Trade Compliance 5W1H
5W - What, Why, Who, Where, When :
1How -Key elements of trade compliance include:
1How -Key elements of trade compliance include:
What is trade compliance?
Trade compliance involves adhering to both domestic and international trade laws, regulations, and rules for importing and exporting goods, software, and services. It encompasses the country of origin and destination of the goods, the identities of the importer and exporter, and the customs regulations of the involved nations. It's crucial for companies engaged in international business to align with global trade compliance and governance rules to mitigate risks.
Why is trade compliance important?
International trade transactions often involve multiple parties, increasing due-diligence complex. This complexity, combined with the document-heavy nature of international trade, increases the risk of discrepancies and inaccuracies, leading to non-compliance.
What are the risks of non-compliance?
- Shipment delays
- Increased shipping costs (e.g. per diem, storage fees, others)
- Customs inspections
- Audits
- Fines and penalties
- Damaged reputation
- Lost earnings
- Scrutiny
Who are the keys involving trade compliance?
Key players include:
- Suppliers/Manufacturers/Exporters
- Buyers/Importers
- Trade partners (freight forwarders, customs, logistics companies)
- Legal, sales, finance, and business owners
Where does trade compliance occur?
Trade compliance can take place in various departments within an organization, including logistics, legal, operations, finances, and sales.
When does trade compliance happen?
Trade compliance occurs when businesses and individuals follow the rules and laws governing the import and export of goods and services. This happens at every stage of the process, including manufacturing, shipping, and selling goods.
1How -Key elements of trade compliance include:
1How -Key elements of trade compliance include:
1How -Key elements of trade compliance include:
1. Shipping documents / Logistics documents
- Bill of landings
- Commercial invoices
- Packing lists
- Import / Export Licenses (If any)
- Certifications (If any)
- Reports, e.g. Danger’ goods, Testing reports, and others (If any)
2. Tariff classification (HS Code)
- HS code, or Harmonized Tariff System (HTS), is a six-digit code that identifies a product for international trade. The World Customs Organization (WCO) develops and maintains the HS code system
- The HS code, which varies from 6 to 12 digits depending on the country, is used to classify imported goods and determine customs duties.
3. Export Control Classification Number (ECCN)
- ECCN is a five-digit alphanumeric code that identifies items subject to export controls. The U.S. Department of Commerce uses ECCNs to categorize items and determine if an export license is required.
- Export authorization: Understanding whether a product and its destination are controlled, regulated, or prohibited.
- Determining if a permit is required to export the product.
4. Valuation
- The valuation refers to the process of determining the value of imported or exported goods. This valuation is used to calculate customs duties, taxes, and other fees.
5. Tariff duty and tax
- A tariff tax is a tax on imported goods or services.
- Tariffs are paid when a product is imported into a country.
- Tariffs can vary by product and by trade agreement between countries.
6. Local Customs Procedures
- Customs procedures include documentation requirements, inspection processes, and duties assessment.
- Compliance with customs regulations ensures that goods are imported, exported, and processed correctly.
7. Record keeping
- Maintaining records of import and export transactions, documentation, and compliance activities.
- Facilitating audits by customs authorities or regulatory agencies.