January 2015 | Commentary | Viewpoint

Customs Compliance: Small Mistakes Can Lead to Big Problems

Tags: Supply Chain Management, Legislation, Public Policy, and Regulations, Risk Management, Export, Logistics

James Min is Vice President of International Law, Deutsche Post DHL, 800-CALL-DHL

Diverse, evolving global trade regulations require companies to implement systems and procedures that ensure strict adherence. Large businesses have in-house compliance staff, but those responsibilities might hold a more vague spot in small enterprises. With stiff penalties at stake—penalties that could put some organizations out of business—small companies must take an aggressive stance on compliance.

With technology and the globalization of trade easing entry into the international trade arena, complying with international trade laws requires review.

Ultimately, each global shipper is responsible for ensuring full compliance with customs requirements and trade regulations around the world. Software programs and resources that organize and outline imports and exports can help companies with compliance.

Whether large or small, shippers should ensure they have proper updated procedures in place, and understand the key areas of compliance risk, including:

  • Destination risk. When trading with countries embargoed by the United Nations and the United States, understand the specific restrictions. If you do business in regions such as Iran, Syria, Sudan, North Korea, and Cuba, get familiar with the types of shipments allowed and prohibited, along with any rules that apply.
  • Product risk. For security and foreign policy reasons, the U.S. government closely controls the export of certain materials and equipment, including software and technology, that may have dual use. Other countries have similar restrictions when shipping to the United States. Global traders must understand the nature of their product relative to existing regulations. For example, certain items require licenses to export. Using a product's Export Control Classification Number helps to identify these items, and the agency that can provide the necessary license.
  • Customer risk. Companies must know who is placing orders and receiving shipments. Shipping to and from well-known overseas companies presents a lower risk, while fulfilling orders through freight forwarders should raise red flags, because shippers are liable for the ultimate end recipient of their products. A number of online tools from government agencies and private companies are available to help verify the identities of overseas customers.
  • Shipping risk. The United States is open to trade. By contrast, many other nations are strict when it comes to shipping violations, and may use significant resources to pursue misidentified shipments brought into their borders. Some countries consider it a criminal violation to undervalue goods, and companies that do so may face severe penalties and delays. Strictly following shipping disclosures and requirements can save companies significant time and money.

Different Sizes, Equal Punishments

Unfortunately, the law doesn't differentiate between small and large businesses, so small enterprises that have a misstep can suffer large consequences.

Trade laws and regulations are complex and constantly changing. Companies that don't understand or follow these laws and regulations can face serious consequences. Compliance should head the priority list of every business seeking to expand into the international marketplace.