What Is Import Compliance?
Implemented in 1993, the Customs Modernization Act established the requirement that all importers must exercise reasonable care when importing goods into the U.S. Import compliance means different things to different people.
Still, the basis of trade compliance stems from the need for the U.S. government to protect national interests and collect revenue through tariffs.
The responsibility of compliance rests with importers. If your business imports anything, then you are solely responsible for ensuring that you comply with the complicated and sometimes confusing regulations around import compliance.
This means that importers have the responsibility to uphold the accuracy of every declaration that goes through the U.S. Customs and Border Protection (CBP). There are many items that you need to have to remain compliant like:
- Statements of value
- Classification and duty rate
- Qualifications for any import or tariff that is claiming eligibility
As you can imagine, there is a lot that your staff needs to consider if you want to remain compliant. All of these variables can put a lot of pressure on your operations, no matter the size of your import business.
Why Is Import Compliance Important?
Trade compliance is vital for any business, and import compliance is an essential part of your business if you import anything into the U.S. Staying in compliance with import regulations offers a number of benefits for your business, including:
- Avoid costly penalties that can set your business back financially and disrupt your operations.
- Establish your business as a reputable name as you meet your legal obligations with Customs and other government agencies.
- Import compliance helps keep you clear from audits and border delays. Both of these items can take a significant cut into your profit margins and hurt the relationship that you have with your customers.
- Part of import compliance means that all of your staff need to know the rules and regulations, how to abide by them, and how to manage the rules as it applies to your business operations.
Trade compliance should be part of the foundation of your business and import compliance experts can help keep your business running as smoothly and profitably as possible.
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 Import & Export 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.
Why Do Companies Fail With Import Compliance?
It’s easy to understand why businesses would let their operations fall out of trade compliance. As their organization continues to grow, and they look to improve their foothold in the market, it’s easy to overlook trade compliance as you focus on sales, marketing, and R & D.
Here are some of the most common reasons that we hear from clients who chose not to hire outside assistance with an import compliance program.
1. Import Compliance Takes Too Much Time
One of the main reasons that we hear from companies for letting their compliance slip is that it takes too long to build and maintain a trade compliance program.
While it is true that a program can take time to develop, and it needs to be maintained, the truth is that a program can help your shipments move more quickly through Customs. This means that you can actually save time with a comprehensive Import Compliance program.
2. Trade Compliance Costs Too Much
Putting together a compliance program will cost your company, and this usually comes in the way of hiring an outside import consulting team. While there is an initial investment, this payment will go a long way as you avoid the cost of penalty actions.
Importers hold all responsibilities for all aspects of their business operation, and negligence can add up to millions of dollars and lost productivity.
This means that not being compliant can cost you more than going through the process to ensure your company is not violating any regulations.
3. Customs Won’t Bother Us
You may think that you can continue to operate as you have in the past because Customs has not penalized you yet. However, this mentality is dangerous because once you receive a violation, you will have to pay a steep penalty, and your business could suffer from long-term consequences that will hit your bottom line.
The truth is that Customs has a variety of Quick Response Audits that they can use to target a single issue for any importer of any size. When you are caught, you will experience costly fines, and your products will get caught up at the border- this can cause your business to look bad and sour your customer relationships.
4. Our Broker Takes Care Of Everything
If you work with a broker, then you may think that this professional is responsible for everything that your business imports. However, the truth is that you are responsible for all aspects of your entry as outlined under 19 USC 1484.
This means that you need to understand all aspects of your trade compliance, and therefore you should only work with import consultants that you trust!
Ensure That You Are Compliant Today!
The trade consultants at Export Solutions have the years and experience that you need to protect your company from costly fines and penalties. Our team will work with you to ensure your business processes and functions are compliant with relevant trade regulations.
Compliance means that your company will save time and money in the long run since Customs can audit your business to find inaccuracies or classification errors. These violations can land you with hefty fines and substantial penalties that hit your bottom line.
Talk to our team today to learn how we can help you and help you reach your business goals today!