We are including a column by Janet Labuda of the FormerFedsGroup which has supported GeyerGorey LLP with investigative and compliance resources and helps FormerFedsGroup clients on compliance issues involving international trade and Customs matters. I will oversee FormerFedsGroup trade compliance training programs and set the protocols of the PerfectShield (TM) certification process.
By Janet Labuda
The short answer to the question who’s driving the compliance bus is your corporate compliance department. The driver’s seat, should not be filled with personnel from your transportation and logistics operation, the sourcing, or import management groups. All parts of your organization need to be involved in your culture of compliance, but the compliance department is where the rubber meets the road, so it should be staffed with highly focused compliance experts. Companies also should ensure that Customs is not in your driver’s seat.
In 1993, the U.S. Congress amended the Tariff Act of 1930 by enacting, as part of the North American Free Trade Agreement, the Customs Modernization Act (Mod Act). Inherent in the legislation was a shift of responsibility, to the importer, to ensure that imports are compliant. In addition, a series of recordkeeping requirements with tough penalty provisions were established. The Mod Act also introduced the two concepts of informed compliance and reasonable care into the legal and trade lexicon. Customs must explain the rules, and importers, and others in the trade community, must take care to understand and follow the rules.
The legislation gave the bus key to the importers. But, an important thing to remember is that although, the importers are driving the compliance bus, the route is dictated by Customs. Most times importers find that they do not travel on the most direct route. Often, there are bumps in the road and unexpected detours. You must be prepared for these inevitabilities.
Over the last few weeks, it has become obvious that international trade will be a priority for U.S. policy makers. The trade community can expect a greater emphasis on the enforcement of laws and regulations, and possible changes to current trade legislation, especially as it relates to preferential access to U.S. markets. Our traditional trade relationships will be tried and tested, and may see unexpected changes to the current norm.
From past experience, the federal government pendulum tends to swing in wide and sweeping arcs. Establishing a predictable balance can be difficult to achieve as guidance and focus shift. Often, the importing community gets caught in the middle.
The time for doing some critical introspection is now. Do not allow your company to be caught off guard. The following recommendations are ways your company can engage in upgrading your bus’s safety and navigation systems:
- Put yourself in Customs shoes and do a complete review of your operations and document how you believe your company is meeting a reasonable care standard.
- Enhance your corporate internal controls, as needed.
- Ensure a transparent and understandable supply chain for all phases of your overseas production.
- Don’t fly under the radar screen. Develop a regular outreach to Customs and other federal regulatory agencies.
- Review your business relationships to guarantee that there is an understanding that compliance is key to working with your company.
- Become a CTPAT tier three partner or an Authorized Economic Operator, and keep abreast of Customs Trusted Trader programs.
- Work closely with a professional broker to navigate complex trade issues. A broker dedicated to compliance is a force multiplier for your company.
- Understand the nature of any perceived risk, e.g., forced labor, anti-dumping circumvention, trade preference non-compliance, and how your products and partners might be affected by such risk.
- Review your sourcing strategies in light of the potential risk you identify.
- If you uncover a problem seek legal advice on the best way to move forward to mitigate any potential downstream penalties.
- Ensure that all corporate departments are pulling in the compliance direction.
- Provide regular compliance training throughout the company.
- Work through industry associations to have your voice heard when changes in government policies and procedures affect your business model.
Start your engines, buckle up, and try to enjoy the ride.