TORONTO, Ont.–Trade compliance has everything to do with risk management and compliance, and much less to do with customs compliance, said Nigel Fortlage, vice president and social business leader of Winnipeg-based GHY International, which specializes in trade compliance and solutions.
Fortlage presented today at the CITT’s National Conference, Reposition 2013, in downtown Toronto.
Going to your senior leadership and getting them to understand your role and importance in language they understand is one of the challenges for those who are tasked with supply chain duties including the need to maintain regulatory compliance.
But compliance “verification” is the minimum standard required to play the game, and many companies aren’t even evolving their organizational structure to meet these requirements, said Fortlage. GHY has released several white papers on these issues, including the recent ‘Integrated trade compliance strategies: the Role of Corporate Leadership’.
“We believe an integrated approach is the way to go,” he said.
With over 30 trade agreements currently in play in Canada, the landscape is changing. And Canadian companies will find that even without being fully aware of it they are implicated and affected day to day by the intricacies of these agreements.
“But it doesn’t end there. The world is continuing to grow, and we’re seeing a wave of trade agreements moving from west to east,” said Fortlage.
Canada is also steadily diversifying its sourcing.
People are now talking about geographic regions of the world as “production platforms” to which your organization must now adapt.
The impact of the NAFTA trade agreement alone has huge implications for trade compliance, noted Fortlage.
What do regulators want? They want greater compliance, greater efficiency and additional revenue, while driving down the security risk, error, the cost of enforcement and the loss of revenue.
“Global trade is a gold mine for them,” said Fortlage.
There is a trend toward regulatory intervention in government, in terms of increased audit activity.
Canadian companies must have a plan to be on the road to compliance because of this, because the level of audit on NAFTA claims has gone up substantially, even without a company directly being at fault.
It’s casting a much wider net because the governments have the business systems to share this information.
“Do not get set into a feeling of compliance complacency. You complacency is the regulator’s best friend,” said Fortlage.
There is a direct disconnect between a product’s sourcing and its sale in many companies still, and this is creating commercial consequences, he noted.
Fortlage cited the case of a client who changed the sourcing of an item which was a cost savings to the company. But the unit, which was only 60 % “domestic” resulted in $1500 in duty each time it was exported.
Business units and external parties “must connect in order to give cost side accuracy and sales side certainty,” he said.
The seven “best practices” of leading traders, said Fortlage, include trade compliance being important to the leadership, identified as a priority by leadership, championed by an individual or team, supported by KPIs, with systems to track and measure, via communication and meeting protocols, with growth plans in place, and with the support of business partners.
“If corporate leadership does not see trade compliance as a priority you cannot go any further with it. Studies suggest only 40 % of senior management have an awareness of the importance of this compliance,” he said.
So what is that corporate leadership role? The first part of it is governance-about ensuring enterprise level success.
Strategy also plays an important role in achieving a vision via a timeline.
Risk intelligence is about what can compromise the success of the plan, what are its probabilities and contingencies.
“By many accounts reputation, brand promise, is one of the more important assets a company owns. These are values measured not by dollars but by the success of the efforts. Trust, respect and loyalty are the glue that binds these together,” said Fortlage.
“Ignorance is no longer an excuse with the regulators. Leadership has to ask the right questions, has to put the checks and balances in place. Consequences flow uphill as well as downhill,” he said.