Trade compliance – third-party management is key
In today’s marketplace, business increasingly take place across borders. Therefore, borders have become blurred and are often regarded as none-existing. However, from a trade point of view, borders still exist and poses a difficult challenge with a line of critical risks, because it not only requires companies to be in control; they are also accountable for third-party relations like clients, suppliers, vendors, business partners, etc.
Trade compliance is a natural consequence of the increase in cross-border transportation and logistics and has the objective of ensuring stability and ethical practices in all trade operations around the world. The comprehensive requirements mean that trade compliance has become a vital component of any global business.
Non-compliance with trade regulations or insufficient documentation can have critical consequences for companies. Shipments can be seized, export privileges can be revoked, high penalties can hurt business, or, in the worst case, losing the customer base and going out of business because non-compliance can lead to the destruction of a company’s reputation, if not even the ‘license to operate’.
What does trade compliance include?
Trade compliance encompasses that companies must understand and follow rules and regulations regarding the import and export of goods, products, and the like across borders – and provide sufficient documentation of compliance. It includes areas such as export control and sanctions, reporting, import clearance, tariff classification, and critical areas such as anti-bribery and overall risk assessment and -management of trade, as well as regulatory risk.
Trade compliance requires efficient third-party management to ensure that all external stakeholders are complying with rules and regulations, and it requires companies to document that they have taken the necessary actions to ensure trade compliance both internally and externally.
Managing third parties
Among other things, third-party management assesses ongoing performance and behaviour, as well as the type and size of risk each third-party relationship represents. For most companies, third parties often include suppliers, vendors, manufacturers, resellers, distributors and agents. Third-party management is a key factor in trade compliance that should be prioritized, and sufficient time and money should be invested in ensuring compliance.
“The tendency is that companies focus more on the behavior of third-party suppliers and partners than before – and with good reason. Governments are imposing more regulations on companies that can hold them accountable for actions of third-party suppliers and partners. But maybe even more essential is that it can – from a reputational angle – be devastating and harm your business if your partner is in conflict with the regulations and e.g. sell your branded products to sanctioned parties” says Lars Brodersen, founder at TradeCompliance.dk
Managing trade compliance
In order to remain competitive, companies must have a comprehensive understanding of the rules and regulations that govern their imports and exports. An efficient trade compliance program protects the company (and its country) from potential dangers by screening new vendors, suppliers, customers and visitors that are applying for licenses to export goods and ensuring that all requirements are met concerning import and export.
Impero offers a cloud-based GRC solution that is essential for managing and documenting trade compliance. With Impero, third parties can easily be held in check to ensure compliance and to document continuous compliance efforts. Impero supports routines and, through the solution, companies can ensure that required documentation is available without spending more time than necessary.
TradeCompliance.dk is a law firm that offers expert counselling on various subjects within trade compliance and has many years’ experience dealing with various aspects of trade compliance. Read more about TradeCompliance.dk here.