By Tom Reynolds, Export Solutions
trade consulting international trade export solutions

Find Out How To Manage The Risks Of Outsourcing

Trade compliance is a massive undertaking. Companies involved in exporting and importing goods have a lot on the line if they violate trade regulations.

According to the Bureau of Industry and Security, export fines can reach $1 million per violation for criminal cases and $250,000 or twice the value of the transaction for administrative cases, not to mention lengthy jail sentences for those found guilty.

So, your company must follow the guidelines, regulations, and laws set forth by various regulating agencies and maintain strict paperwork documenting the process.

Additionally, your compliance team must continuously monitor export trade activity to ensure that all operations remain in line with the applicable laws and regulations.

Companies increasingly turn to compliance outsourcing to help them manage their business’s export and import compliance needs.

Outsourcing trade compliance may seem nerve-wracking, but it’s a cost-effective way to build your business and keep your operations compliant. This is because outsourcing your trade compliance helps reduce your overhead while ensuring that you have a team of expert trade compliance consultants on your team without hiring in-house.

Let’s take a closer look at outsourced trade compliance, five common risks that many leaders fear about outsourcing their trade compliance needs, and how you can overcome those risks to get the trade compliance services you need at a fraction of the cost of hiring in-house trade compliance officers.

What Is Outsourced Trade Compliance?

Trade compliance refers to government processes relating to the import and export of goods, like export controls, import/export licenses, customs procedures, tariffs, and free trade agreements.

In a recent study, the U.S. Small Business Administration (SBA) concluded that the true financial cost of an in-house employee is typically 1.25 to 1.4 times the amount of their salary. These costs include I.T. support, Human Resources, and lost productivity through Personal Time Off.

Each employee requires a range of systems and other departments to support their role, and these additions can add up quickly across your organization.

When you outsource trade compliance, you gain access to a team of compliance specialists for less than a full-time salary. Like your in-house expert, an outsourced trade compliance specialist will act on your behalf with various responsibilities, such as:

  • Keep tabs on regulatory changes, so your business is always compliant.
  • Run compliance audits and reports regularly to avoid surprises throughout the year.
  • Identify and address compliance issues to ensure all departments are operating responsibly.
  • Communicate compliance progress, so you and your team are aware of any issues as they arise.

The list goes on, and it is clear that outsourced trade compliance offers companies many benefits. However, some business leaders hesitate to outsource their trade compliance needs for various reasons.

So what are some common concerns associated with outsourcing compliance, and how can you address them?

Let’s find out.

5 Common Concerns Of Outsourcing Trade Compliance And What You Can Do About Them

Outsourcing is a tactic used by companies in various industries to stretch the budget and optimize workflow for their in-house compliance teams.

While it is true that there are always risks when it comes to outsourcing any part of your business, the good news is that there are steps you can take to mitigate the risks if you want to outsource your trade compliance needs.

Let’s look at five risks business owners may face when outsourcing trade compliance and what they can do to reduce the risk to leverage all the benefits of outsourcing.

Concern 1: Loss Of Control Over Trade Compliance

Taking a task that you typically handle in-house and assigning it to an outsourced compliance team will lead to a natural loss of control.

You may worry that, if an issue arises, you will be unable to reach out to discuss it or have a say in the compliance solution. You may also worry that potential violations will go unreported to you, making it impossible for you to address them promptly.

The amount of control lost will vary depending on the scope of work and expectations. It’s also difficult to monitor the progress of your new compliance team from far away.

However, it’s important to remember that you are still in control of compliance and have a say in the decision-making process.

Tips To Avoid This Issue:

  • Build a relationship with a contact person you can turn to as needed.
  • Decide which tasks to keep in-house and which to outsource.
  • Set timelines and reporting protocols for vendors to follow.
  • Set expectations for turnaround times and follow-up (e.g., 24-48 hour response times, weekly check-in meetings, etc.).

Concern 2: Lack Of Product Knowledge That Could Result In Compliance Issues

Your in-house compliance team most likely receives onboarding training that includes a rundown of your products. They are embedded into your team, and this typically results in a strong understanding of your products and related regulations or policies that must be followed.

As a result, some business leaders may worry about the risk of compliance issues stemming from outsourced employees not understanding what they offer and the laws associated with their products or services.

The good news is that while in-house teams may have intimate knowledge of the products and services you offer, outsourced compliance specialists have years of experience working with companies just like yours.

While there may be a learning curve, your new trade compliance manager will be ready to learn about your products and have pre-existing expertise on how they must handle your company’s compliance needs.

Tips To Avoid This Issue:

  • Offer training tools to get compliance specialists up to speed when you meet with your new trade compliance company.
  • Be sure to work with trade compliance specialists who have experience with your industry, products, and services.
  • Communicate the product knowledge you feel is essential for proper compliance and provide ongoing training and information as needed.

