Five Customs Compliance Tips for Aerospace Companies
Aerospace manufacturers and distributors who move shipments across international borders face an often-complicated, high-stakes process as they navigate export rules and local customs regulations.
Fines for non-compliance can amount to millions of dollars. That makes understanding guidelines a vital business priority. For some companies, the hassles associated with customs can dissuade them from expanding into profitable international markets.
In 2013, U.S. companies exported goods and services valued at $2.28 trillion, up 23 percent from 2010. That’s impressive growth that makes a solid business case for exporting. Still, many shippers make mistakes, and bungled border crossings that resulted in prosecutions and enormous fines.
While customs compliance can be difficult for all manufacturers, it is even more challenging for aerospace manufacturers, who often sell dual-use products for commercial or military purposes that have higher compliance obligations. The U.S. government levies fines starting at $250,000 per violation for any company, but non-compliance involving defense-related items earns companies even higher penalties. Fines soar into the millions, and the potential revocation of export privileges can be even more devastating. So can the damage done to brand and reputation.
Despite the hazards of cross-border trade, customs compliance does not have to be a barrier to global growth. It does, however, require a lot of know-how. In fact, many exporters have dedicated compliance teams or engage outside customs experts.
These five tips will help manufacturers and their shippers stay compliant:
- Know the U.S sanctions, embargoes, and export restrictions for countries you wish to ship to. The geopolitical landscape is dynamic. For example, U.S. exporters generally know not to send goods to Iran, Cuba, or North Korea. But restrictions also are tight on certain exports to China, and the United States recently issued new restrictions on exports to Russia. Certain parties have also been restricted from receiving U.S. exports. Manufacturers also must know the Export Control Classification Numbers and U.S. Munitions List categories for the items they ship and whether these goods must be licensed. Rules change regularly, so constant vigilance is essential.
- Keep up with changing customs regulations in countries where you do business. Customs rules change frequently in some countries, and speedy clearance demands that shippers have their documentation in order and be prepared to answer questions. For example, the European Union requires shippers crossing into any of its member nations to have plans for disposing of cardboard packing materials. Failure to produce this plan can slow or stop the shipment.
- Thoroughly vet customs brokers to ensure strict compliance. The Foreign Corrupt Practices Act (FCPA), which governs the conduct of American companies doing business overseas, holds companies responsible if their vendors provide gifts or cash – even in small amounts – to a non-U.S. government official for purposes of obtaining a business advantage. This is true even if local regulations require a shipper to use a local customs broker. These brokers can help navigate local laws, but not all are well versed in anti-corruption laws like the FCPA or the UK Bribery Act. A logistics partner that has relationships with trusted brokers can ensure that no unlawful payments are made on your behalf.
- Audit your staff and vendors to ensure compliance with FCPA requirements.Conduct background checks, and screen payroll records against other employee records. Also, compare local employee names and addresses against vendor names and addresses to spot undisclosed conflicts of interest.
- Protect your goods and your intellectual property. American aerospace companies could be liable if a non-US national gains access to their controlled technology. This is known as the “deemed export rule.” It provides that if a U.S. company allows a foreign national to view designs or plans or other kinds of specialized information – even inadvertently – the company may be considered to have exported the technology. This can happen at any stage in a product’s lifecycle, including shipping.
Ethical, legal, and efficient importing and exporting is a pillar of global trade. It’s not always easy. But, with good partners, diligent preparation and attention to the rules, companies can do it consistently. Savvy manufacturers and distributors understand this as clearly as they understand the benefits of global expansion. There’s a world of opportunity out there. Companies just have to be alert to the pitfalls so they can manage the risk and trade with confidence.