflect that risk level. However, for low-risk regions, a compliance program that is unnecessarily restrictive could mean lost business.
Consider the Gaps
When establishing your compliance program it is important to consider potential gaps. One example is parcel and non-production shipping. Front office personnel often handle parcel shipments. However, administrative staff may be less knowledgeable about compliance procedures and customs regulations than warehouse personnel.
If you manufacture or distribute dual-use goods or controlled substances, this is even more important. Staff can mistakenly send samples or sensitive materials to denied parties or without the correct documentation.
Ensure You Have The Right Technology
A compliance program without systematized processes is unlikely to be robust enough to protect a company from human error. Ongoing compliance with global trade regulations is significantly easier with the right technology. For example, item and material codes can be matched to regulatory requirements and corporate policy. As a result, enterprises can check compliance requirements at any stage in the inbound or outbound material movement.
Import management software and export management software automate trade compliance processes, reduce manual processes and eliminate human errors. Capabilities include:
- Import admissibility flags
- Denied party screening
- FTA regional value content calculations
- The solicitation of certificates of origin
- License determination
- License management
- Customs declarations and export documentation
- Import and export declaration preparation
Automation also frees up trade compliance managers and personnel to work on value-added tasks.
In addition, enterprises should consider the benefits of integrating compliance with transportation. A robust transportation execution solution will create and maintain an audit trail for all your shipping and compliance documentation. Furthermore, access to electronic documentation creates efficiencies and more accurate reporting.
When evaluating the technology your company needs to ensure ongoing compliance, confirm your vendor can provide the following features:
- Smart classification of goods
- Sourcing comparisons to identify advantageous duty rates, such as eligibility under a free trade agreement
- Automatic access to updates of government denied party lists and other regulation changes
- Screening of trading partners, embargoed countries, sanctioned parties, watch lists and more
- License determination and management
- Product-related compliance checks
- Audit trails and reporting
A compliance program backed up by technology is not simply about avoiding fines and penalties. Done correctly, international trade compliance is a source of competitive advantage. Companies that flout the rules and regulations are likely to experience delayed cycle times, increased oversight from customs authorities and unhappy customers. Whether you import or export, ensuring your goods glide through customs is critical for maximizing supply chain performance.
Visit our website to find out more about QAD Global Trade and Transportation Execution.
