February 2017 | Commentary | Risks and Rewards

5 Steps to Reduce Supply Chain Risks When Going Global

Tags: Legislation, Public Policy, and Regulations, Global Logistics, Cross-border Trade, Logistics, Supply Chain

Peter Liston is Senior Director of Global Trade Compliance, Flash Global, 866-611-7874

Natural disasters, huge economic swings, supply shortages, and security issues present considerable challenges to supply chains. One critical area that can bring a supply chain to a screeching halt is international trade compliance.

Whether you're starting out in the global market or already dealing with supply chain issues, these five tips will help you mitigate risk.

1. Take supply chain risk and trade compliance seriously. Many companies spend more time planning the annual picnic than they do mitigating risk. In fact, 90 percent of supply chain executives responding to a University of Tennessee study on supply chain risk management didn't quantify risk as a verifiable threat to their companies.

2. Write and implement strong export/import procedures. Robust compliance policies help you avoid penalties, control costs, and create a reliable supply chain. Buy-in should start at the executive level. Without that support, compliance policy may carry little weight throughout the organization.

When problems arise, regulatory agencies including the Bureau of Industry and Security (BIS), U.S. Customs and Border Protection (CBP), and others consider the strength of a company's compliance program when they assess administrative penalties for violations. A strong program that includes meticulous recordkeeping, auditing, and self-reporting may help mitigate penalties.

3. Use trade compliance programs. An Export Management Compliance Program (EMCP) and Import Management Compliance Program (IMCP) provide the best insurance against regulatory infractions. These systems assess trade compliance risk by monitoring regulatory requirements and changes, training, recordkeeping, and auditing. EMCP and IMCP teams can recommend and monitor corrective actions when needed.

4. Implement best practices. The following procedures help companies reduce risk and supply chain disruptions:

  • Properly classify each item, from components to higher-end assembled items, under both the Harmonized Tariff Schedule for duties and tax purposes, and by jurisdiction (military vs. commercial dual-use).
  • Screen parties against the Restricted Party List and Denied Party List published by the U.S. government and the United Nations, as well as lists published by export control regimes in the regions where you do business.
  • Verify requirements for countries of origin and destination. Export/import laws regulate a shipment's country of origin, declared value of goods, destination country, purchaser, and buyer.
  • Set "Reasonable Care" standards within your policy. Refer to CBP (CBP.gov) and BIS (BIS.doc.gov) standards.
  • Ensure all documentation complies with export and import regulations.

5. Consider a supply chain solutions provider. Many companies lack the personnel and expertise to monitor trade compliance and manage supply chains. Specialized supply chain solutions providers help companies enter the global marketplace quickly with customized, end-to-end supply chain solutions.

While the rewards of global operations are substantial, so are the risks. Compliance failures delay shipments, disrupt operations, and negatively impact your bottom line. Having a skilled team to manage the supply chain and mitigate risk is crucial when seeking long-term success in global markets.






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