An unlikely hero has emerged in the story of global trade. In the face of rising protectionism, changing geopolitical alignments, supply chain disruptions, and climate change, compliance has become a critical consideration for companies involved in cross-border trade.
For a long time, efficiency in international trade was only about managing logistics and the supply chain. Increasingly now, trade compliance has taken center stage, impacting every aspect of the value chain, from R&D to sourcing, manufacturing to logistics, finance, and even reputation.
With many types of compliance to manage, benefits to avail, and challenges to address, technology becomes a key lever to not just keep track of the moving pieces but also to make businesses audit-ready, intelligent, and in the best place to use compliance as a strategic advantage.
Elements of Trade Compliance
Trade compliance is a complex labyrinth of regulatory frameworks. It is a way to monitor and control what is being traded, where it originates from, where it is headed, what it will be used for, and where and how the end product will be used.
Given the very nature of international trade, each of these can change at any time. Businesses engaged in global trade, therefore, need not just to be aware of these, but also be able to manage the changes in real time.
Customs
There must be an accurate and timely submission of customs declarations, invoices, and other required documents essential for smooth customs clearance. Goods must be classified correctly with the right Harmonized System (HS) codes so that the appropriate duties and taxes can be applied.
Export and import controls
Some goods or technologies, like those related to the military or having dual applications, are controlled and require specific licenses or permits before they can be imported or exported. They usually need special licenses under the relevant government regulations, like the US Export Administration Regulations (EAR) or the EU Dual-Use Regulation.
Trade agreements and rules of origin
This is currently a hot topic. Trade agreements lower or eliminate barriers like tariffs and quotas between the signing countries. While this creates a lot of opportunities, it also means increased compliance requirements, as companies must align with international standards, documentation protocols, and rules of origin.
Determining the ‘country of origin’ is vital for applying appropriate tariffs, especially when leveraging trade agreements. This involves complex calculations based on where the goods were produced or underwent a substantial transformation.
Sanctions and embargoes
These are a result of ongoing geopolitical conflicts and changing alignments, as well as regular risk assessments. Goods must be screened to ensure that the company isn’t inadvertently dealing with embargoed entities or countries.
For instance, several countries had imposed sanctions on Russia when the war with Ukraine started.
Product safety, environmental, and other regulatory issues
Ensuring products meet national and international safety, quality, and environmental standards is crucial for consumer protection and market access. This can include certifications, inspections, and adherence to specific labeling requirements, like the ASTM F963 safety standards for toys being imported into the US.
Many countries also enforce anti-bribery laws such as the U.S. Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act.
How Trade Compliance Makes a Difference
While the common refrain is that compliance and regulatory controls are making business exceedingly tough today, smart automation with a platform like Trezix can turn the complexities into opportunities.
Driving growth through operational efficiency
Effective use of trade agreements, duty schemes, and tariff structures leads to significant cost savings. By correctly classifying goods and applying relevant preferential programs, businesses can reduce duty payments, improve overall efficiency, and free up working capital.
Well-managed compliance processes also help avoid costly mistakes, cut down on time and effort, and ensure smoother operations.
Reduced risk exposure
Adhering to trade regulations reduces the risk of fines, penalties, and legal actions, which can arise from non-compliance with customs, export controls, or sanctions laws.
Also, effective compliance programs can help prevent shipment delays, seizures, and supply chain disruptions, ensuring smoother business operations.
Access to new markets
Trade compliance enables companies to access new markets. It gives them the framework so that they can be eligible for preferential tariff rates under trade agreements and meet country-specific regulatory requirements.
In fact, demonstrating compliance can be a prerequisite for entering certain markets or participating in specific trade programs and expanding a company’s global reach.
Enhanced reputation
One of the less obvious, but increasingly more critical benefits of compliance is the positive impact on the company’s reputation. When businesses consistently meet regulatory obligations, they build credibility that strengthens partnerships, opens new collaborative opportunities, and provides a competitive edge.
This earned trust becomes particularly valuable when dealing with regulators, as companies with solid compliance histories typically experience smoother approval processes and fewer obstacles during expansion or new initiatives.
Trezix Tip: An AI-powered global trade platform like Trezix consolidates all your essentials, like customs documents, duty calculations, product details, and others, which are updated in real time. This means that the ups and downs in tariffs, sanctions and embargoes, and any other changes are all reflected as they happen, and there are no delays or discrepancies.
The Technology Edge for Trade Compliance With Trezix
The notion that compliance is a millstone around the neck of companies needs a rethink. Trezix ensures 95%+ compliance accuracy through embedded jurisdiction-specific workflows and origin validation. So, with a technology platform like Trezix, proactive compliance changes from being a regulatory liability to a strategic asset.
To turn compliance into an advantage for your trade operations, request a demo with Trezix today.
