International trade is more relevant in today’s world than it ever was. Companies across the world continuously try to venture into foreign markets and expand their businesses. Even manufacturing or procurement of material has been in some cases shifted completely to foreign countries which mean countries not only receive foreign investments but also become a part of the global supply chain.
Managing operations related to international trade is not easy. There are Custom regulations to deal with, local laws to comply with and penalties to pay in case you did not meet expected levels of compliance. It is therefore recommended that companies set up internal programs that help increase compliance awareness among employees.
A compliance department should be headed by a compliance manager who should be responsible for running compliance-related educational programs within the company. These courses should help employees identify potential risks, prevention, and mitigation of those risks as well as increase familiarity with Customs regulations of all the countries the company deals with.
The trade compliance manager should have the following primary tasks:
- Implement a program to address and continuously improve Customs compliance in areas of HS Classification, Free Trade Agreements, licencing, export controls, valuation etc.
- Manage ad hoc Customs compliance issues
- Monitor the issues arising out compliance lapses
In order to be effective, a compliance program should ensure that all employees who deal with import/export activities of the firm are properly informed about and engaged in any compliance program.
In order to effectively advice the company regarding Customs laws and regulations, a compliance manager needs to be fully aware of general business operations within the company. If he/she knows fully understands the products the company moves across borders, he/she can proactively check any potential compliance issues, laws related to the export and import of that product and can also provide technical advice such as the right value of the goods for Custom duties and taxes. He/She needs to be familiar with the laws of the country the company exists in, the country it exports from, and the country it imports into. Moreover, international laws and agreements relevant to the product being shipped also carry great importance.
The trade compliance manager also needs to stay in touch with the legal department of the company and actively engage them whenever needed. In matters related to the international shipment of goods, it often happens that the transportation is carried out by a third party. In such a model, the third party deals with Customs authorities and not the company itself which means the company’s best practices for managing Customs relations and compliance would not be followed since all the communication is done by the third party on behalf of the company.
The legal department can be engaged to ensure that any contracts with third parties ensure compliance with Customs rules and regulations. It needs to be ensured that there is no delegation of responsibility that takes matters out of the control of the client.
A useful tool for managing Customs compliance can be a checklist of actions that need to be taken by employees, brokers, and third parties when dealing with Customs authorities. Such a checklist should be incorporated in the regular training of relevant personnel to make it more effective.
An integral part of customs compliance is stopping any corrupt practices the company or its employees may potentially get involved in. Due to the large scale of international trade today, many countries use their anti-corruption forces to ensure there is no corruption in trade matters. Even in other cases not directly related to international shipments, it often happens that a corrupt practice included products that were imported. In such cases, it is common for law enforcement agencies to check import records which eventually lead to the company that imported those products.
It is therefore important that customs compliance is in place at all times irrespective of the nature of the goods being imported.
International and local laws regarding import and export keep changing and it can be daunting for a compliance manager to keep track of those changes. It makes sense that he/she appoints a person to monitor these changes in regulations. The responsibility of such a person should be to inform the compliance manager of any changes, their effects on the existing compliance practices and possible changes to compliance programs to reflect these changes.
An example where such a position becomes really useful is when a specific country is disallowed from importing certain goods and dealing with certain companies. In such a case, it is important that the compliance department informs the sales and finance department of such developments so that the company does not perform any action that will land them in trouble with the government.
Any changes in rules and regulations need to be effectively communicated within the company.
Periodic training sessions and distribution of manuals related to regulation are two ways to efficiently communicate these changes to relevant staff. The role of the compliance manager here is to keep all the departments informed of any changes in law so that the departments can adjust their training accordingly.
In many companies, the role of the compliance manager extends to more than one department. This creates problems in the hierarchy as department managers find it hard to find themselves being told what to do by someone from the outside. This sometimes hinders their ability to implement required changes in time. To avoid this, the compliance manager should be made accountable directly to the board of the company or at least the legal of finance function and not report into supply chain as conflicts of interest will often arise.