# Strategies You Need to Manage Logistics and Trade Compliance

Strategies for Managing Logistics and Trade Compliance

September 30, 2021 - Emily Newton

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Trade compliance across the entire global supply chain is not optional or a “good idea” – it is essential. Regulations and expectations for logistics and trade companies exist because these entities keep the modern world turning. One error or oversight can cause lost time and productivity or compromise human health and safety.

Balancing these expectations with the drive to grow, seek new markets and remain competitive in a global economy isn’t easy. And then there’s the added complexity from unforeseen events, like public health events and geopolitical turmoil.

Getting and staying compliant across logistics and trade networks spanning the globe isn’t just about appeasing the long arm of the law. It’s about finding ways to make the entire system more resilient and harder to disrupt, whether from forces inside or outside the sector.

Whether you’re just beginning your compliance journey or looking to refresh your knowledge as an industry veteran, we’ve gathered five strategies for managing logistics and trade compliance. They all apply in an increasingly fast-moving and complex world.

What Are the Essentials of a Good Compliance Program?

Any company that wants to do business in the global supply chain, or amodern world, with modern complexities and modern problems, needs a compliance program.

Before we get into the specific actions your organization can take to become and remain compliant, it’s worth studying how compliance programs impact company culture.

These are the essential components of any trade or supply chain compliance program:

  • To create an objective testing and audit function. This process should work as independently as possible from the other departments and provide the means to escalate observed issues.
  • To know where to look for information on the latest regulations and expectations. The business environment is always changing, and you need to know how and when. Companies that value compliance must also value ongoing learning and thought leadership across disciplines.
  • To remember that, in the eyes of the law at least, companies are responsible for how their products are used, if such uses fall under government-prohibited status. We’ll touch on this more later. Even benign-seeming products may require special attention, licenses or clearance. Ignorance is no excuse for non-compliance.

Why Is Trade Compliance Necessary Now?

Today, more than in any previous period in history, companies from every corner of the globe do business in a broad and rich global economy. Understanding trade and logistics compliance requirements isn’t just a matter of protecting one’s partners, customers, and country. It’s also unambiguously self-serving. A solid compliance program protects profitability and maintains a sense of agility, even as the world of commerce changes.

The expectations for the business world in general are changing as well. New technologies make it possible to create products never seen before. The time to market is an ever-shrinking window. Companies need to know how new technologies and techniques impact them, their products and their risks of non-compliance.

Fines in the millions of dollars have become commonplace for companies that fail to read the writing on the wall where safety, environmental, and cultural expectations are concerned. Some say this is merely the cost of doing business. However, compliance requires an ounce of prevention instead of a pound of cure. And prevention is good for business.

The following provides a guide for organizations on trade and logistics compliance. Whether this is your first exposure to this topic, or you want to understand how the industry has changed during an absence or a long tenure, you’ll find actionable steps here.

1. Deploy Trade Compliance Automation Technologies

International shipping, logistics, and trade in general are complex processes requiring attention to multitudes of details. Regulations might seem like “just one more” variable, and from a certain perspective that’s true. This is where automation shines, though. It builds repeatability and precision into tasks that are high-risk but rote and tiresome for humans to do.

Companies can use automation to remove guesswork or the likelihood of error from reporting and background checks. It can also help them store and sort data within regulatory limits. People increasingly turn to automated platforms to help track and report on compliance metrics, too.

Entities found guilty of compliance fraud face a raft of penalties that could drive smaller operators out of business. Automation minimizes the sometimes difficult cost of remaining compliant. The expenses for small business owners generally amount to around $83,000 on average during the first year of operation. Applying automation where it makes sense, and where it is likely to return dividends in safety, compliance and peace of mind, increasingly makes good business sense.

2. Understand Who Uses Your Products (and How)

Every company wants to do business with the global supply chain because it’s the ultimate expression of competitiveness. However, expanding into new territories requires a thorough understanding of how products are classified and export-controlled. Failure to remain cognizant of these details could derail your expansion plans, or worse.

Depending on what you export, you might require a license or multiple licenses. The U.S. Department of Commerce maintains a list of Export Control Classification Numbers (ECCN) for reference, based on:

  • The nature of the product
  • The product’s intended use or end-user

Knowing where to find this list, and referring to it as your business changes and your portfolio of products expands, is crucial for trade compliance.

An associated issue concerns “deemed exports. They encompass source code or other technologies, released by a company under U.S. jurisdiction, to a party within a sanctioned country or territory. As with other issues we’re discussing here, doing so is sometimes entirely unintentional. However the onus is on the exporter to understand the nature of their products, the status of the receiving party. and any complicating factors.

Releasing technology or source code into sanctioned hands makes your company liable for damages. Moreover, it opens you up to legal actions that may end your business.

3. Read Between the (Geopolitical) Lines

The last few years have been complicated for logistics and trade. Joining omnipresent public health concerns was a sweeping trend of protectionist economic policies and trading requirements, trade wars, and threats (or actual actions) to dissolve economic treaties.

To put it another way, nations have spent the last few tumultuous years building “trade walls” around their borders. This means, to stay compliant, logistics and import/export companies need to keep one step ahead of emerging regulations. Step one is finding a balance between trading within and without one’s own borders. The rest of the process requires close, ongoing study of proposed legislative actions and emerging industrial trends.

4. Know Who Is in Your Supply Chain

A topic related to staying cognizant of shifting political, geopolitical, and regulatory actions is knowing who you’re actually doing business with at all times across the global supply chain.

The U.S. Office of Foreign Assets Control, within the Department of the Treasury, provides guidance for companies within U.S. jurisdiction concerning supply chain partner oversight. The agency recommends parties “employ a risk-based approach to sanctions compliance.”

The U.S. has a revolving cast of bad actors on its list of sanctioned countries, including perennial favorites like Cuba, China, North Korea, and several others. Complying with national security-minded sanctions means building a restricted-party screening mechanism into your standard raft of compliance measures. Doing so means lowering or eliminating your risk of inadvertently trading with a party that poses a risk to national or international security.

5. Use Trade Compliance Technology to Remove Weak Links

Modern innovations make it simpler to ensure one doesn’t become the weak link in the supply chain oneself. Smart technologies down to the assembly, picking, packing, and dispatch and delivery levels make it a snap for logistics companies to see a top-down view of what’s going on.

And, as mentioned earlier, automation plays a heavy role. Using real-time data to form a preventive, proactive approach to workflow design and equipment maintenance means up to 40% savings and makes sure the risks of defects, rejects, returns, and recalls is as low as possible.

Process-level data makes it easy to see where energy and other resources are going to waste, too, which makes it simple to see where upgrade funds would do the most good. Getting ahead of energy expenditures and carbon footprints is a good step for the compliance-minded, given that environmental rules and regulations are under constant review.

Don’t Take Trade Compliance in the Global Supply Chain Lightly

Now is the time for each company that engages with the global supply chain to invest their time and energies in a compliance program. Compliance can’t be an afterthought – on the global supply chain, it’s an ongoing process that’s always changing and requiring thoughtful new approaches. With these fundamentals accounted for, your own compliance program should be off to a strong start.

Revolutionized is reader-supported. When you buy through links on our site, we may earn an affiliate commision. Learn more here.


Emily Newton

Emily Newton is a technology and industrial journalist and the Editor in Chief of Revolutionized. She enjoys reading and writing about how technology is changing the world around us.

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