Shipping Solutions Newsletter

By John Goodrich email | bio

In the first part of this article, we explored the challenges and barriers (alright excuses!) that some of you face in implementing effective import/export compliance programs at your companies. In this portion of the article, we will explore the reasons for moving forward with your compliance programs including reasons why it is good business to do so.

You are likely aware of the book, All I Really Need To Know I Learned in Kindergarten, by Robert Fulghum in which the author light heartedly reminds us that living our lives by a few simple tenets, mastered at an early age, will lead to a more rewarding less complicated way of life.

Second on his list of 16 tenets is the commandment “PLAY FAIR.”

The above came to mind as I organized my thoughts for the second part of this article because it closely matches the first argument for investing in regulatory compliance:

1. Regulatory Imperative

Play Fair! Play by the rules! It is the right thing to do. Compliance with import/export regulations is the law! Honesty and integrity are their own rewards.

This should be argument enough for any company to strive to continually enhance its import/export compliance program.

While I would like to believe this feel-good-flag-waving-mom-and-apple-pie argument would be enough to motivate all of your companies, I am not that naïve. Some of your companies may require additional convincing.

2. Risk and Penalty Avoidance

I think of this as the “or-else” argument. Others might call this the “fear” argument. Non-compliance with the import/export regulations carries with it serious penalties, chief among these is the loss of importing and or exporting privileges.

If you choose not to play by the rules, the federal government can take measures to bar you from playing the import/export game. Such restrictions could prevent your company from being successful in today’s global economy.

Both import and export regulations carry with them impressively large fines for non-compliance.

By way of example the Commerce Department regularly shares its Major Cases List at the Bureau of Industry and Security (BIS) website. This publication, which discloses the fines and penalties assessed against companies for export non-compliance, is an effective tool in gaining support within your company’s organization.

While Customs does not regularly or publicly publish the penalties it has assessed against importers, they did recently make it known that a well-known manufacturer was assessed fines in excess of $40 million for alleged improper use of NAFTA and record-keeping infractions.

As a rule, the fines and penalties provide a compelling business argument, albeit a negative one, for companies to develop import/export compliance programs.

If that does not strike you with fear then consider this. In extraordinary cases of non-compliance both import and export regulations allow for imprisonment of the individual.

3. Competitive Advantage

Import/export regulatory compliance is good business! Companies that invest in trade compliance programs see positive returns on their investment.

Say what? John, you have clearly drunk too much of that consulting drink you hawk to your clients! Everyone knows the import and export managers are no more than overhead with no contribution to the bottom line.

Bear with me, please.

As an importer or an exporter, your company has already made a strategic decision that international sourcing and selling are key to its success. To achieve the full benefit of importing and exporting, your company must strive to master a variety of competencies including sourcing, marketing, international contracting, logistics and regulatory compliance. In other words, mastery of import/export compliance is a business necessity, not a luxury. Investment in import/export regulatory compliance pays dividends in both quantifiable and intangible ways.

Reduced and known costs lead to competitive pricing: A commitment to core compliance competencies, such as classification, pays dividends in predictable and accurate payment of duties and fees. A company that knows its costs can price its products more accurately and competitively.
Participation in preferential trade programs leads to a competitive advantage: A commitment to a rigorous compliance program permits a company to participate in more complex duty minimization programs such as free trade agreements, 9801/9802, duty preference programs and duty drawback. This argument applies to importers and exporters alike. Importers can clearly quantify the reduction in duties they pay to the government. The benefit to exporters may be in increased sales. An exporter who supports compliance, for example, will be able to participate in NAFTA and will find their products to be more competitive in Mexico and Canada.

(Those of you participating in preferential duty and trade programs without robust compliance programs are participating in behavior that puts your company at risk. See argument 2 above.)
Supply chain cost reductions: Disciplined compliance programs contribute to predictable, dependable international supply chains. Dependability and regularity in a supply chain allows a company to focus on cycle time reductions. Those of you familiar with supply chain management know that reduced cycle times relate directly to reductions in inventory costs.

I am familiar with one importer whose commitment to a more disciplined management of the import clearance process resulted in a four-week reduction in its overall cycle times. This resulted in an annualized inventory carrying cost savings of greater than $500,000. While much of the four-week cycle time reduction was a result of transit time gains, it was the focus on compliance that allowed the company to identify the opportunity and realize the gain.
Logistics savings: As in the above argument, companies that focus on auditing their imports and exports for compliance purposes uncover logistics cost savings opportunities. A logistics rule of thumb states that an unmanaged transportation program includes an approximate 10% cost savings opportunity. The savings are generally discovered in a combination of misrated freight bills and misrouted cargo.
Ethical behavior pays dividends: Commitment to regulatory compliance is an indicator of an ethical business environment. Studies indicate that while ethical behavior does not guarantee success, success cannot be achieved or maintained in the long run without it. (Admittedly, recent anecdotal evidence has shown that unethical behavior has resulted in some rather wealthy scoundrels, too.) For mainstream business, however, this argument holds true. In an increasingly commodity-driven global environment, a reputation for doing business ethically and honorably can be the differentiating factor in establishing and maintaining business relationships. This argument is the most difficult to quantify.

This last argument seems to bring us full circle to our first argument: your company should comply with the regulations because they are the law.

