Written by Thomas Cook, Managing Director, Blue Tiger International
Companies that import and export in their global supply chain operations need to understand their responsibilities in trade compliance.
At a high-level starting point, Due Diligence, Reasonable Care, and Supervision and Control are the three stalwarts of government agency expectations on how importers and exporters need to behave in their global operations.
We would add Proactive Engagement to the three areas above. Our 40 years of experience have proven this as a fourth criterion that government agents, principally Customs & Border Protection (CBP) and the Bureau of Industry & Security (BIS), have as an expectation. In other words, in an audit, agents will often ask the question, “How are you being informed of import and export regulations and where do you obtain that information?”
Their expectations align with the concept that in order to be trade compliant, companies and the personnel responsible for trade compliance need to develop “input information flows” on both import and export regulations and how they adapt and change over time. Acceptable evidence may include membership in various trade associations, such as the the American Association of Exporters and Importers (AAEI), the Institute of Supply Management (ISM), the Council of Supply Chain Management Professionals (CSCMP), and the Association for Supply Chain Management (ASCM), and by following or subscribing to the daily flow of emails, posts, and briefings available from numerous professional trade attorneys, consultants, freight forwarders and customhouse brokers.
Due diligence and reasonable care can be simply explained as a company adhering to their import and export regulations in their day-to-day trade practices. This is best documented in trade compliance SOP’s and protocols which must be maintained and updated regularly. They can be shown to Enforcement Officers at the time of any review, audit or intensive inspection.
The focus of this article is the third category, the “supervision and control” provisions and expectations of all government agencies, particularly CBP and the BIS. These government agencies fully acknowledge that most importers and exporters outsource their logistics, distribution, shipping and brokerage needs to service providers, principally 3PLs, Freight Forwarders and Customhouse Brokers and that the majority of importers and exporters are likely to depend heavily on the advice and counsel they receive from these sources.
In recognition of this strong interdependence, these government agencies have serious expectations that principal importers and exporters “supervise and control” their service providers. That includes not only their operations but the advice and counsel they provide with respect to their trade compliance responsibilities as well.
It is important to keep in mind that these service providers also have their own independent liability to CBP and the BIS in how they manage their trade compliance service portfolio with their clients and in their own independent actions.
It would be fair to think that all parties to a transaction would ensure a compliant import or export, but reality creeps in and there is still a high degree of importers and exporters that incorrectly manage their trade compliance responsibilities. How and where?
In imports, the culprits are typically in the areas of Harmonized Tariff Schedule (HTS), valuation, origin, forced labor and record keeping.
In exports, the culprits are typically incorrect documentation, not checking the Denied Party Lists, wrong Schedule B Numbers or shipping goods which have restrictions as to destination countries or the specific consignees.
Auditing your service providers is a detailed and arduous responsibility that must be done continuously. The touchpoints mentioned in this article will form a solid basis for your efforts.
Recognize that at the end of the day, exercising and documenting supervision and control is a risk management strategy that assures you are trade compliant in your global supply chain responsibilities.