There are more than 28 government agencies involved directly or indirectly with regulating goods and services that pass through our borders each day. It is a daunting task to keep track of these agencies. While  many companies are impacted by multiple agencies, it is not always clear where they overlap. 

Companies actively engaged in trade compliance management may have to deal with various agencies that regulate their goods and services in international trade. Trade compliance management is a moving target, affected by economic, political, and commercial factors–and these factors change frequently.

The successful trade compliance professional has multiple inputs coming into them every day containing changes, modifications, and updates. They must know how to comprehensively apply updates and changes to their companies’ supply chain and business model. This is not an easy task to begin with, and many trade compliance managers may encounter disbelievers and naysayers within their companies who block the path to proactive trade compliance culture and activity.

Negotiating these challenges is a daily activity for most trade compliance professionals. Rules involved in import and export trade have always been in place but were significantly moved to the forefront of global supply chain management when 9/11 occurred.

We were involved in management training on the 55th floor of the World Trade Center, so we were directly impacted by the events that happened that day. Our hearts and prayers go out every September, to all the families, as the day is continually memorialized.

Here we are in 2023, and there are still regulations that continue to evolve and new regulations being implemented including export controls, forced labor initiatives and Customs-Trade Partnership Against Terrorism (CTPAT), a voluntary supply-chain security program led by U.S. Customs and Border Protection (CBP) focused on improving the security of private companies’ supply chains with respect to terrorism. 

The functionality of global trade incorporates trade compliance in every aspect of how goods and services move in international business. Almost every company, service provider and carrier engaged in global supply chain operations has at least one person dedicated to trade compliance, or it is one of the many “hats” one wears in purchasing, supply chain, logistics and transportation management. 

Many supply chain professionals view trade compliance as an intrusion of government regulation and oversight. Others see it is a necessary evil related to managing the impact of terrorism and keeping our country secure and safe.  Irrespective of one’s individual view, trade compliance is a reality–composed of expense, time, and resources that we all must manage in our global supply chain operations, purchasing and export global reach.

Many corporations have embraced trade compliance as a standalone function in the organization that, when managed successfully, can reduce risk and cost, as well as improve effective operations and performance.

FOCUS ON FORCED LABOR

In the past two years, CBP has adapted social compliance as part of its governance, and forced labor is now a focused area of their oversight into inbound global supply chains. Definitions can be categorized as:

1. Work or service refers to all types of work occurring in any activity, industry or sector including in the informal economy.

2. Menace of any penalty refers to a wide range of penalties used to compel someone to work.

3. The term “offered voluntarily” refers to the free and informed consent of a worker to take a job and his or her freedom to leave at any time. This is not the case, for example, when an employer or recruiter makes false promises so that a worker takes a job he or she would not otherwise have accepted.

Importers now need to vet suppliers on whether they are utilizing forced labor in their manufacturing, along with their supplier base.

In December of 2021, the Uyghur Forced Labor Prevention Act was announced. It is a federal law that changed American policy on China’s Xinjiang Uyghur Autonomous Region, with the goal of ensuring that U.S. entities are not funding forced labor among ethnic minorities there.

Trade compliance management includes staying up to date on any import and export regulations that could impact one’s supply lines. In many instances this is a full-time responsibility and should be taken seriously.

FOUR PILLARS OF TRADE COMPLIANCE

Key edicts of trade compliance are due diligence, reasonable care, supervision and control and proactive engagement.

Due diligence and reasonable care refer to the development of knowledge of regulations that will be applied within the operation of a company’s global supply chain structure. 

Supervision and control ties in the reality that most companies with an international presence will use third-party resources to help manage various supply chain responsibilities, such as trade compliance consultants, attorneys, freight forwarders, customhouse brokers, carriers, 3PLs and sourcing or buying agents. 

However, the principal importer and exporter must supervise and control any outsourced activities. So, while it is OK to outsource, know that you will be held accountable and therefore must have the knowledge and skill set to manage the third parties.

Government agencies, including CBP, the Bureau of Industry and Security and the departments of State and Treasury are all proactively engaged in regulations, operating guidelines, and legal controls on how companies manage their import and export operations. These agencies require companies (the principal importers and exporters along with the companies providing forwarding, brokerage, and related transportation services) to follow the four edicts outlined above as general guidelines, followed by a vast amount of regulatory minutia.   

All of this needs to be incorporated into one’s global business operations.

TRADE COMPLIANCE: A COMPETITIVE EDGE?

Of the 50,000-plus U.S. companies involved in global trade, a small number have embraced trade compliance as a tool to gain competitive advantage. This is a shame because compliance can: speed deliveries, lower insurance costs; reduce opportunities for fines, penalties, seizure, and delays; and provide access to technology, lower duties, and drawback refunds.

This is especially true if the movement of goods is covered under free trade agreements, foreign trade zones, bonded warehouses, Buy America/Buy American programs, government programs such as CTPAT and Free and Secure Trade (FAST), and correctly utilized Harmonized Tariff Codes.

There are numerous methods for how companies can change their mindset about trade compliance and utilize it both as a necessary point of control and, more importantly, method to reduce risk and spend.

Trade compliance, supply chain and logistics professionals need to maintain a regular flow of information, intelligence, and regulatory updates to be in the best position to maintain operational excellence in their global supply chains.

Successful trade compliance managers can contribute to profitability by accessing government programs that can reduce supply chain risks and costs; keeping companies out of regulatory costs and entanglements; and providing competitive options in how goods and services move internationally.

All of this can impact the bottom line on profits and margins.

TRADE COMPLIANCE RESOURCES 

Successful trade compliance managers need to be up to date with the information flow necessary to maintain the challenges they face in handling the multitude of compliance and regulatory concerns not only here in the U.S. but in all the countries they import from or export to.

Periodicals and information sources such as Global Trade magazine offer a very reliable and contemporary flow of data that can be very useful in leveraging trade compliance opportunities. (www.globaltrademag.com)

Accessing key important government websites is another option. (www.cbp.gov, www.bis.doc.gov)

Continuing education and training are also critical elements of any trade compliance program and the process of learning contemporary options in importing and exporting. Two examples, the American Management Association (www.amanet.org) and the National Institute for World Trade (www.niwt.org), are excellent options for certificated public and in-house instruction, coaching and educational capabilities specializing in international business and supply chain.

The professional organization International Compliance Professionals Association (icpainc.org) is a great resource for trade compliance operatives to join to gain tremendous resources and insight.

Conferences and seminars offer excellent intense information flows that can be of immediate and of long-term value along with the networking and professional colleague interface. Affiliation with professional organizations in your field always proves beneficial.

BOTTOM LINE: TRADE COMPLIANCE MANAGEMENT IS GROWING IN IMPORTANCE

As the complications of geopolitical events continue to occur in the world, the importance of assuring a trade compliant global supply chain will be as relevant as who the COO, CFO, CSO and CIO are in any business model.

Thomas A. Cook is a seasoned global supply chain professional, author of more than 20 books on global trade and managing director of Blue Tiger International. He can be reached at tomcook@bluetigerintl.com or (516) 359-6232.