By Shawna Karajic, Export Solutions Inc.

Who’s Responsible For Trade Compliance?

This is a question that most companies struggle with when it comes to their imports or exports.

Who is responsible? The answer… everyone!

Some companies might have a designated Trade Compliance Manager who oversees the trade compliance program. Others might even have a dedicated team built just for compliance. Other companies think they can rely on a customs broker to manage customs compliance in their supply chain and business operations.

But when it comes down to it, your company is responsible for customs compliance, and this means that everyone in the company should have some knowledge and training on trade compliance and how it affects them.

The question you should ask yourself if every employee understands their role for your company’s import compliance and how they are responsible for the entire compliance program.

Since trade compliance is the responsibility of every employee, your team should have a clear idea about how their job role influences global trade compliance. This goes for everyone from those who oversee finances to the employees who are in charge of recordkeeping. When all employees buy-in and take responsibility for their role with import-export compliance, your company will carry less risk, have fewer internal audits, and avoid more extensive issues with CBP.

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For example, the person in finance, accounts payables or receivables who approves invoices or makes the payments, do they know what they are looking at when they receive the invoice to pay or know what to look for when they receive a payment to ensure that it doesn’t violate the Foreign Corrupt Practices Act (FCPA)?

The person in the shipping/ receiving department, do they know what US Customs restrict countries or products?

The president or CEO, do they know what is required of their company when importing or exporting?

Trade Compliance needs to start at the top level of the company and trickle down to everyone else. Most positions in a company have either direct or indirect contact with international trade.

Everyone needs to be aware of what the laws and regulations are to help ensure that the company does not face fines/penalties or unwanted scrutiny from US Customs, especially if it is something avoidable.

Don’t roll the dice with thinking that just because you have an import compliance manual, you will be safe from facing any reparations to US Customs. Your manual needs to be complete and specific to help ensure that you are compliant with any import shipment you may have.

What Is The Purpose Of An Import Compliance Manual?

An Import Compliance Manual is a necessity for any company that imports. It is like having that manual for your new device that contains all the ins and outs of how things work.

The purpose of the Import Compliance Manual is to provide direction for every aspect of what your company needs to do in order to be compliant with US Customs. This is your go-to guide when an issue arises, and you are not sure how to handle it, or you haven’t had to deal with an aspect of Customs in a while, and you don’t remember what to do.

The world of import compliance is very complicated and having a manual that is readily available to anyone in your company is a must!

When Is An Import Compliance Manual Required For Your Business?

With the inception of the Customs Modernization Act of 1993, and Customs putting the responsibility on the importers to exercise reasonable care, all companies that import should have an import compliance manual.

Did you know that if you get your valuation wrong, have incorrect classifications, or any other aspects of an import entry, your company can face costly delays and possible fines and penalties from Customs? If you are a small or medium-sized business, those fines or penalties could be detrimental to your business.

When you have an Import Compliance Manual that is comprehensive to all aspects of your business, then it can help with mitigating any potential fines or penalties issued from Customs. It conveys that you are using reasonable care and have policies and procedures set forth on how each aspect of the import process should be handled.

So, when do you know the right time to get an Import Compliance Manual in place for your company to follow? If you already have an import Compliance Manual, does it incorporate the appropriate policies and procedures that will help you keep out of trouble?

1. Your Company Has Performed A Meaningful Risk Analysis

Whether you have an import compliance manual or not, the first step is to perform a risk analysis of all your shipments. This risk analysis will provide a baseline of where your company is in terms of Trade Compliance.

Once you complete your risk analysis, the next step would be to develop or refine your import compliance program, and the best place to start is to create an Import Compliance Manual, which captures all of your policies and procedures in one place. If you already had a manual, then it would be the time to update it to ensure you capture any areas missed that can cause compliance risks.

2. Your Company Does Not Have A Formal Written Compliance Program

Without having a formal written compliance program, you don’t have a starting point to measure any sort of compliance.

Having a formal written compliance program gives you the tools to measure the effectiveness of how your program is working and areas that need attention and more focus. This is one thing that Customs loves to see if they ever come in for an audit.

The formal written compliance program gives your company the direction and consistency needed to maintain compliance with all the various Customs laws and regulations. It also ensures that every member of your company has the same information, and nothing can be misconstrued.

3. Your Company Needs Training For Employees

Since importing can be so complex, and there are so many aspects to it, you should ensure that your employees are trained on just what they need to be.

For example, your company has products that qualify for Free Trade Agreements (FTA), but your company does not have a Foreign Trade Zone (FTZ), there would be no need to train your employees on an FTZ.

All of the areas that training would need to be focused on would be laid out in your import compliance manual. It is a great resource even after training.

