Playing by the rules

In the past, compliance with international trade regulations might have been viewed as an esoteric and "nice but not necessary" backroom function. But that's no longer the case. As supply chains continue to extend into all four corners of the world, and international security regulations become ever more complex, companies are making trade compliance one of their top priorities.

It's in their best interest to do so. Trade compliance is the thread that weaves a company's supply chain together, creating a seamless global shipping process. If an organization's supply chain is not supported by a sound trade compliance structure, it risks being barred from conducting business globally, as well as possible fines or imprisonment of key individuals.

And that's why Mark Baxa's mission is critical. As leader of Monsanto Company's global trade compliance initiatives, his job is to preserve the company's freedom to operate globally. While not a lawyer by trade, Baxa is well-versed in trade law, both U.S. and international. His understanding of these often-complicated rules is essential to keeping the company's seeds and other agricultural products flowing unimpeded into airports and seaports around the world.

In short, globalism is the name of the game today. In this recent interview, Baxa explains that if you want to stay in that game, you need to play by the rules of trade compliance.

What responsibilities does trade compliance encompass?
Trade compliance establishes the policies and processes that are used to carry out a company's global shipments. It ensures that the organization acting as the importer or exporter of record and the freight forwarders and customs brokers who represent it adhere to the official international shipping requirements.

Trade compliance is accountable for everything from issuing policy on required documents to determining export-license needs to denied-party-list management criteria, anti-boycott statements, embargoes, and specific commodity management, trade policy, tariff structures, duties, taxes, financial reporting, document retention, proof of performance, letters of credit, third-party contractual obligations, power-of-attorney management, official customs point of contact, supply chain security, government trade agencies, Foreign Corrupt Practices Act (FCPA) adherence, and internal audits.

As a global trade compliance manager, you need to work within the laws of your own country, those of the country you're doing business with, and international business laws. How do you juggle these different laws, and how do you resolve any conflicts that may arise?
Good questions. All trade, U.S., and foreign laws must be taken into consideration as part of a comprehensive trade compliance effort. Global participants must interact at the business and legal levels, putting all questions on the table for discussion. Generally speaking, the importer must specify his requirements and show proof of the specific regulations that govern them.

"Can we sell to someone who is on a U.S. government denied-party list but not recognized as such in the country we are selling to?" is an easy question to answer: No! However, issues can become increasingly complex when dealing with certain customers and commodities. If a question arises that could have multiple answers, consult with a foreign trade policy attorney. In most cases, United States law governs U.S.-based multinationals operating on foreign soil.

What's more important when dealing with international trade compliance issues: a supply chain management background or a law degree?
The answer is "both," as each is extremely important. Having a well-rounded supply chain management background and experience managing complex shipping scenarios and third-party vendors who support trade activity is essential to leading an organization's trade compliance efforts. To ensure that your company meets today's stringent government compliance requirements, however, it doesn't hurt to be an attorney. If you're a supply chain manager without a law degree, you need to have access to a legal team that practices trade law.

Are there different nuances of global trade compliance that apply to large, multinational companies versus smaller companies that may be venturing into international business for the first time?
Company size does not come into play when transacting business internationally. As the importer or exporter of record, all U.S.-based firms are bound by the same requirements. Before any company makes its first import or export shipment, it should seek counsel of a legal firm that practices trade law ? or it could face serious ramifications like noncompliance fines, penalties, disbarment, or even the imprisonment of company staff members [if it should commit a serious violation].

A single shipment of one stock-keeping unit (SKU) that might have dual uses —such as a civilian and a military purpose —transacted without a required export license and sold to a denied party could result in very severe penalties for an organization. When it comes to company size and scale, the rules apply to all.

How do international trade embargoes affect the global supply chain? For example, the United States has a trade embargo in force against Cuba, but many of its trading partners do business there.
There are a number of things that come to mind relative to embargoes, but let me address two of them. First, it takes skilled and knowledgeable compliance and legal staff to determine if your products fit under any embargo exception guidelines. Great care should be exercised here, as the guidelines for exception often include obtaining a commodity-specific export license. In the case of U.S. exports, don't assume that one U.S. government agency has all the requirements you must meet. Exceptions are often complex and require careful, multiagency research.

The second and perhaps least understood issue relating to trade embargoes is dual nationals who carry a U.S. passport in addition to another country's passport. United States citizens are prohibited from engaging in any business activity with countries that are under a U.S. embargo. This creates problems for U.S. companies that have global operations staffed by dual nationals or U.S. citizens on assignment in foreign countries. In either case, embargoes impact a company's ability to conduct business. They lead to underutilized production capacity and resources as well as create surplus inventory that otherwise would have been intended for a particular country.

In a perfect world, everybody abides by the law. But what about doing business in countries where payoffs and other extra-legal expenses are the rules of the game?
My response is ... get out of those countries, stop participating, and self-disclose to the U.S. Department of Justice (DOJ) before someone else does it for you. The "game" is rapidly changing for corrupt business practices and is affecting all parties involved, including third-party vendors conducting business on a company's behalf. The FCPA has seen more activity in the last five years than in the previous 20 years combined, and many countries have created similar laws to punish corruption. Foreign-based companies have also come under the DOJ's scrutiny, with a number of them suffering serious consequences for such violations.

What advice can you give to a company that wants to do business globally for the first time?
Check and double-check the rules and regulations governing the export/import of the commodity you plan to ship to or receive from foreign countries. There is a host of U.S. government web sites and resources governing foreign trade to and from the United States. These include the U.S. Department of Homeland Security (DHS), U.S. Customs and Border Protection (CBP), U.S. Department of the Treasury, DOJ, Bureau of Industry and Security (BIS), and the U.S. Securities and Exchange Commission.

If your business task is complex, seek legal counsel or the services of a reputable consultant who is an expert in international trade. Keep in mind that the importer/ exporter of record is ultimately accountable for compliance. If you make an entry mistake or need to adjust your documents, contact U.S. Customs and Border Protection immediately and ask how to resolve the issue. Getting it right means you will have a compliant, responsive, and competitive supply chain.

How do you envision trade compliance contributing to the global supply chain in the future?
The demand for internationally sourced products and technology will continue to rise. Products and technologies will change over time, as will country-specific sourcing decisions. Therefore, it becomes critical to a company's success that trade lanes producing the lowest total landed cost are protected with compliant trade policy so that it can remain competitive and preserve its freedom to operate.

Trade compliance is an integral and important part of one's global supply chain. Therefore, the need for IT (information technology) systems, well-versed supply chain professionals, and well-defined trade compliance policies will continue to increase. Companies are moving quickly to secure their trade lanes and seek out business partners with similar philosophies who will enhance their global supply chain performance and reliability.

Can professionals like yourself who work with global trade compliance influence regulations in a way that will make the supply chain run more smoothly as well as have a positive impact on the supply chain business?
Yes. As the U.S. government, its agencies, the World Customs Organization, and other world governments work to improve existing policy, opportunities for industry representatives to provide input into policy development often arise. One of the best examples of this cooperation and ability for supply chain leaders to influence regulations is the Customs-Trade Partnership Against Terrorism (C-TPAT) program.

What tools has your membership in cscmp provided you to give you an edge in conducting business globally
The wide array of publications, web-based seminars, and the annual global conference are great learning tools for supply chain professionals. And the professional network of industry peers I've created as a result of my CSCMP membership has added enormous value to the work that I do.