Source or Sell Globally? Read Our Retail Trade Compliance Primer 15.03.2018 updated 15.03.2018 by anne-sexton Retail trade compliance has become increasingly important as retail has changed. Not so long ago, retail was a bricks-and-mortar business. Further back in time, it was a locally based industry too. These days, retail supply chains are global and customers too may be anywhere too. A business in Boston, Brussels or Dubai can and may source from suppliers — and sell to customers — in any part of the world. This means that mastering global trade is critical for retailers. One of the biggest challenges is getting a handle on the complex web of trade regulations that governs cross-border transactions. Here we’ll examine some of the most important trade compliance issues that retailers face and how to address them. Sanctions, Denied Parties and Fines: Why Retailers Need to Comply with Trade Regulations Every country has trade regulations. If you are doing business in that country, then you must comply with their laws. That’s in addition to your home country regulations. Furthermore, if you trade in US dollars, have a US bank account or there is an American citizen party to the transaction, you are subjected to US law too. Let’s say you are based in Frankfurt, sourcing from suppliers in China and paying for these products in dollars. That means you must adhere to EU, Chinese and American trade regulations and be in compliance with their Denied Parties Lists and sanctions. Denied parties are people and organizations who have links to drug trafficking, criminal or terrorist activities. There are a variety of Denied Parties Lists. To complicated matters, sanctions rarely ban all trade with a country. Sanctioned countries often have limited trading relationships. Retailers can trade there, but only with licensed individuals. Again, these licenses are subject to change. It’s a big challenge to keep track of these changes. However, it is crucial. Failure to comply costs. The EU sets fines of $10,000 per violation. That’s high, but pocket change compared to the US’s Office of Foreign Assets Control. OFAC’s maximum civil penalty is $284,582 per violation. Luckily, fines are less of an issue for most retailers. Banks and businesses in strategic industries such as telecommunications and oil are more likely to be subjected to them. However, trade compliance is still necessary if you send packages and parcels abroad. One of the most common issue for US retailers is returned shipments due to OFAC sanctions. Naturally, retailers are liable for the cost of returned goods. From both a financial and reputation standpoint, if you trade globally you need to eliminate the possibility of fines and minimize costs associated with returns. Global Supply Chains: Delays and Returned Shipments Global trade compliance is a bigger issue for retailers on the supply chain side. Get it wrong, and customs will delay your inbound shipments or send them back to their point of origin. When this happens, delays and stock outages are common. If you need to replace those goods quickly, you will pay a premium. You will also pay steep warehousing costs while compliance issues are resolved. Plus you may also be liable for customs penalties. All of this adds up to one undeniable fact: international trade compliance is a major issue for global retailers, regardless of whether their shipments are coming in from abroad, or being shipped to overseas customers. Retailer Compliance Made Easy Regulatory bodies regularly publish Denied Party Lists. If you do business abroad, you need to ensure that none of your trading partners appear on any relevant DPLs. That’s not as easy as it sounds. DPLs are long and they change frequently — amounting to thousands of changes every year. Therefore, maintaining compliance can be tricky — if you do this manually. Technology has made this job much easier. Desktop and parcel shipping software with built-in compliance checks makes it easy to determine whether a shipment, or batch of shipments, is in compliance. Trade compliance software automatically checks every international order against all published lists to ensure that the shipment isn’t being sent to an embargoed nation or organization, or to a person that appears on a DPL. E-commerce has changed retail. These days retailers increasingly operate from a virtual online store and serve a global customer base, as well as source their products from around the world. Therefore, the ability to manage regulatory compliance is becoming a high priority for successful retail brands. Parcel shipping software with built-in international trade compliance checks help retailers manage their international shipments to avoid fines, product returns and damage to their reputations.