Navigating the complexities of international trade compliance
Rofiat Oyenpemi
University of Lagos
This blog is written by Rofiat Oyenpemi, a Second-Year Law Student of University of Lagos
Introduction
International trade compliance is the technique, method, and approach in which goods exported from one country and imported into another country take place within the rules, laws, and regulations of the countries involved. International trade compliance is necessary because countries differ in laws, regulations, and requirements needed when interacting with other countries of the world. Additionally, different countries have strict rules against certain goods that should not be traded in their country such as Tramadol, Diazepan, and Cannabis is banned in Nigeria, Saudi Arabia also has strict rules against Cannabis. Therefore, the main purpose of trade compliance is to ensure that when trade(the process of export and import) goes on, laws, regulations, and rules are not broken facilitating continuous relationships between the countries involved. Some examples of key regulatory controls include the WTO- World Trade Organization, whose main function is to ensure a smooth global system of trade rules and help developing countries build their trade capacity. Other regulatory controls include Export controls and Customs. Customs is an authority or agency in a country responsible for collecting tariffs and for controlling the flow of goods, including animals, transports, personal effects, and hazardous items, into and out of a country. Every country has this authority to smoothen its trade processes.
KEY COMPLEXITIES OF INTERNATIONAL TRADE COMPLIANCE
The complexities of international trade compliance can be classified into several key areas. One major key area is regulatory differences, many countries have varying laws, regulations, and rules. These laws must be met to ensure safety, quality, and conformity. Examples of regulatory differences include the EU’s GDPR and, the US's EAR. It is therefore up to the business owner to ensure that when exporting his goods he is aware of the rules and laws of the country he is planning on selling to.
Additionally, tariffs and taxation are another complexity faced in international trade compliance. Some countries have complex duty calculations and tax implications which must be addressed before any trade can go on. For example, the US-China trade war.
Likewise, the supply chain can pose a risk. Businesses must monitor third-party vendors and ensure compliance to promote smooth trade within the country. For example, cases of forced labour and the sale of counterfeit goods would be bad for the business exporting country.
Similarly, businesses must keep accurate paperwork and manage their data. Documentation and record keeping are some of the faced problems by international trade compliance. This is where the use of commercial invoices and certificates of origin comes to work.
Other complexities include sanctions and embargoes to comply with restrictions, export controls, custom classification, international property protection, anti-corruption, bribery, and lastly, data security and privacy.
Each complexity faced has its disadvantages and takes its toll on the countries involved.
STRATEGIES FOR NAVIGATING COMPLEXITIES
There are several strategies for navigating trade complexities, one important strategy would be to conduct a thorough risk assessment. By conducting risk assessments, businesses would be able to detect potential risks and vulnerabilities. On the other side, businesses would also be able to access the country's specific regulations and laws. By doing these businesses would be able to implement mitigation measures. As a case study, Walmart conducted a risk assessment on its supply chain in Bangladesh in 2019 related to labour practices and factory safety. The benefit of this assessment was the introduction of new safety standards and auditing procedures.
Another case study relevant to navigating international trade compliance would be the Siemens’ Compliance Program which involved auditing to check out for corruption and bribery. Therefore, businesses should try to implement compliance programs to establish clear policies and procedures and train employees and partners alongside monitoring and auditing regularly.
Other strategies would include staying up to date with regulatory changes as demonstrated by Apple as a response to EU's GDPR, can't laboratory with trade partners like Cisco partnered with trade experts to navigate complex export control regulations.
Conclusion
Navigating the complexities of international trade compliance is complex for businesses operating on the global market. However, these countries must relate with one another as a measure of international trade. The interplay between varying laws, regulations, and rules makes it necessary to have a strategic technique and method to mitigate risks and ensure compliance. With the right methods, companies and businesses can mitigate those risks.
References
https://corporate.walmart.com/purpose/sustainability/people/responsible-sourcing
https://www.just-style.com/news/walmart-tackles-social-risk-in-bangladesh-apparel-supply-chain/
https://www.ioscm.com/blog/navigating-international-trade-adhering-to-import-and-export-compliance/