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How to ensure trade compliance
17 January 2023
Staying the right side of international trade rules can seem daunting. But trade compliance is a vital part of managing international supply chains, as ClearBorder explains.
Photo by Naufal Giffari on Unsplash
NOW THAT Britain has left the EU, UK-EU supply chains must comply like any other. ClearBorder are experts in international trade. In this article we explain trade compliance, how to take the worry out of trade and improve trade efficiency.
What is trade compliance?
Trade compliance refers to compliance with the rules which govern the import and export of products, services and technology. You need to know the rules to protect your reputation and bottom line.
Why is trade compliance important?
First and foremost, trade compliance is a matter of law. HMRC uses audits to “check that all matters relating to customs and international trade are correct, including that you’re paying the right amount of tax.” So it’s vital to know your compliance needs.
How do I stay compliant?
The exact procedures depend on a number of factors: origin, destination, goods, products or services, to name a few. We’ve produced a starter guide to reducing risk:
- Identify who’s in charge
- Train them, and give them access to support
- Keep accurate records
- Keep up to date with regulations
- Establish an ongoing trade compliance program
“Incoterms define how risks and costs are shared between buyer and seller. It’s vital your teams understand Incoterms - they are internationally-recognised and used by courts in arbitration disputes.”
What happens if I don’t comply?
Customs rules are law. The penalties for failing to comply can vary but range from fines to delays, impounded goods, unexpected charges, criminal sanctions and/or court proceedings.
What’s involved?
We’ve highlight six key aspects you need to get right to stay compliant.
Classification: Governments use commodity codes to classify goods. This classification determines tariff rates, statistical and export control requirements. So, classifying your goods correctly is the first step to compliance.
Preferential origin: This allows countries to trade goods tariff-free under a Free Trade Agreement. For example, you may not need to pay duty when importing EU goods - but you must record the origin correctly.
Incoterms: This defines how risks and costs are shared between buyer and seller. It’s vital your teams understand Incoterms - they are internationally-recognised and used by courts in arbitration disputes.
Licences & permits: Trade in advanced technologies, historical artefacts, animal or plant products require permits or extra certification. You must establish what licences you need and ensure that your teams and suppliers comply.
Customs management: If you trade internationally, you will almost certainly be subject to a customs audit. It’s important to be prepared to manage an audit, keep on top of payments and demonstrate compliance.
Valuation: HMRC needs to establish the value of imported goods to determine VAT and duties. They use what’s called ‘landed value’ - a reasonable and justifiable valuation calculated with one of the six methods approved by the World Trade Organisation.
clearBorder can help
Trade compliance is important. If you get it wrong, you can face unexpected bills, fines or even prosecution. But let us help you get it right to reduce risks and build the skills you need to increase efficiency.
The Retail Supply Chain & Logistics Expo takes place at London’s Excel on 28 Feb-1 Mar. Stand PE2723
For more information, visit www.clearborder.co.uk
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