Relying on spreadsheets and decentralized data can leave a company
vulnerable to a global trade compliance misstep. In this QAD
Precision Report, we look at how having the right systems in place
help enterprises avoid violations.
In October 2020, it was reported that over 16,000
coronavirus cases went unreported in England. The problem? The
reliance on spreadsheets, legacy file formats and human error.
Health reporting and global trade compliance may be very different
disciplines. However, a dependence on spreadsheets is not.
Some of the world’s largest enterprises rely on spreadsheets to
manage their global trade and supply chain operations. Unfortunately,
that leaves them vulnerable to compliance violations. Lack of version
control, typos and other unwitting mistakes could mean that critical
processes are not met.
Then there is the data itself. Any organization that uses
decentralized data risks time redundancy and duplication when
different teams work from different, potential outdated data — thus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
could lead to legal vulnerability.
Globalization, international business and the trend towards world
markets introduces complexity for business. In addition, geopolitical
tensions and increasingly labyrinthine laws and regulations can make
ongoing trade compliance a serious challenge. Having said that, no
matter how difficult compliance may be, companies must abide by the law.
Here we look at how companies can meet the demands of global trade
compliance and avoid missteps.
The first critical step is to establish a compliance program for the
entire enterprise. What does your business look like, and what is it
that you need to do?
imports so that your payment of duties is no more or less than
it should be?
Establish ongoing compliance with free
trade agreements, including FTA determination?
trading partners against restricted party lists and other
governmental or international watch lists?
Export controls so 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 be compliant, 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. However, for low-risk
regions, a compliance program that is unnecessarily restrictive could
mean lost business.
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 could mistakenly send
samples or sensitive materials to denied parties or without the
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.
trade compliance processes reduces manual processes and human
error. These include:
Import admissibility flags
Denied party screening
FTA regional value content calculations
The solicitation of certificates of origin
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 shipping and compliance documentation. Furthermore, access to
electronic documentation creates efficiencies and more accurate reporting.
When evaluating the technology your company needs for ongoing
compliance, ensure 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
Ongoing 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 robust compliance program backed up by technology is not simply
about avoiding fines and penalties. Instead, 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.
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