What is trade compliance?
At its most basic, trade compliance is an aspect of corporate compliance that includes the rules, regulations and best practices of importing and exporting between two or more countries.
It’s important that every part of your organization—including but not limited to sales, accounting, shipping, purchasing, and legal—is aware of their trade compliance responsibilities to ensure that all import and export transactions are in conformance with the laws and regulations of the countries involved.
While international trade compliance is already quite complex, adherence to compliance best practices also applies to in-country transfers of goods manufactured aboard. Companies that export and import internationally need to comply with a complex regulatory framework imposed by multiple governing bodies within even the same country.
For exporters, the steps for ensuring trade compliance may include:
- Determining which government agency has jurisdiction over your products
- Identifying if there are restrictions on exporting those goods to certain countries, such as embargoes, sanctions, or license requirements
- Cross-checking lists of denied parties to prevent exports to banned individuals and organizations
- Preparing the appropriate export documents
For importers, ensuring trade compliance includes:
- Determining if there are any restrictions or limitations on importing certain goods into the country
- Identifying the correct classification for the goods
- Identifying and reporting the appropriate duty rates and taxes for entering the goods into the country
Why is trade compliance important?
International trade compliance policies are essential because countries have the right to protect critical products, technology, or information from falling into the wrong hands or simply to safeguard competitive advantages in a global marketplace
For importers and exporters, there are consequences for not understanding and abiding by trade compliance regulations. Unfortunately, regulations are often not harmonized across trading countries and navigating these requirements amid a volatile global trade environment poses new challenges for compliance teams.
Regulatory and enforcement climates of export and import controls often change rapidly and in some cases with little warning. As countries update their sanctions lists to address the current state of foreign affairs, global trade compliance processes must also react accordingly.
If done incorrectly, importers may face financial consequences, which can include higher interest rates, financial penalties, and more. In addition, imports could be held in customs without a timeline for release, thus delaying the payment for the goods. According to the Bureau of Industry and Security (BIS), fines for export violations can reach up to $1 million per violation in criminal cases, and administrative cases could result in a penalty of up to $300,000 or twice the value of the transaction.
What is the latest in trade compliance legislation?
Import and export trade laws are in a constant state of flux. Trade compliance teams need to be working off of up-to-date information.
For example, one of the latest pieces of legislation to watch out for is the Uyghur Forced Labor Prevention Act (UFLPA), passed on December 21, 2021. The UFLPA, which went into effect on June 21, 2022, is unique in its enforcement protocol. U.S. Customs and Border Protection (CBP) has made clear that all imports from Xinjiang will at least be detained – in some cases seized – unless the importer can provide “clear and convincing evidence” that the goods are free of forced labor. While this does bring additional challenges for importers, the law is a major step towards weakening the forced labor industry in China.
Another major global event for trade compliance professionals to watch out for is the Russian sanctions regime. In the six months since Russia’s invasion of Ukraine, countries across the world have stepped in with sanctions to attempt to damage Russia’s economy and weaken their military power. Even as recently as August, the U.S. Treasury and State departments have continued to impose new sanctions. Over 30 countries have issued far-ranging sanctions and bans on Russian imports. Companies who do business internationally face the challenge of understanding different sanctions regimes from around the world to ensure all of their imports or exports remain in compliance.
How can I run efficient trade compliance investigations?
It would be impossible to remain in compliance with import and export laws if you didn’t have all of the information on the associated importers, exporters, and manufacturers. Automation will be key to modern day trade compliance.
For instance, Sayari Graph leverages global public records and graph technology to pre-compute complex, cross-border corporate networks, thus providing a clear picture of illicit financial actors, their infrastructure, and relationships. This comprehensive view provides importers with broader context surrounding their partners and counterparties. If you’re looking to stay in lock step with regulators, U.S. Customs and Border Protection also relies on Sayari Graph data for regulating trade.
Sayari Graph can help identify and investigate counterparties to shipments, and check for exposure to high-risk and sanctioned markets like Iran and Venezuela, or to non-obvious state-owned or state-invested enterprises (SOEs) in places like Russia and China. It can also be used to help organizations look for indicators of forced labor in global public records, scan for known high-risk companies, and screen beneficial owners to ensure a supply chain is unexposed to any sanctions risk. The platform’s continuously updated public records will ensure that you’re always working with the most current information.
See the impact for yourself with a personalized demo of Sayari Graph. For inspiration, watch one of our in-house analysts perform an example investigation and learn how to identify the hidden risk of Chinese military companies.