|
By Mark Parker
At risk of compliance failures in their physical supply chains, US exporters and importers have more responsibility than they think. Regulatory changes have made the accurate recording and maintenance of trade-related data a compliance requirement.
As data automation increases, along with greatly-improved visibility for the company it also brings a higher visibility of errors to the regulators, increased fees and penalties, and a heavier load of responsibility for the trade community.
Companies have a tendency to place the onus for compliance on freight forwarders--making them responsible for classification, reporting, accuracy and recordkeeping. But forwarders rely upon information provided by the exporting company, and regulators hold the exporter responsible--not the forwarder--if the information is incorrect. A forwarder's primary role is to arrange and manage the transportation of goods; they should not be expected to serve as a company's compliance personnel.
In selecting a freight forwarder, the old adage rings true: you get what you pay for. Selecting the best forwarder for your business is critical to smooth supply chain operations. Once a forwarder has been selected, the challenge and responsibility for the exporter or importer becomes managing the forwarding service effectively.
Here are some tips for best practice standards to ensure the smooth flow of not just goods, but also of timely and accurate information-which is so critical to compliance reporting.
1. Establish and maintain clear communication guidelines. Document in detail information related to staff turnover; host regular meetings to discuss problems and identify solutions that will improve compliance and shorten timelines; use metrics to monitor progress and problems--both yours and the forwarder's; and have a reporting structure for any potential non-compliance issues.
2. Be sure the communication process includes prior notification of shipments. Many mistakes happen because a forwarder has insufficient or inaccurate information on the shipment. In addition to required logistic information, compliance information should be included on all export related documents. For imports, require that forwarders notify you of all incoming shipments in advance to ensure shipment details are verified and supporting data is provided.
3. Get a complete copy of the transaction. A checklist of required documents will help ensure that the entire transaction has been received. Giving a copy of the checklist to the forwarder can help limit document requests.
4. Audit documents after receiving them. Then, if errors are found, corrections can be made as soon as possible to limit potential penalties and fines.
5. Maintain strict controls on Automated Export System (AES) filings. Outline clear Service Level Agreements on AES filings with your forwarder. Changes to the AES record will result in a Compliance Alert Message to the filer, meaning your shipment is in violation of the export reporting requirements.
6. Know your responsibility in the transaction. Regardless of terms of sale, under the various US export regulations, all parties remain liable for compliance. It is essential to know your responsibility and participation in the transaction.
7. Make compliance your business. A freight forwarder will never be able to effectively run your compliance program and you cannot outsource liability. The onus is always on the exporter and importer.
8. Qualify your own transactions for preferential trade agreements. The cumbersome, detailed qualification process should be performed only by the trained personnel in your company's compliance department.
9. Limit powers of attorney, written authorization, or signed authorization granted to agents. The more POA's and authorizations you give to forwarders, the harder they are to manage.
10. Keep talking. It's important to keep your forwarder aware of the enforcement of new regulations and the development of new technology.
When a government agency comes knocking, very little blame for violations can be laid on the forwarder. The more control you give up, the more likely you are to increase risk of regulatory non-compliance.
None of this is to say that forwarders are free from liability. In fact, it's just the opposite. Forwarders are still subject to criminal prosecution and penalties for violations of US trade regulations.
But ultimately, the importer or exporter is always responsible - it's much harder to avoid an accident if you are a passenger instead of the driver. To effectively manage your freight forwarders and brokers, be the driver in your compliance department.
Mark Parker is a lead auditor and consultant in the Trade Management Consulting team at JP Morgan.
 |
in CFO Conversations by 
Subscribe to this comment's feed
