In a recent news, a shipper trade facilitation group claimed that trade compliance requirements are holding back international trade. The Sage group, which includes members such as Sony and Pfizer, claimed traders should be given the right to control their own trade compliance, rather than have it controlled by governments. It described current practices as “costly, inefficient and unnecessarily bureaucratic”.

In today’s globalized consumer and manufacturing world, materials, semi-processed products and finished goods need to move seamlessly across multiple boundaries before reaching the final consumers. The manner in which this is done, however, is not usually left to the whims and fancies of the shippers and receivers. Instead, there are laws and regulations that govern the process of exportation and importation, better known as trade compliance. While we do have a World Trade Organization (WTO), the world today does not work on a single set of global trade rules. In many cases, there is not even a single set of rules within some nations.

A same item can be subjected to different trade regulations depending on which other country is involved in the deal. Trade agreements are contracts entered into by two or more countries. These often determine what actions constitute compliance and non-compliance.

To be compliant, importers are generally required to provide information about the goods they receive. This information can vary from one country to another and depending upon the goods that are being dealt with. At a minimum, an importer or exporter is usually required to state what a shipment consists of and its value. Either of those parties may also be required to state the purpose of the goods being transferred.

Trade compliance does not only determine the steps that one must take when engaging in international commerce. Laws and regulations also dictate the things parties are not allowed to do. For example, some countries prevent sending or receiving certain items from certain other countries.

Trade compliance is often taken very seriously. Failure to follow such laws and regulations can result in a range of negative consequences. In some cases, materials may be confiscated and destroyed or returned to the sender. In more severe cases, the receiver may be charged penalties or imprisoned. There is also the possibility that trade could be blocked from certain entities or countries.

While organization such as Sage believes that trade compliance hinders trade and believes that the issue can be resolved by self-regulation, such process can only succeed with rigorous monitoring, policing and expensive, control management systems.

Conversely, there are those who believe that trade compliance is a necessary evil as without proper regulatory measures, abuses will bound to escalate leading to accusations and counter actions in trade – and may even lead to global trade wars if left uncheck!

Being a compliant importer or exporter works well for everyone. Non-compliant importers tend to face many more inspections and delays, especially after Customs finds the first problem. Due to limited resources, Customs targets the bad guys. Even compliant importers face delays, but if Customs already knows your company has a trade compliance program, they are more likely to work with you.

While failure to maintain a viable trade compliance program may sound facetious, border delays, inspections, audits and penalties are not. Trade compliance and supply chain security is more then a fact of business life today. Our world has changed. It’s here to stay. Work closely with your trade compliance team. Top down support is the critical component for a successful trade compliance program.