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What are they?
Let’s start with the basics: Internal (Customs) Compliance Programs are a set of internal policies and procedures designed to ensure compliance with export control regulations. There is no blueprint, so the system should be tailored to each company.
Why should companies care?
Internal (Customs) Compliance Programs are recommended by the European Union, USA, China, Japan, India, Australia & many more other countries to address risks such as:
Some EU Member States even require exporter to have an Internal Export Compliance Programs in place before they will issue a global exporter license. In Japan, the Ministry of Economy, Trade and Industry publishes the companies that have registered their programs.
But, in addition to help mitigate risks, there are also additional advantages to having these programs in place.
These advantages can be split into 2 main categories:
- Macro benefits at a higher – global – level sort of say, that help build a more sustainable world:
- Micro benefits – that directly profits the company itself:
- Mapping an efficient export flow
- Obtaining knowledge and control of the end user’s nature and activities
- Complying with export control legislation
- Reducing the risk of penalties by having risk controls in play
- Minimising the risk of involvement in unauthorised exports and/or proliferation practices
- Avoiding being entered on a list of targeted entities by some bodies and authorities
- Raising the awareness of members of staff
- Protect corporate reputation
- Obtain a global export authorisation
What does the program look like?
Since a picture is worth a thousand words (and in this case maybe a few more!), I thought it might be easier to simply depict a summary of the various program areas:
Now, for the main question: how to implement it?
In today’s short blog, I wanted to invite an expert in the domain to offer their insights on best practices in terms of Internal Compliance Programs. I was very fortunate that Kevin Shakespeare – Director Professional Practices at the Chartered Institute of Export & International Trade agreed share his expertise on the matter.
What is the Chartered Institute of Export & International Trade?
The Chartered Institute of Export & International Trade’s purpose is to empower organisations and equip individuals with the expertise to trade effectively, sustainably and competitively.
Established in 1935, the Chartered Institute is trusted by governments, businesses and trade professionals around the world as the leading experts in international trade and the foremost association of exporters and importers.
It is committed to professionalising trade through education and training, while partnering with national and international partners to facilitate the acknowledged mutual benefits of free, frictionless and legitimate trade.
From your experience, where would you recommend companies start, and progress to implement an effective program?
Starting the process:
The process should start with the following actions and internal reviews
- Know your customer and know your product
- Understanding end use / end user, and understanding risk of diversion
- Understanding where companies in the supply chain are established
- Carry out a gap analysis and risk analysis
- Ensure the company has an understanding of controlled goods
- Ensure the company know the regulations that apply to their products and services and the countries that they trade with
All internal stakeholders should be involved in the planning process and companies should ensure that all team members are qualified and trained to a sufficient level of competence.
Practical implementation and understanding
The company should understand the following and ensure that procedures are clearly documented and applied.
- Denied party screening and sanctions compliance
- Trans-shipment licenses
- Understand the receiving countries licensing rules
- Post movements requirements (OGEL)
- Clear document audit trail
- Creating and maintaining Export controls / customs compliance policies
- Sub-contractor awareness / supply chain visibility
- Extra territorial jurisdictions
- Classification for customs and export controls
- Clear internal audit and reporting (voluntary disclosures) process
- Digital supply chain checks where possible
- Objectives on what the Internal Compliance programme should achieve and how the standards will be maintained
Security requirements
The company should ensure the following security requirements are in place and ensure that procedures are clearly document and applied.
- Security policies for employees
- Secure software and cloud storage locations
- Sufficient security clearance for employees
How can the Chartered Institute of Export & International Trade help companies achieve their objectives in this area?
There are a number of ways in which the Chartered Institute of Export and International Trade can provide support, for example:
- Company health checks on existing internal compliance progress, aligned with an analysis of existing processes
- Advisory services including assistance in developing, implementing, and delivering the internal programs necessary for an Internal Compliance Programme
- Support for classifying your goods
- Knowledge sharing
- Regular information bulletins
- Provision of a Regulatory calendar
- Training programmes; public training courses and courses specific to your company
- Applications for export licenses and customs authorisations
- Professional and Regulated Qualifications
- Professional member communities in Export Controls and in Customs, including special interest groups and networking opportunities
- Authorised Economic Operator status
In the (translated) words of Lao Tzu: “Anticipate the difficult by managing the easy”. So, should you want to anticipate and stay ahead in the ever-changing world of international trade and keep up with the latest trade news and announcements, I would suggest easilly subscribing to the Chartered Institute of Export & International Trade updates!
What about you, is your company looking into Internal Compliance Programs? I look forward to reading your thoughts and comments either on this blog or on Twitter @TFrenehard
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