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Managing the Global Trade-off

Jan. 12, 2008
Manufacturers are trying to simplify their approach to global trade compliance.

The majority of Americans are pretty clueless when it comes to U.S. Customs regulations, but these days manufacturers are having to become virtual experts. Partly, it's because most of them have made doing business with foreign buyers and suppliers an integral part of their businesses, but it's also in response to a variety of new security measures enacted in the post-9/11 world.

Today, manufacturers involved in importing or exporting goods regularly find themselves under a microscope, subject to a laundry list of different rules and regulations to comply with federal law. According to Trudi West, director of global trade compliance for Hitachi Data Systems Corp., a manufacturer of data storage systems, compliance functions seem to reach new levels of complexity every year.

"We're dealing with issues that are very different than they were just a few years ago," notes West. "Regulations that had been clearly defined in black and white are now in much more of a grey area. And with more responsibility on companies to self-police, everyone needs to make sure they have a squeaky-clean program if the government ever decides to perform an audit, which are also a lot more common."

If a company is the subject of a compliance audit, the cost of a violation can be expensive -- and the rates are only going up. To make sure their trading activities are on the straight and narrow, most manufacturers have programs or full-blown departments in place with the sole function of handling compliance-related issues and avoiding costly fines. Typically, importers and exporters are given the opportunity to demonstrate "reasonable care," which West says can simply mean covering all of your bases, asking your buyer or supplier enough questions, and being confident that your audit trail can stand up in an enforcement matter.

In an increasingly common scene for manufacturers, a Customs and Border Protection boat patrols a shipping port as cargo enters the United States.However, trade compliance programs are also in a unique position in that they are seen as a foregone cost for many manufacturers, making them difficult to measure. "If you do everything right, no one notices," says Louis Lisowski, manager of global customs compliance and policy with high-tech giant Hewlett-Packard Co. "What we try to do is look at the speed and accuracy with which shipments clear customs. Then we do a post-mortem and look for any internal errors that might need to be fixed. Those outcomes will tell you whether your staff is communicating effectively and give you an idea of how well your program is doing."

One of the most critical components of any compliance program is that it has a champion at the top levels of the company. Upper management needs to be vocal and visible, making the entire organization clear on their responsibility to follow trade regulations and that they seek support from the professionals within the organization. If that sentiment isn't ingrained in the culture, even the best-laid programs and policies will never be successful.

"If manufacturers want to continue selling in the global market, they need to be able to comply with trade regulations," Lisowski says. "They have to understand them on a global basis, too -- not just what's required in the United States. These products are traveling around the world and they have to meet the standards of wherever they are going. And it's only becoming more important as suppliers become more global."

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