“All the best intentions in the world can’t guarantee that a company is complying with the volumes of laws and regulations that govern international trade.”
Navigating through evolving Customs & Trade Compliance Landscape has become the differentiating strategy to Maximize Market Opportunity. Companies engaged in global trade face a maze of complex trade regulations and tough competition. Today, the efficient and strategic integration of import and export processes into overall business goals, tax planning, and supply chain management is crucial to every company’s success in the marketplace.
Penalties for violating trade compliance can significantly impact the bottom line. Over the past few years, Trade regulatory agencies have taken a more aggressive approach to enforcement, both in the number and size of fines levied against companies. It’s not uncommon to see enforcement agencies imposing fines in the seven to eight-figure ranges. In addition to financial penalties, corporate violators also face significant business disruption and reputational damage, including loss of contracts and supply chain delays which can significantly impact their ability to compete in the marketplace.
In light of these trends, it is easy to see why trade compliance has become both a strategic issue and an operational imperative for companies. Those companies that consider trade compliance as part of their corporate goals and embed compliance into their day-to-day operations are ensuring that the movement of goods and technology enables their overall business strategy. Even for companies where imports and exports do not represent the main business focus, non-compliance in any of the above areas can present a significant challenge to operational effectiveness.
Some of the standards that are expected of importers and their trade transactions include:
- An accurate valuation of all imported items
- Accurate application of the Harmonized Tariff Schedule
- Accurate utilization of duty rates, including preferential claims to free trade agreements
- Accurate marking of imported items
- Knowledgeable logistics team who both understands and remains current with importing and exporting regulations
- Staying apprised of the many potential Anti-Dumping and/or Countervailing duty cases that may be applicable to an imported product
- Correct and complete documentation
Now that we understand the primary principles of what makes an importer compliant, let us take a look at the associated costs.
Too often, companies are accepting compliance risks that they should not accept simply because terms of sale, distributor agreements, and other arrangements with third parties have not been thought through or they have grown accustomed to the insufficient program.
A critical internal look at company import product classifications is a great first step toward thinking and acting strategically to develop a company-specific compliance program.
Benefits of Trade Compliance
Without trade compliance, a global supply chain can’t achieve operational excellence. Unexpected delays, fines, and penalties associated with non-compliance can easily erase expected revenue gains from offshoring. Compliance is needed to deliver goods in a timely manner; maximize supply chain efficiencies; lower costs and increase revenues; decrease cycle times and lower inventory levels.
Costs of Non-Compliance
The compliance costs described above are typically realized upfront. However, costs associated with non-compliance are realized throughout a company’s importing lifespan such as:
- Overpaying or underpaying duty
- Unintentional evasion of duties and other potential fees
- Unintentional smuggling of commodities
- Administrative Monetary Penalty System (AMPS) penalties which range from X – X for the first offense and increase for the successive offensive of the same nature per instance.
Other costs such as loss of importing privileges or obtaining a flawed record with Customs can have ongoing impacts on a company’s bottom line. The costs of non-compliance are too great to gamble with.
Yes, compliance with regulatory requirements is definitely an expense that all importers must contend with. However, in comparison with the much higher costs of non-compliance, it is a total bargain.
Being protective of your company’s bottom line is a vital business practice. However, the bottom line is trumped by Customs drawing the line. Do not let your trade practice reach a point where your business is negatively impacted. Educate your logistics team as the first step towards trade compliance.
Ref: Pacific Freight Forwarding Canada – The custom Compliance.