What Is Customs Compliance?
International trade in a global marketplace involves a complex system of suppliers, shippers, and many other parts. If your business relies on International trade, then it is your responsibility to ensure that you meet regulatory compliance` in all business operations.
As you dive into Customs laws that apply to your industry, you should think about how you can build a process to prevent penalties of noncompliance. While your company likely requires a comprehensive compliance program, you should look at compliance in three ways:
- Know The Product or Service: Understand all details of what you are buying/selling.
- Know Your Partners: Understand the needs of your international customers or suppliers.
- Know Your Regulator: Stay educated and updated on all related laws and regulations.
Unfortunately, many people don’t think about import-export compliance until it’s too late. Their product has already left the shipping dock and is being delayed for export because they didn’t get something right. Or, their import is being held for entry while everyone tracks down the paperwork which should have been filed correctly the first time.
While trade regulations are often overlooked by most companies, penalties for non-compliance can range from unhappy customers to delayed shipments and missed deadlines. In some cases, this can impact your bottom line as your business will need to absorb re-working and storage costs, along with monetary penalties or even prison time for extreme situations.
What Are The Most Common Causes Of Customs Violations?
Leadership in your company could receive civil or criminal penalties for each violation. Most non-compliance violations are the result of small errors, minor mistakes, and simple oversight of essential details in the trade process.
If you are subject to a Customs violation then it is critical to determine what caused the violation so you can implement necessary procedures to prevent future noncompliance. Here are some elements that you should consider throughout your trade process.
- VAT Regulations: You must obtain specific documentation of export and "destination accounting" rule when working with the European Union.
- International Commercial Terms (Incoterms): These are terms that are used for financial protection, and your company could make costly mistakes if you do not understand their proper use.
- Tariff Classification: You are required to use the right commodity codes for all items imported and exported.
- Origin Rules: Different international trade agreements impact where/how you can import or export items from a foreign country. You must abide by the strict regulations and include all required information with each shipment.
- Export Controls: You should understand how ITAR and EAR apply to commodities.
Export Solutions offer the services you need to avoid costly violations. Our team will work with your employees and leadership to build a trusted compliance program.
Who Is Responsible For Compliance?
No matter the size of your business, it is your responsibility to be compliant with all trade regulations. We have found that many large companies have in-house compliance staff who handle compliance responsibilities, while smaller companies lack the resources to have a dedicated team and resources.
We work with organizations of all sizes because as globalization becomes more complicated your company should consistently review your international trade program. All shippers should ensure they have updated procedures and understand compliance risk like:
1. Destination Risks
The first thing you should consider is if you are trading with countries embargoed by the United States or the United Nations. You must understand specific restrictions if you do business with regions and know which shipments are allowed or prohibited in each country.
2. Product Risks
The U.S. government closely monitors specific materials and commodities for national security, trade policy and other specific purposes. These restrictions apply to equipment, software, technology for defense articles, defense services, and even dual-use items. You must understand the nature of your products or services regarding various trade laws like ITAR and EAR. You may need to have specific licenses to export items, and you could receive steep penalties if you violate these regulations.
3. Customer Risks
It is your responsibility to know who is receiving shipments from your company and placing orders with you. You can mitigate this risk by only doing business with well-known companies overseas because fulfilling orders through freight forwarders could increase liability. This is because you are ultimately responsible for the end recipient of your products and services.
4. Shipping Risks
While the U.S. is open to trade, many countries throughout the world allocate significant resources to pursue violations with companies who misidentify shipments that enter their borders. In fact, some states will seek criminal charges for companies that undervalue goods that can lead to severe penalties and delays in Customs.
As you can see, there are several ways that your company can fall victim to severe penalties if you violate custom compliance. These can impact your business even if they are not done intentionally, so it is crucial that you talk to a Customs Compliance Specialist and attend training sessions as needed.
Import Export Compliance Specialists
Understanding the requirements of U.S. Customs can be difficult for any importer or exporter. The rules are lengthy and complicated and can change based on your company’s products. For many people, training is the first step towards a successful approach.
Our trade compliance training programs take many forms – from instructor-led, face-to-face sessions, to remote “user-led” online environments. We can work with your organization to define the learning objectives, understand your challenges, and develop/deliver training that makes a real difference for your team. No two training programs are the same, which is why we work hand-in-hand with you to create a tailored approach that works.
You can attend seminars and workshops all day long, and hope to get your questions answered by the “experts.” Or, you can let us develop an import/export compliance training approach that addresses the real needs of your organization.