To consider this question, it might make sense to think about why companies engage in global trade in the first place. Companies leverage international trade because their imports and exports allow them to increase profits or gain some market advantage — but those advantages aren’t free. One of the costs of engaging in international trade is that you become subject to following the rules and regulations of the countries in which you do business.
And just as you need to pay for the trucking to get your goods to port or for the shipper to move them, you also need to figure into your costs what you pay for the activity that will keep you in compliance with trade regulations. The good news is that there are benefits to compliance activity. Some of these benefits are realized by the importer or exporter and others support the countries that are party to the trade.
Trade laws benefit countries by:
Compliance with trade laws benefit companies by:
Multiple teams within companies support trade activity. They include supply chain / logistics, product development, regulatory, finance, and law. These teams’ activity can range from maintaining product specifications, to classifying products, to completing the documentation to move the goods. In companies whose trade processes are highly defined, efficiency increases and the cost of importing and exporting goes down. Often this is through reduced labor to correct issues with Customs, taking advantage of trade programs that reduce or eliminate duty costs, or through a reduction in time to market.
There are no good shortcuts
Some companies try to lower labor costs by taking shortcuts in their trade due diligence. However, many find that responding to subsequent Customs inquiries can easily lead to more hours of labor activity to correct these issues, resulting in few, if any, savings. For example, a simple Form 28 Request for Information by Customs questioning a product tariff code will likely trigger a flurry of time-sensitive activity, including:
In a best case scenario, Customs will agree with you, but if they don’t, this can trigger duty reviews of prior shipments of the same item and you may have to pay additional duty and penalties. One investigation can lead to other investigations, and if good trade processes are not in place, employees will have higher stress levels trying to support your trade program.
Clear processes and policies are key
The bottom line is that goods don’t move unless required import or export data is on the shipping documentation, so something must be put on the forms. Even entering bad data takes time - why spend money to use bad data that increases penalty risk when time could be spent doing it right. Creating and maintaining effective trade processes across all relevant departments is a smart thing to do. It drives cost savings, leads to higher employee satisfaction, and increases customer confidence.
Employees that support companies that engage in trade must remember that complying with trade laws is not optional. Most companies already have an employee policy in place that compels staff to comply with these rules. Just as it wouldn’t be okay to violate consumer protection rules or to engage in bribery, trade laws serve important goals that ultimately protect your company’s reputation and help you maximize your competitive advantage.
Adam Palmer - helping importers and exporters remain compliant.