How do you build a “culture of trade compliance” in your organization? You might as well ask, “How do you eat an elephant?” In both cases, the answer is seemingly simple, yet also complex – one bite at a time. A quick search for “culture of compliance” on the internet yields thousands of scholarly and corporate articles about the subject. It can be overwhelming. Rather than regurgitating what is already out there, let’s try to break this down in smaller, bite-size chunks.
Compliance starts at the top
It’s a bit cliché, but it still holds true in most cases – “what the boss says, goes.” However, if your CEO tells you to make everyone compliant but provides no support to your program, he or she has sent you on a fool’s errand. Time to brush-up the old resume. Export Solutions recommends an (at least) annual, written commitment to trade compliance by the top dog to be shared with all company employees, contractors, temporary hires, interns, etc. It should be somewhat personal, reflecting the leadership style of the CEO, and it must be sincere. Your top executives should also talk about this informally – at meetings, town halls and in casual conversations. This reiterates the messages and reinforces management commitment.
A compliance plan must be in writing
This shouldn’t come as a surprise to anyone in the business world in 2016, but we’ll explain why. A compliance plan must have the following characteristics to be successful:
- It must be an approved company document (or series of documents), that is accessible to all employees who are affected and governed by it.
- It must be understandable. An export/import compliance manual that no one understands does no one any good.
- It must be auditable. In the event of an incident, such as a suspected or actual violation, voluntary disclosure, or a routine audit of your program, it should show a roadmap to how your company complies with the trade regulations.
- It must reflect how your company actually does business. It should not refer to nonexistent organizations, such as if you have a Purchasing Department but the manual assigns responsibility for certain compliance functions to “Supply Chain Management.”
- It must be scalable and adaptable. More on that a bit later.
Training is key
Everyone in the company, to varying degrees, requires awareness of trade compliance. Whether it’s simply recognizing the difference between a U.S. Person or Foreign Person I.D. badge, or how to draft a DSP-5 license, compliance is the responsibility of everyone. A robust Trade Compliance program includes new employee orientation, annual training refreshers, and even (dare I say it…) remedial training when gaps in compliance are discovered.
Compliance must be easier than noncompliance
“To improve is to change; to be perfect is to change often.” - Sir Winston Churchill
Human nature is to take the path of least resistance. After you have your boss’ buy-in, your written processes and procedures, and training under your belt, you must make it a natural part of your business to think about compliance and practice it every day. Awareness posters, employee newsletters, and even compliance pep rallies (yes, I have seen those!) work in some companies. Your company might require something else. Every business culture is different so you must make compliance a part of yours. Some companies, as a matter of policy, open every meeting with a “Safety Minute” to address employee protection. Something similar addressing trade compliance could work as well.
The essential element to compliance is very similar to the concept of Quality Assurance. If you wait until the end to put it in, it is too late. Trade compliance personnel should be regular attendees at all planning meetings, kickoffs, proposals, etc. that will involve shipment of product or customer contact. Time must be built into the schedule for the appropriate licenses or agreements to be drafted, submitted, approved, and implemented. Even if export will not be required for a project, the correct disclaimers and Destination Control Statements on domestic shipments will afford your company some protection against diversion or unlawful export of your products by others. If your product is restricted from certain end-uses or destinations, you must put everyone who will “touch” it on notice so that none can claim plausible deniability. Bad things do happen, but when they do, you want to be sure that the fingers are pointed at other companies, not yours. Sound cold? Look which company’s name is on the paycheck you receive. Keeping yours in business and out of trouble is a very good thing.
Automate as much as possible
Starting in the 1980s, everyone discovered the wonderful world of spreadsheets. To this day, we use spreadsheets to keep track of everything. But just as spreadsheets were so much better than pen and ink records, databases, ERP systems, and other automated solutions blow spreadsheets out of the water. A person with a spreadsheet has a good idea of what he or she is keeping track of. A person with two spreadsheets is never quite sure. Any automated system should have a single entry point for each element of information to reduce the risk of multiple entries having multiple, conflicting information fields. This applies to everything, not just trade compliance. Automation lowers the risks involved with human error.
Automated systems allow consistency of data, auditability, repeatability of results for the same data, and the ability to analyze and correct. These are huge advantages in a culture of compliance. One note of caution: You will always need a human element, even in the most automated compliance environment. Trade compliance is not something that can be entirely managed by computers.
To paraphrase everyone from Clausewitz, to Moltke, to Sherman, to Patton: “No plan, no matter how well conceived, survives first contact with the enemy’s plan.” Your compliance program must be robust, but it must also be flexible and living. As situations change, so must your plan. If you build a culture of compliance into everything your company does, small course corrections and even fairly major missteps will be easier to recognize and your employees will be more apt to become part of the solution.
Tom Reynolds is the Vice President of Operations for Export Solutions, a consultancy firm which specializes in ITAR and EAR compliance.