4. Ensure Your Company Screens Customers & Transactions

With having an Import Compliance Manual in place, you can layout the policies that employees need to follow to maintain the level of compliance with importing and exporting.

Do employees know where they can have products sent and if there are any restrictions for countries on what can be imported? Is the company that you are purchasing from on any sort of Sanctions from US Customs?

Are you sure there aren’t any charges on an invoice that shouldn’t be there or could be construed as bribery or corrupt payments?

Having an in-depth compliance manual will help to elevate any potential risk as long as it is followed, and employees are trained on what to do and what to look for.

5. Compliance Manuals Assist With Recordkeeping Requirements

Do you know the recordkeeping requirements for US Customs? Do your employees?

All of these details can be laid out in an Import Compliance Manual.

How long documents need to be kept? How are you allowed to store them? What documents need to be kept?

What's In Your Import Compliance Manual?
Is your import compliance program strong enough to stand up to CBP? Are you at risk for fines, penalties, and lost business?

What Should Your Company Have In An Import Compliance Manual?

A useful Import Compliance Manual shouldn’t be a one size fits all, out of the box solution.

The best Import Compliance Manuals are explicitly tailored to your company and your business needs.

These are just some categories that your Import Compliance Manual should contain:

  • Program Organization
  • Personnel and responsibilities
  • Customs documentation (i.e., Purchase Orders, Invoices)
  • Entry Process
  • HTS Classification
  • Valuation
  • Country of Origin and Markings
  • Recordkeeping
  • Free Trade Agreements
  • Partner Government Agency Processes (i.e. FDA, FCC, USDA)
  • Post Entry
  • Audits
  • Disclosures, Fines, and Penalties

Once your import compliance manual has been completed, it shouldn’t just sit on the shelf. Ensure that everyone is trained on what pertains to them thoroughly and has an overview of what doesn’t. It is better to have an overall picture of the process, so it is easier to spot a compliance issue or potential risk.

The manual, as well as employee training, should be reviewed at least once a year. Customs laws and regulations are ever-changing, and your Import Compliance manual should be as well.

What Could Happen if Your Company Does Not Have a Manual?

Failure to maintain a viable trade compliance manual could be potentially devastating to companies and even individuals. An Import Compliance manual is a crucial part of a trade compliance program.

There have been enforcements by US Customs that has cost companies millions for violations that ultimately could have been avoided had they had a solid Import Compliance Program with an Import Compliance Manual for their employees to refer to.

Did you know that the liability can also be imputed to company officers and employees? Depending on the level of culpability of the violation, companies and individuals can face fines, penalties, and/ or even jail time.

Wouldn’t you breathe a sigh of relief knowing that you have provided a solid Trade Compliance Program and Manual that could help avoid any potential violations?

So, what’s the big deal if you misclassify a product, claim the wrong value, or make any other false claims on your import shipments? Could you or your company afford to suffer the consequences?

1. Fines

Depending on what the violation is and how often it has occurred are a few factors that Customs looks at when they issue a fine. If you had 1 shipment that had an incorrect classification, then your fine might be just to pay the additional duties owed. However, if the same error has occurred for years, your fines/ penalties could substantially increase.

In one recent instance, a clothing company was caught intentionally undervaluing their invoices to avoid paying millions of dollars in duties. The owner of the company had to pay over $117 million.

2. Prison

Along with a fine or penalty, Customs could also institute a prison sentence, depending on the type of violation and the intent behind the violation. A significant violation would be trying to defraud the government and intentionally avoiding paying duties on import articles.

Another one will be if you try to smuggle items in under the assumption that they are something else or even hide them in a shipment.

In one instance, a company had tried to avoid anti-dumping duties, by having their shipment go from China to Malaysia, where the product was repackaged and sent on to the United States. The vice president and the company’s CFO was sentenced to 18 months, plus 3 years of supervised release and a fine of $25,000.

3. Probation

Customs violations could also include probation. Not only can probation be instituted for the individual, but also for the corporation as well. Going back to the previous example, the corporations were sentenced to 5 years of probation.

What's In Your Import Compliance Manual?
Is your import compliance program strong enough to stand up to CBP? Are you at risk for fines, penalties, and lost business?

Conclusion

Importing is not a right that a company has, it is a privilege. If you violate that privilege, then it can be taken away from you. Make sure that you have the tools needed to ensure you and your company are compliant with US Customs.

If you don’t have a formal written compliance program or an Import compliance manual, don’t wait any longer. You don’t want to become the next headline of a company that has violated US Customs laws and regulations. If you do have an import compliance program or manual, but need a second look, now is the time to dust it off and see if it needs revising.

Now is the time to claim your free, no-hassle consultation today!

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Shawna Karajic is a Trade Compliance Specialist for Export Solutions -- a full-service consulting firm specializing in U.S. import and export regulations.