The role of the trade compliance manager

April 2016  |  SPECIAL REPORT: MANAGING RISK

Financier Worldwide Magazine

April 2016 Issue

April 2016 Issue


The increasing internationalisation of companies around the world, including inflows of foreign investment and the use of a global value chain, has elevated the importance of international trade activities.

However, international trade operations can be a major source of risks for companies in terms of strict control by governmental authorities due to customs issues, complex rules regarding import and export controls, and high penalties applicable to international trade activities. For these reasons, companies should establish internal programmes of trade compliance, under the coordination of a trade compliance manager.

The trade compliance manager is responsible for implementing a trade compliance programme which allows for identifying risks, and preventing and mitigating damages related to the customs laws of countries where the company operates.

The trade compliance manager should divide his or her tasks in the following main areas: the implementation of a customs compliance programme and the monitoring of exports controls issues.

An efficient customs compliance programme should engage the different departments of the company that may have any activity related to import and export operations.

The trade compliance manager must have sound knowledge of the company’s business, in order to be able to identify red flags in operations, and to prevent violations of customs regulations. They must research all applicable regulations to import and export operations, including the ones applicable to the relevant sector or product in particular. The research must include the domestic laws and regulations of the country of origin of the goods, of the country of destination of the goods, of the country where the company is located (in case of extraterritorial application), and also international rules applicable to the matter.

One crucial point is implementing tools to monitor the activities of third parties, notably trading companies and customs brokers. These players are usually more exposed to risks in customs operations, since they are in direct contact with the customs authorities.

In order to control the actions taken by these third parties, particularly with regard to trade activities, companies should implement agreements which, for example, prohibit delegating powers to other parties without the express authorisation of the company. Uncontrolled delegation of powers may result in a loss of control for those effectively responsible for import and export operations, making it more difficult for companies to implement compliance measures. Contracts should also include anti-corruption clauses and establish basic conduct procedures for these trade operators.

It is essential, therefore, that the trade compliance manager engages the legal department in the implementation of the customs compliance programme, since many measures involve the drafting of legal documents.

Another useful tool for enhancing trade compliance within the company would be the creation of a checklist containing the procedures to be adopted by customs brokers and trading companies in the company’s import and export operations.

Staff involved in the legal, logistics, foreign trade and finance departments, as well as third parties, should undertake regular training on trade compliance matters.

Finally, customs compliance programmes should take into account anti-corruption actions. Many countries have recently created complex anti-corruption laws, which cover acts and practices closely linked to foreign trade, such as bribing public agents or presenting obstacles to investigation or supervision. These anti-corruption laws frequently require companies to implement strong compliance programmes and trade activities must be included under the scope of the adopted actions.

Regarding exports controls, it is important that the trade compliance manager appoints a focus person to constantly monitor alterations in export controls legislation. Some country’s export controls legislations, notably US law, have a significant impact on companies located outside their territories. These laws change frequently and have a direct impact on a company’s exporting and importing activities. Constantly updating the company’s export controls is therefore of the utmost importance to ensure compliance with these regulations.

Export controls legislation may dictate that companies cannot maintain trade relations with certain countries and actors. It may also regulate some target activities that are subject to stricter controls. Therefore, the trade compliance manager should engage the sales and finance departments in any monitoring actions in order to avoid the company engaging in any commercial activity which is subject to ongoing legal restrictions.

Export controls demand that companies remain informed of any changes in law and that these developments are disseminated throughout their organisations via efficient communication channels. Companies must also hold regular training sessions and distribute regulatory manuals for internal staff.

Accordingly, the trade compliance manager must be able to coordinate efforts between different departments in a company and must also be able to supervise activities regarding customs and export control legislation.

The trade compliance manager should not be subordinated to one single department. They should have the ability to monitor different staff activities. For this reason, it is advisable that the manager report directly to the company’s board, which would enable them to be able to fully implement the measures and programmes required to achieve trade compliance.

 

Vera Kanas Grytz is the head of international trade and Carolina Jezler Müller is an associate lawyer at TozziniFreire Advogados. Ms Grytz can be contacted on +55 11 5086 5314 or by email: vkanas@tozzinifreire.com.br. Ms Müller can be contacted on +55 11 5086 5089 or by email: cmuller@tozzinifreire.com.br.

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