Customs regulations require importers to “establish and implement internal controls which provide for the periodic review of … records.” The Polly decision highlights the necessity for suppliers to maintain accurate production records as well as regularly reviewing those records to ensure they meet FTA and trade preference standards. It is crucial for importers to educate their foreign suppliers on the documentation requirements. This is particularly important during this time of increased U.S. customs scrutiny of production documentation.
It’s important to remember that when importing, whether you are managing a free trade agreement or not, compliance with customs regulations is vital – and not easy. And, the difficulties of ensuring compliance with regulations and managing multiple suppliers expands exponentially as companies try to utilize multiple trade agreements.
Finally, much of the company does not understand the value of compliance- outside the compliance department, of course. Just check out this LinkedIn Question that informally polled the online community about compliance:
Q: Do you care about your business being compliant with government regulations?
- “I think most businesses assume they are compliant.” – Sales/Marketing
- “My experience while working at other companies, both large and small, was that they didn’t necessarily care.” – VP Operations
- “Most businesses … don’t care about federal regulations. Those are issues that will be dealt with when/if they ever surface.” – Sr. Accounting Analyst
- “Compliance does not equal value.” – Managing Director (Ed. Note: OUCH!)
- “I would love to say that all business wants to be compliant and will spend money upfront to ensure that they are. [However] they will often put less emphasis on compliance through technology and manpower than needed. Unfortunately, whether the compliance issues relate to government, contract or internal processes, companies often ignore the reality.” – Compliance Management Attorney
On top of this, AberdeenGroup reports that “71 % of all companies surveyed complain that internal stakeholders outside of the compliance department do not understand the impact of their actions on trade compliance or the risks associated with non-compliance”
So how do you convince your company of the value your compliance department provides? Well, how do you convince them of anything – - ROI!
Trade Agreement Management is a great stepping stone to implementing compliance technology and raising the profile of compliance in the company while also seeing a fast, tangible ROI. As mentioned in “Compliance Is Not Just About Avoiding Risk: It Is Also About ROI,” free trade agreements, while difficult to manage, also offer significant savings (usually $500,000 per year or more). And implementing trade compliance technology will ease the difficulties of managing the trade agreement regulations.
A major opportunity resides in optimizing the use of preferential free-trade agreements. By shifting supply sources to take better advantage of the more than 200 FTAs now in existence, companies can realize significant duty savings, says Aberdeen. Twenty-nine percent of firms it surveyed report having changed their global sourcing mix or redesigned their supply chains based on such considerations.
Leveraging FTAs is one of the biggest value propositions for trade compliance systems.
If you’d like to learn more about managing free trade agreements, ensuring compliance, AND seeing an ROI, please contact us and we can help analyze the savings you can realize. Or, download the whitepaper below.
Free Trade Agreement White Paper: Best Practices to Achieve the Next Level of Savings from Global Sourcing
This whitepaper addresses five best practices that will allow your company to fully take advantage of FTA opportunities:
- Establish a Supplier Management Program
- Implement Multi-sourcing Data Visibility
- Manage Supplier Communications with an Automated Solicitation Process
- Automate the Qualification Process
- Expand your FTA Portfolio
Learn more by reading the Free Trade Agreement white paper.