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Trade Compliance – what does it mean, and why is it so important?

Published: August 16, 2021
Author: Keelin Rowan

Trade Compliance – what does it mean, and why is it so important?

Trade compliance is a corporate compliance requirement, which includes rules and regulations regarding the import and export between countries.  Compliance will ensure that these international transactions conform with the laws and regulations of each country within each transaction..

Many organisations experience challenges in complying with the laws and regulations regarding  international trade.  In some cases this is due to a lack of awareness of their legal obligations.  Not maintaining compliance can have significant impacts in terms of fines and penalties and can also lead to criminal prosecutions.  Your company’s ability to trade internationally can also be withdrawn.  For many companies, they do not have trained compliance personnel internally and instead they rely on the limited information that is provided by their logistics partners.

In Europe, BREXIT has raised the profile of international trade compliance.  However, much of the focus has been on the documentary and process requirements for a company to get their goods through customs.   We continue to come across companies that remain unaware of their responsibilities under EU and US trade legislation in the areas of compliance with embargoes, trade sanctions, denied party screening, dangerous goods handling and product licensing requirements.

Some of the regulations that must be complied with, include;

  • EU Dual-Use Regulation
  • U.S. Export Administration Regulations (EAR)
  • German Foreign Trade and Payments Act (AWG)
  • German Foreign Trade and Payments Regulation (AWV)
  • U.S. Export Administration
  • U.S. International Traffic in Arms Regulations (ITAR)

Ultimately, if your business is trading internationally, then you have trade compliance obligations that you must adhere to. 

Key practices that you should address within trade compliance, include;

  • Establish which government and legislative controls are relevant to your products and to your organisation
  • Ensure that you have access (internally or externally) to information on the specific trade compliance requirements for your business and develop formal procedures to ensure compliance
  • Evaluate your internal processes to ensure that they adhere to restrictions as defined by EU & US export controls, which include export license requirements, sanctions, or embargoes
  • Review your internal processes to include the completion of the required screening against denied parties, whether persons or businesses, to ensure you do not do business with such parties
  • Understand product origins and preference protocols, as well as validating the correct classification of your products
  • Consider the potential application of regulations regarding dual use or dangerous goods handling for your products
  • Prepare and present the appropriate import and export documentation and adhere to customs and duties requirements. 
  • Appoint responsible individuals within your organisation and provide them with access to training and resources to be successful

So, what can I do to get started on my organisation’s trade compliance program?

Introducing an entire trade compliance program can be a significant undertaking.  It can, however, be broken down into manageable pieces of work.

You can start by;

  • Gaining an understanding of your organisations’ obligations
  • Completing a risk assessment of your current international trade movements
  • Identifying and addressing gaps in your organisations trade practices
  • Understanding the key operations of your business, and documenting risks in a detailed and comprehensive manner
  • Developing a series of policies and procedures for your business in the form or a trade compliance manual that can be kept up to date as requirements change
  • Identifying and training responsible individuals within your organisation to meet your compliance requirements
  • Considering the need for external customs and trade support and advice if needed.  This can enhance your internal knowledge base, and support your program development.
  • Providing ongoing management support through regular trade compliance reviews

Are you currently experiencing challenges with your trade compliance processes?

Do you have a trade compliance function, but need advice on particular aspects of your obligations and relevant regulations?

Perhaps you don’t currently have a trade compliance function, but you think it might be relevant to your business?

If you are looking for advice, PerformanSC may be able to assist you in this area.  We would be delighted to have an initial conversation and point you in the right direction.

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