global trade compliance

The Case for Global Trade Compliance

By: Mike Smiszek, Senior Trade Advisor, Braumiller Consulting Group

Holistic is a word rarely associated with the highly regulated world of global trade compliance, but it’s an apt word to describe a successful compliance program.  According to the Oxford English Dictionary, holistic means “characterized by comprehension of the parts of something as intimately interconnected”.  In the grand scheme of corporate governance, a successful trade compliance program will look holistically at all aspects of trade compliance as interconnected parts of a larger machine.  A smart trade compliance professional (TCP) like you understands that compliance doesn’t just magically happen—you understand that every action not only results (hopefully) in an intended reaction, but often (hopefully not too often) in unintended and unanticipated reactions. You know that strategic and tactical compliance decisions can’t be made in a vacuum because, like a stone that causes ripples when tossed into a pond, a company’s compliance decisions may directly or indirectly influence many of its business decisions.  This ripple effect is often negligible, as when a decision impacts the unique circumstances of just one transaction, but sometimes compliance requirements can have a lasting and profound impact on a company’s business decisions.  As just one example, an HTS classification decision might open (or close) the door to a tariff engineering opportunity, or to participation in a free trade agreement, or it might suggest avoidance of an offshore supplier saddled with an onerous antidumping duty order, or it might even be a critical factor in a factory relocation decision.  It is, therefore, good practice to start with the presumption that every compliance decision may be to some extent a consequential business decision.  Only with experience will a TCP gain the wisdom to discern whether a compliance decision is, or is not, a consequential business decision.

It is one thing to recognize the importance of holistic trade compliance integration, but that’s only half the battle.  What tangible actions can you take to effectively implement a trade compliance program?  How do you ensure that trade compliance becomes an integral element of corporate decision-making?  In a word: visibility.  The sad reality is that the global trade compliance function is invisible in many companies.  Worse, when trade compliance is noticed it is too often seen in a negative context, as a roadblock to success.  Why does this happen?  What can you do to change this false impression, or to bring trade compliance out of the shadows?  While a formal job description for a TCP role will never include the word ambassador, I’ve learned over the years that diplomacy is a big part of a TCP’s daily job.  Just as an ambassador must build relationships that reflect favorably on his or her country, and that furthers its policy goals, a TCP must be an advocate for trade compliance.  This is, of course, where visibility—along with its twin sibling, communication—becomes critical to success.  A trade compliance program is successful only when it is effectively communicated.  Hence you and each of your colleagues in trade compliance must ensure that you’re not merely visible but are seen, through effective communication, as providing a vital and valued function—a business partner who helps rather than hinders, who enables rather than disables.  A partner who is widely recognized throughout the company, if not by face, then at least by name and reputation, as someone who solves problems rather than creates them.  Because most employees have little understanding about what trade compliance really means to the success of the company they work for, you must seize every opportunity to educate Joe in purchasing, Mary in engineering, and Holly in sales.  These folks must see you not as a dour naysayer to be avoided like the plague, but as a friendly, helpful, trusted, and useful ally who ought to be proactively invited to a wide range of business meetings.  As a trade compliance ambassador your job is to make sure the Joes and Marys and Hollys understand that global trade compliance isn’t just about managing risk (whatever that means!) or responding to a litany of daily crises, and it isn’t just about rigidly following laws and regulations and policies as an end unto themselves; it’s about touting compliance as a proactive means to enhance productivity and profitability—in short, it’s about growing a competitive advantage. 

But greater visibility is a double-edged sword.  Greater visibility brings greater accountability.  Over the course of my 30+ years in corporate trade compliance I’ve tried to build strong relationships with my fellow employees—from the C-suite to the manufacturing floor—that have helped to instill trade compliance as a crucial element of an organization’s overall success.  This means you’ll be asked for your guidance or opinion more often, and you’ll be invited to more meetings—but that’s exactly what you want!  You want to be in the game rather than watching from the sidelines.  You want your corporate colleagues to proactively ask questions (What if we …?) rather than reactively complain when something goes wrong that “trade compliance is causing problems.”  In my experience I would rather answer a thousand proactive questions—and remember, there’s no such thing as a dumb trade compliance question—than be faced with one serious problem that could have been avoided with a little foresight and communication.  When tackling a problem reactively rather than proactively, the mood of the people involved is often negative, which only serves to reinforce a negative view of trade compliance.

Visibility also means reciprocity.  We TCPs are typically good at asking people for their time and expertise in support of a compliance need, but we always must remember that it’s not a one-way street, especially in a busy workplace environment where it’s a daily struggle to manage the demands on one’s time.  As with any human interaction, people like to feel as though they’re getting something in return for their time and effort.  What do I get out of this relationship?  In addition, people like to deal with other people who, aside from being competent and knowledgeable, are friendly and reasonable to deal with, and who are appreciative of the help they receive.  So, if you go the extra mile to support the needs and goals of your co-workers by helping to solve problems rather than just creating more problems, all the while with a smile on your face, then karma is more likely to reciprocate with the workplace equivalent of sunshine and daisies.

