5 Reasons Trade Compliance Is So Important

Imports and exports are regulated by governing authorities all over the world. Here in the U.S., multiple agencies have regulatory and enforcement control over imports and exports. Other countries have their own agencies. It all adds up to a complex web of compliance requirements that businesses involved in international trade have no choice but to adhere to.

Remove all the fancy language from the equation and you are left with two simple words: trade compliance. An understanding of how it all works reveals that trade compliance is not just for multinational companies trading billions of dollars in goods and services. It also applies to the small, local retailer who chooses to import products from overseas.

As a business owner involved in international trade, do you understand the importance of trade compliance? If not, consider the following:

1. Mistakes Are Easy to Make

Vigilant Global Trade Services says the biggest challenge for most small companies is avoiding the little mistakes often caused by a lack of knowledge. Something as seemingly minor as product classification can land a company in trouble with Customs, for example. The thing is this: mistakes are easy to make.

One of the things Vigilant does is help clients minimize the frequency of mistakes in order to ensure they stay out of trouble. Some of their clients only need minimal assistance. Others outsource their entire compliance programs to Vigilant.

2. Border Delays Are Costly

Whether importing or exporting, border delays are costly for both shippers and receivers. Border delays are almost always the result of a failure to comply. It doesn’t make sense for a company to ignore compliance procedures and protocols when entire shipments are in jeopardy. And yet, many do.

3. Taxes Are in Play

A majority of the issues related to global trade compliance have to do with taxation. Countries use tax policies to try to maintain a competitive edge in the global marketplace. Thus the need for things like excise taxes, tariffs, and so forth. Trade compliance is important because taxes are in play.

Make a few administrative mistakes that result in misclassification and the correct taxes might not be paid. Your company could pay too much or too little. In either case, rectifying the mistake is a hassle. On a more serious note, willful violations intended to avoid taxation could lead to serious penalties.

4. National Security May Be at Stake

Some goods and services are heavily regulated by ITAR and EAR rules for the express purpose of preventing dangerous products, technologies, services, and data from falling into enemy hands. In simple terms, this means trade compliance is important because national security may be at stake.

Governments have a vested interest in ensuring that their enemies do not gain an advantage through international trade. As such, they are extremely strict about ITAR and EAR compliance. They do not tend to show mercy when violations are discovered.

5. Penalties Can Be Severe

If none of the previous reasons impress you, understand that penalties for compliance violations can be severe. Monetary fines range anywhere from a few thousand dollars up to $1 million per violation. In the most serious cases, prosecution and conviction could lead to prison terms of up to 20 years per charge.

Importing or exporting a small amount of goods with a relatively low value may seem like no big deal in terms of trade compliance. But trust the experts when they say that compliance is not something to be ignored. It is important for all the reasons listed here, as well as others this post did not discuss.