A final thought. Throughout your company you have made a commitment to a wide range of professional competencies and services including accounting, human resources, product development and supply chain. You have made these commitments for the very same reasons I have detailed above for import/export compliance.

What is holding your company back from making a comparable investment in import/export regulatory compliance?

Time is up! You have run out of excuses.

Top of Page

The Government Takes Export Compliance Seriously. Do You?—Part 1

Export compliance regulations don’t just apply to the big guys. Even the smallest U.S. businesses that send their products to customers outside the country are subject to a variety of export regulations and could face substantial penalties for violating these rules. Unfortunately for many small and medium-sized businesses, company personnel may not know these requirements until it’s too late.

According to the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), fines for export violations can reach up to $1 million per violation in criminal cases, $11,000 per violation in most administrative cases, and $120,000 per violation in cases of national security. In addition, criminal violators may be sentenced to prison time, and administrative penalties may include denial of export privileges.

Penalties of this size and nature can be especially devastating to small and medium-sized businesses, which represent 97% of the more than 220,000 U.S. companies that export, according to U.S. Census Bureau statistics. Small and medium-sized businesses may think they lack the time or money to train personnel in export regulations and the necessity of compliance screening. Even if they do have the necessary experience and training, export personnel may not have the support of senior management, who are often totally unaware of U.S. export regulations.

BIS has published a book, Don’t Let This Happen to You, which outlines exporters’ compliance responsibilities and includes real-life examples of penalties they have recently issued against individuals and businesses. You can download a copy of the book at the BIS website.

Implementing Export Compliance Procedures

Companies of all sizes need to be aware of their responsibilities as exporters. Part 2 of this article will focus on some basic steps that all export companies and their personnel should know, follow and document. It should serve as a starting point for creating a more comprehensive and written export management plan.

For any plan to be effective, it must be endorsed by companies’ top management and shared with all employees involved in any part of the export process—from managers, to sales and administrative personnel, to the warehouse team. Such an effort can save companies thousands if not hundreds of thousands or even millions of dollars in fines, prevent restrictions on exporting that can cost companies millions of dollars in lost revenue, and even jail time for the most serious violations.

Shipping Solutions Export Compliance Solutions

Shipping Solutions provides easy-to-use tools to help implement and meet your export compliance responsibilities. At www.ExportCompliance.com, you can subscribe to only those compliance tools your company currently needs:

Product Classification—Our online Product Classification tool makes it easier for you and your company to identify your products’ proper Schedule B or Harmonized Schedule (HS) numbers that are required on your export documents. In addition, this tool searches the Export Administration Regulations (EAR) to see if the government identifies your product as a controlled item and helps you determine the proper Export Control Classification Number (ECCN) required for export license determination.
Export Controls—Before you export your goods to another country, you need to determine whether or not you must first get an export license based on your product classification and the destination country. This online screening tool will tell you just that plus provide assistance to help you apply for an export license or other export control document if required.
Trade Party Screening—The U.S. Export Administration Regulations (EAR) prohibit trade with specific individuals, companies, institutions and organizations. Instead of publishing all these names in a single list, each government department and agency with jurisdiction over exports publishes their own list, which means there are more than 10 lists to check! By using our online screening tool, you can check all the U.S. lists—as well as the United Nations list, European Union list, Japanese list and Canadian list—at one time and in just seconds.

If your company is involved in importing in addition to exporting, Shipping Solutions also provides online compliance tools that will help you comply with current U.S. import regulations:

Import Controls—The U.S. government’s import regulations impose import quotas, licenses and certificates on certain goods. Our Import Controls tool identifies any import controls that may exist for your products and/or the countries from which they are originating and provides information concerning the support documentation needed to receive an import license or other control documents.
Landed Cost Calculator—Before you can accurately determine the best country to source a product, you need to know the final cost of delivering that product to your warehouse or other destination including all import duties, taxes and other government charges. In addition to providing that detail, our Landed Cost Calculator will also warn you if anti-dumping duties or countervailing duties may apply for a specific product. Our Calculator even allows you to simultaneously compare products imported from up to four different countries so you can quickly compare costs.

Visit the website or call 1-888-890-7447 to sign up for a free online demonstration of the compliance tools.

Top of Page

Thousands of successful exporters are using Shipping Solutions to complete their export documents faster, easier and less expensively than ever before. Why aren't you?

If you're too busy trying to complete your export documents by hand to spend some time reviewing the Shipping Solutions Professional export documentation and compliance software yourself, let us do it for you! Sign up for one of our free online demos and let us give you a one-hour overview of the software.

We'll take you step-by-step through the process of completing your export forms, filing your SEDs electronically through AES, and checking your exports against the various government restricted parties lists and export regulations to make sure your shipments are in compliance, and you—and your company—stay out of trouble.

These free online demos are available on Tuesday's at 1:00 p.m. and Thursday's at 10:00 a.m. Central Time. All you need is an Internet connection to watch the demo and a phone to listen in and ask questions about the software. It's the perfect opportunity to get your first view of Shipping Solutions or to convince your coworkers and your boss that Shipping Solutions is the perfect solution for your company.

See why Shipping Solutions is America's #1 export software. Sign up for the free online demo today!

Top of Page