Compliance training and education offers a golden opportunity for constructive visibility.  I’ve conducted a lot of compliance classes, in the U.S. and, so far, twenty-one other countries.  Training classes offer priceless face time with a captive audience, sometimes big and sometimes small.  The reality is that the majority of the people in a training class are there reluctantly, only because their boss mandated their attendance.  Therefore, to engage my mostly uneager audience I’ve often asked the following question right at the start of a Trade Compliance 101 class:  Why is it important to comply with import and export laws?

“Because we have to” is a wisecrack answer I’ve heard more than a few times, but sarcastic answers are the exception rather than the rule.  I’m always pleased at how many thoughtful answers I get about why we—individually and collectively—should strive for compliance:

…because it’s bad business not to comply.
…because we could be fined by the government.
…because I don’t want to go to jail.
…because I want to have pride in the work we do.
…because our customers would be upset.
…because our families would be disappointed.
…because our Code of Conduct and policies require compliance.
…because we must protect our stock price.
…because I like to sleep peacefully.
…because our reputation with the government would suffer.
…because our reputation with our business partners would suffer.
…because my reputation would suffer.
…because of the bad publicity we’d get in the press.
…because it gives our sales team an advantage over competitors.
…because our products are dangerous in the wrong hands.
…because it promotes confidence in every transaction.
…because non-compliance is expensive.
…because a lack of ethics or compliance taints everything else we do.
…because my spouse [or son or daughter …] works here, too.
…because it’s hard to reestablish lost trust.
…because bail can be expensive.
…because our CEO sent a memo stating the Company’s compliance commitment.
…because our supply chain would see delays.
…because our deliveries to customers would be delayed.
…because I want to contribute to world peace and security.
…because compliance gives us a competitive advantage.
…because it’s the right thing to do.

Each of these is a valid answer, and there are certainly a few more that I’ve not listed.  Some of these answers reflect strictly pragmatic concerns over job security or the company’s bottom line, while others speak to personal integrity or corporate responsibility.  The point is that there are as many good reasons why a company should implement an effective compliance program as there are good employees.  Also, we see that each of these answers shares a common thread that leads back to at least one of the four buckets of global trade compliance risk: legal, financial, operational, and reputational.

So, I then ask this question: When is it OK to not comply with import and export laws?

Silence.  This is the point where everyone glances around, hoping that some brave soul will shout out an answer—but, unlike the infinite range of possible answers to the first question, the only good answer to this question is really just one word: never.  Someone eventually says it if I wait long enough.  The simple fact is that the sincere pursuit of compliance with global trade laws is always demonstrably better than the alternative.  Most of us inherently understand this because we are wired to conduct our lives with good intentions.  Most of us want to do what’s right, and we generally work hard to follow the rules and policies our employers and governments put in place, but sometimes our good judgment and common sense is overpowered by the business pressures we may face—Dagnabit, man, you have to cut costs this quarter or else!—or by a hubristic sense of invulnerability—If I break this dumb rule just this once, who’s gonna notice?

Like everything else in life, compliance with laws and policies is a choice.  It is a communal choice—Our Company will take compliance seriously—but, more important, it is a personal choice—I will take our Company’s compliance policies seriously.  An organization will achieve maximum success only when its communal and personal choices are in synch.  Good things can happen when a sincere and comprehensive compliance mindset is home-grown across all functions and at all levels.  Good things will happen when a company’s employees—all employees, from the tone-setters in positions of leadership and influence to the workers on the manufacturing floor—are personally committed to ethical and rule-abiding behavior.  But whether the choices we make are ethically or legally good or not so good, each choice has a consequence.  For an employee or a company that chooses to minimize or ignore the importance of following rules and using good judgment, potential disaster lurks in the background of every negotiation, every transaction, and every relationship—in short, some degree of risk lies in practically every material decision made by every employee.  But compliance achieved under a culture of ethical and lawful conduct is only a means to an end, the end being the protection of an organization (and its employees) and the enhancement of its competitive advantage—not to mention the peace of mind that comes with doing the right thing. 

We can all agree that compliance policies and procedures are essential, but they are merely the tools we use to facilitate a collective culture of good behavior.  More important is how a policy or procedure is implemented and communicated.  Our most important tools are visibility and communication, because without them we might as well be talking to the wall and writing documents that nobody ever reads.  Maybe not tomorrow, maybe not next month, but eventually the debilitating effects of a poorly communicated trade compliance program will be revealed, just as a small ding in a windshield inexorably spiders-out until the windshield is entirely crackled and worthless.  So, let me leave you with this question about your company:  does trade compliance have the positive visibility and effective communication it deserves?  If it does, great!—but if it doesn’t, today is a perfect day for a new beginning.

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