Concern 3: FTA Issues And Overlooked Regulatory Updates

Free trade agreements, or FTAs, occur between two or more countries and involve them agreeing on specific trade-related obligations.

Many business owners worry that outsourcing compliance means potential FTA issues, especially since some products qualify for some agreements but others do not.  Not taking advantage of FTAs can cost companies significant money in overpaid duties.

The good news is that if you choose the right trade compliance company, they will be well-versed in these agreements and can easily categorize your items. This means that you won’t have to add headcount to your budget while you will still receive the same level of attention and support that you deserve.

Tips To Avoid This Issue:

  • Outline which of your products currently receive FTAs early on.
  • Communicate clearly with your compliance team throughout the year and as issues arise.
  • Ask about the vendor’s experience with FTA and regulatory changes to ensure you get the team and support you need.
  • Document FTA procedures and do periodic compliance audits to ensure your organization adheres to the regulatory requirements.

Concern 4: Communication Gaps With Your External Compliance Team

Communication between departments and teams is a vital part of a company’s success. Unlike teams of in-house trade compliance experts, outsourced trade compliance often means depending on virtual meetings and online communication instead of frequent in-person meetings.

Since you can no longer visit your compliance team’s office during the workday, you’ll need to get creative to ensure effective communication. Some business leaders see this as a potential risk, as they can’t communicate with the outsourced trade compliance team immediately.

However, this is not a significant issue as there are many ways to mitigate potential risks with a few easy steps.

Tips To Avoid This Issue:

  • Identify core business hours that overlap with the external compliance team’s work time so you know when you can reach out to your dedicated trade compliance team when needed.
  • Talk to your trade compliance expert to determine the best ways to communicate with them. This will include the method of communication and if you will have regular calls.
  • Establish regular communication standards and escalation mechanisms with your trade compliance team if any compliance issues arise.

Concern 5: Outsourcing Will Increase Your Trade Compliance Budget

It’s essential to keep a close eye on your budget no matter the economy, but it is essential during tough economic times. Reducing your headcount means that your business can be more agile and adapt to changes in the market, which will give your organization a competitive advantage.

For less than the typical salary and costs of benefits of one or two employees, you gain access to an entire team of compliance specialists with the knowledge and experience to catch any potential issues.

Compared to building an in-house compliance team, you’ll save money in the long run with an outsourced trade compliance team. However, some leaders worry about financial factors from outsourced trade consulting. So here are some tips to help you get the most out of outsourced trade compliance teams.

Tips To Avoid This Issue:

  • Define workflow requirements and timelines for compliance reporting to keep your outsourced team on your schedule and needs.
  • Use productivity management tools to track compliance monitoring to ensure tasks are completed on time.
  • Ask your vendor about potential additional costs that could arise, so you and your accounting team are not surprised by extra costs from unscheduled or out-of-scope work.

How To Succeed When Outsourcing Trade Compliance

Trade compliance is an essential part of any business. If your business wants to operate as efficiently as possible, then you need experts to ensure you meet trade regulations throughout the year.

In the past, most companies relied on in-house trade compliance experts to oversee operations, but in recent years countless organizations have turned to outsourced trade compliance management solutions.

Here are some things you can do to make the most of trade compliance outsourcing and help your business grow.

  • Create strong partnerships with your new team: Your compliance team is on your side. Ensure you build strong relationships with your trade compliance team and clearly define how you’d like these issues handled.
  • Pick and choose which tasks you outsource: At the end of the day, your company carries most of the compliance liability. Carefully select which compliance tasks you assign to your external vendors and those you keep in-house.
  • Stay informed on export compliance: Even when outsourcing trade compliance to an external vendor, you must stay up-to-date on the latest regulations and policies.
  • Communicate, communicate, communicate: Establish a point of contact and multiple means of communication. How responsive is your vendor?  Do they get back to you quickly with updates and answers?  The easier it is to contact your trade compliance support team with questions or requests, the less likely it is you will experience issues.

Avoid Common Outsourcing Risks And Stay Compliant With Export Solutions

Some companies keep their import and export trade compliance processes in-house. However, many companies partner with a third party to help ease the pressure of trade compliance on their team and increase efficiency.

If you’re looking for a vendor to help with your business’s trade compliance, then our trade experts at Export Solutions are here to help you find the right solutions for your needs.

Our experienced team of trade compliance professionals has the knowledge and expertise needed to keep your company in compliance and stay ahead of any potential issues. We have been helping companies like yours for over 15 years in several industries.

Contact us today for a free consultation to learn how Export Solutions can help with your trade compliance outsourcing needs.

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Tom Reynolds is the President of Export Solutions, a consultancy firm which specializes in helping companies with import/export compliance.