Global trade compliance: keeping your business safe and successful

If you're able to achieve and maintain high standards of global trade compliance, you can feel confident about staying on the right side of international law.

There are several factors to take into consideration when working to minimize your compliance risk. These include efforts to comply with the terms of free trade agreements, arms regulations, sanctions and customs duty requirements. The key elements of global trade compliance include the below.

Ensuring that you are using the correct classification codes for every item is an essential first step in international trade compliance. The use of codes to categorize goods for customs purposes ensures that all businesses are paying the appropriate duties and any other customs measures are applied correctly. Failure to do this could lead to firms missing out on tax relief they are entitled to, or falling foul of export control issues.

Countries and trade blocs follow different rules to establish where goods, and the materials they contain, originated from. This is important to ensure products with preferential origin aren't subject to unnecessary duties, for example as part of FTAs. Understanding exactly where your items come from is especially important for areas such as manufactured goods, which often have complex supply chains where certain components may be entitled to duty relief. Accurate reporting on these is essential for global trade compliance.

There are several factors involved in maintaining compliance with export control law. There includes export control classification, denied party screening / restricted party screening, checking sanctions lists and embargos, determining licensing requirements (including license management) and checks of end use and/or end users. Therefore, commitment to export control compliance and effective risk management is required.

International commercial terms, or Incoterms, are globally recognized rules and definitions that are crucial for establishing the responsibilities of buyers and sellers at different stages in the shipment cycle. Issued by the International Chamber of Commerce and supported by bodies such as the World Trade Organization, following an agreed set of terms prevents any confusion in foreign trade contracts and ensures all parties are aware of what their responsibilities are when it comes to compliance.

Exports of certain types of goods - such as medicines, chemicals, plants and dual use items that may have both civilian and military applications - are carefully controlled, so businesses need to ensure they have the necessary licenses and permits before shipping them.

Global trade compliance is a broad subject area that encompasses many other elements - management of customs investigations and customer screening, to name just two. It's important, therefore, to do your research, prepare carefully, and use effective tools and software solutions to drive performance.

Failure to meet compliance requirements can have a wide range of consequences. At an operational level, if firms have not accurately submitted the correct documentation for their goods, they could face the prospect of lengthy - and costly - shipment delays, as goods have to wait at ports of entry before being cleared by customs authorities. However, the issues can go far beyond this.

One of the clearest motivations to strive for high standards of global trade compliance is financial. The penalties for contravening local laws and regulations can be severe, so if you don't want to be hit with fines that threaten to wipe out any profits you've made from international sales, you need to understand and stick to the rules.

It's also important to be aware of how non-compliance can have wider repercussions for your business. From a brand reputation perspective, for example, potential buyers may take a dimmer view of your company and be less likely to buy from you if they know you've incurred financial penalties or even criminal sanctions.