While trade compliance in itself is a major factor in managing global
supply chains, so is it to engage senior management in this process. Customs and
Border Protection (CBP) and the Bureau of Industry and Security (BIS) have an
expectation within their regulations and prowess that senior management does
need to get involved in oversight of trade compliance initiatives within their
corporate domains. For public companies one could readily argue that in their responsibilities
under Sarbanes-Oxley (SOX) would clearly dictate that trade compliance issues having potential financial impact
on the corporation, would then be part of the governance of SOX within that
company's operation and certainly in their supply chain. In order to develop a
successful global trade compliance program, company executives in trade
compliance, logistics, supply chain, etc., will most likely have to: spend
funds restructure organization deploy personnel set SOP's and protocols all
within the structure and fiefdoms of the organization. All five areas listed
will come together better and more cohesively when senior management: buys in
to the program, allocates funds, breaks down areas of resistance, makes sure
everyone falls into line and steps on the right page.
Senior Management does need to understand the issues, consequences, benefits
and proactively make sure that managers and staff are involved in taking the
high road and protecting the interests of adherence to government. Regulations Trade
compliance manuals should always be accompanied by letters from the most senior
managers, such as the President, CEO, COO or CFO addressing the company's
commitment to Global Trade Supply Chain Compliance Management. This clearly
documents and speaks out to government authorities that senior management is
aware and "on-board" to what they have to do to be trade complaint.
Some companies have bridged their organizational silos by
developing integrated supply chain teams that take a more holistic view of
their operations. Placing trade compliance within such a group puts it on par
with and gives it the opportunity to influence other critical parts of the
supply chain. Supply chain based trade compliance offices are still distanced
somewhat from some of the other areas in the company such as accounting and
strategic planning. Placing trade compliance within the supply chain organization
can, however, be a reasonable compromise to my unreservedly favorite choice and
that is to create a completely independent compliance team.
Here are some Tectono Business Review’s
recommended key steps to take to ensure that effective compliance enhances
supply chain.
Obtain board-level commitment: Before any
compliance program can be successful, buy-in from the board of directors and
senior level staff must be secured. The U.S. Government Sentencing
Guidelines state that corporate officers and board members must be
knowledgeable about the content of their compliance program, exercise
reasonable oversight, and give compliance officers direct access to the
Board. Increasingly around the world, we see governments imposing a
standard of care on the board and or senior management. Senior officers
risk personal liability should your compliance program fail.
Assess processes: Hire
outside trade experts to perform a compliance gap analysis on your current
compliance processes. Then fill the gaps. What gates and stops have
been and can be established? How are compliance records stored and
located? Your company is not allowed to trade with certain
countries. Ensure that you have established a list of embargoed countries
and created effective stop measures that ensure items are not shipped to those
countries directly or indirectly. Electronically
screen names and addresses in your master customer/partner files
against the various government black lists. With more than 50
international restricted party lists in existence, it is important to work with
a firm that organizes these ever-changing lists into a central database that is
monitored and updated daily.
Establish an on-going name and address screening process:
Just because you have screened a customer once does not mean your name
screening is done forever. Governments constantly add and delete names
from the various restricted lists. In 2004, more than 14,000 updates were
made to the restricted party lists, while more than 162,000 updates were made
since September 11, 2001. It is vital that you remain current with list
updates and modifications.
Perform end use and diversion risk screening:
Take steps beyond mere name screening by collecting end use information from
customers and other parties in the supply chain that work with you. Be certain
that your product is being purchased for its intended use. In addition to
end use screening, perform diversion risk screening. Collect information
about the nature of your customer's business to determine whether your product
or service is consistent with the business of your customer. Make sure
that your customer is not diverting your product to another party. Perform license determination.
Develop a license determination process for list-based license requirements and
perform license determination prior to each export and each re-export.
Write and implement processes and procedures that are part of each
business function: Compliance must be a key concern across the company.
Processes should be in place for IT, R&D, engineering, manufacturing,
sales, order entry, fulfillment, shipping, comptroller, legal, the board of
directors, and compliance to ensure that the proper measures are taken to
control the export and re-export of goods, technology and software. Do not
develop processes and procedures only to file them away in a cabinet.
Procure training for the whole company with different levels of training based
upon each job function. Train on your processes and on the ever-changing
substantive rules. Train your staff until they understand how an
effective compliance program can make or break a company, and then train them
again.
Perform audits every year: Ensure that your
compliance engine is running smoothly by performing annual audits.
Alternate it by performing an internal audit one year and an external audit the
next. It is better to be safe than sorry, and every process breaks down
over time unless it is audited.
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