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In this guide, you’ll learn all about trade compliance: what it is, why it’s important, what it involves, and answers to FAQs. By the end, you’ll be better informed to ensure your business is compliant when importing and exporting.
What is trade compliance?
When goods enter and exit a country, trade compliance is the process whereby these goods have to adhere to local laws, regulations, and rules. It’s an umbrella term that encompasses lots of different types of compliance: taxes, classification, import duties, and more.
There are different regulations for different countries. For example, countries will have restrictions when importing certain goods. Not only that, there are different regulations depending on the industry and type of goods. For instance, the regulations will differ for technology, IT, aerospace and medical sectors.
Why is trade compliance important?
- It ensures your goods meet local rules, regulations and requirements.
- The country can be confident that consumers are protected, goods are ethical, and financial laws are adhered to.
- Complying ensures your business doesn’t incur any fines, penalties, or even imprisonment.
- It prevents shipping delays, as failure to comply can cause stuck shipments, ultimately leading to dissatisfied customers.
What does trade compliance involve?
This is the classification of goods entering or exiting a country. It’s important for customs compliance, working out duty rates, origin of goods, and other customs duties.
Typically, the Standard International Trade Classification (SITC) is used. This is managed by the United Nation’s Statistics Division, and means classification can be compared across different countries.
Goods coming from countries with a special trade agreement can enjoy reduced rates of duty. There are specific rules to follow based on preferential origin and, on the flip side, rules for goods with non-preferential origin.
Incoterms (or the International Commercial Terms published by the International Chamber of Commerce (ICC)) clarify the responsibilities of buyers and sellers in regard to importing and exporting. They’re internationally recognized, and provide a common set of rules across different countries. Learn more about this in our incoterms guide.
Businesses need to check whether they need certain licenses when importing. For example, there may be licenses and permits you need specifically to import technology hardware. Without this, you may be liable for fines, stuck shipments, or even the complete destruction of the goods.
Equally, there is legislation for exporting that you need to follow. As a business, you need to classify your goods against the correct laws, otherwise you could experience fines or penalties.
Customs management is the process of ensuring all trade compliance needs are met. This includes classification, licensing, and so forth.
You need a plan for if anything goes wrong, and should be confident that you meet all the necessary requirements and laws. This requires a lot of expertise, especially if you’re importing and exporting into many different countries. If you hire a customs compliance specialist, you can be confident that all these requirements are met.
This is the process of screening goods that are restricted. You’ll need to cross-reference data from the customer, transaction, employee, or supplier to check they’re not an undesirable party.
Embargoed goods and countries change regularly, so this is something you need to stay on top of.
All goods need to be valued accurately, so they are imported at a fair rate and the destination country gets the correct amount of tax and duties.
Your valuation needs to be defendable if questioned. To combat this, have an approved methodology for valuation, otherwise you may be fined or penalized.
Who has to comply?
All businesses who are importing and/or exporting goods. There are stricter requirements for certain industries, for example medical and technology sectors, but all businesses still have to comply.
Who is responsible for trade compliance?
As a business, you are responsible for trade compliance. It is your responsibility to do thorough research, ensuring you’re looking at country and industry-specific requirements. If you don’t comply, the responsibility falls on you.
If you hire a customs compliance specialist, they can take on the responsibilities, through an Importer of Record service.
What are the consequences of not complying?
Failing to comply can lead to fines, penalties, shipping delays and even imprisonment. It will, ultimately, stagnate the growth of your business and affect your bottom line.
Is trade compliance the same as customs compliance?
Trade compliance is an umbrella term that include taxes, duties, licensing and more. In contrast, customs compliance is just one part of this process.
TecEx Importing and Exporting Solutions
From this blog post, it’s easy to understand that importing and exporting comes with a high risk. If you fail to comply with local laws and regulations, your business could be seriously impacted.
TecEx can help you navigate the complexities of international expansion. We’re customs compliance specialists, and offer global trade compliance services to help you expand without any risks. Our experts have a wealth of experience in over 200+ destinations, so you can import and export almost anywhere in the world without having to worry about non-compliance.
Without expert help, trade compliance is a stressful process. But with us on board, you can spend less time on compliance and more time on other areas of your business.
Contact us today to discuss how we can help.