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I am frequently asked where the trade compliance office should be placed within an importing or exporting organization. Should it be part of sales, accounting, shipping, legal, purchasing, supply chain? My answer may seem flippant, and among readers of this column, it may even seem controversial.
It really doesn't matter! The fact that your company has recognized the need for a dedicated trade compliance office and is placing it somewhere in the organization is good enough!
"Heresy!" you decry.
Fair enough. Allow me to rephrase that last statement.
It really doesn't much matter where the trade compliance team is placed in the organization as long as it can effectively oversee and control the importing and exporting activities of the company.
Is that better?
Experience has shown that trade compliance offices can be more successful when slotted into certain parts of the organization compared with others. No matter where your company places the group, there will be tradeoffs. This is because the concept of trade compliance extends across a broad range of business activities within any importing or exporting company. It is rare, however, that any single group within a company is tasked with all of these activities. Indeed, many organizations are divided into pockets or silos of independently operating disciplines sometimes with conflicting business objectives and agendas.
Let us look at some of the typical places in organizations where trade compliance is placed and discuss the advantages and disadvantages of each.
Traffic/Logistics
The logistics or transportation department seems to be a logical location for a trade compliance office. This is because the customs entry, AES and logistics processes are intertwined. The group is well positioned to be aware of and respond quickly to issues that arise. As one of the last links in a commercial supply chain the transportation team is frequently the victim of some unwitting decision made earlier in the process. Implementing controls and changing upstream behavior can be a challenge for the downstream traffic office.
Some logistics teams are measured using transit time and cost-minimization goals. These could be perceived to conflict with trade compliance objectives that can, on occasion, delay a shipment or cause additional expense. If this is the case a company will need to implement controls to ensure logistics and compliance goals do not conflict with one another.
Sales/Customer Service
It is not uncommon for export trade compliance to fall under the sales arm of an organization. The benefit of such placement is that the sales team has valuable visibility into the end use and end user. Because of this it is well positioned to evaluate the compliance ramifications sooner in the sales cycle, helping the company focus its limited marketing resources on both profitable and compliant business. The downside is that sales organizations frequently have conflicting short-term sales goals. These might lead the sales team to disregard compliance red flags. An organization that takes a longer term more measured approach to its markets may be able to temper this inherent conflict. Some companies do this by assigning trade compliance to the inside sales or customer services associates who are able to nurture the customer relationship while ensuring the company remains compliant.
Product Management/Purchasing/Inventory Management
The mirror image of the above for importers would be to assign trade compliance to the purchasing department or inventory managers. The benefit of such an alliance is that the trade compliance team will be better positioned to influence the beginning of the supply chain. Purchasing-based compliance teams have advanced notice of new origins, vendors and products to ensure product screening, classification and vendor compliance. Purchasing departments, however, have a vested interest in cost and duty minimization. This may cloud their judgment when assigning HTS codes or screening for antidumping duties.
Export offices within sales and customer service organizations and import offices within product procurement offices both suffer from the same structural weakness. They tend to be distanced from the logistics of exporting and importing and may face challenges executing delivery of goods. As a result they may be limited in their ability to respond to in-transit compliance urgencies.
Accounting
Placing trade compliance within the accounting department is another common choice of international companies. Accounting departments are steeped in the concept of control. They usually are responsible for approving new vendor and customer relationships, assigning product codes, and monitoring purchasing and sales commitments. On the back end of a transaction they are aware of vendor payments, customer receipts, and shipping and receiving variances. These controls and this vantage point complement the responsibilities of a trade compliance office. Accounting has one of the strongest tools available in business. It controls the corporate purse strings. Withholding payment is a surefire method of gaining a trading partner's attention and eventual cooperation.
As with the sales and purchasing examples above, these offices may be unfamiliar and distanced from supply chain management and the logistics processes and may face challenges intervening effectively when required.
Legal/Regulatory Compliance
It is not unusual for trade compliance teams to report directly through the legal or regulatory compliance team. Such departments typically have strong influence with senior management and as such can be effective at driving compliance strategies throughout all levels of an organization.
As with several of the operations above, such organizations are often removed from day-to-day operations. While effective at driving strategy they may be less effective at implementing successful tactical controls.
Supply Chain
Some companies have bridged their organizational silos by developing integrated supply chain teams that take a more holistic view of their operations. Placing trade compliance within such a group puts it on par with and gives it the opportunity to influence other critical parts of the supply chain.
Supply chain based trade compliance offices are still distanced somewhat from some of the other areas in the company such as accounting and strategic planning. Placing trade compliance within the supply chain organization can, however, be a reasonable compromise to my unreservedly favorite choice and that is to create a completely independent compliance team.
Independent Trade Compliance Office
For some companies the optimal organizational structure places trade compliance on par with operations, purchasing, finance and legal functions within the company. Such trade compliance offices are organized under a C-Level executive such as a Chief Compliance Officer who may have responsibility for a broad range of regulatory compliance functions. This type of structure is the most effective at providing corporate-wide visibility to trade compliance and for empowering the trade compliance team to take effective action within the company.
The greatest weakness of an independent office is that it risks isolating itself from the organization becoming what can be referred to as "fortress compliance." When integrated properly into the business, however, centralized independent compliance offices can be very effective.
All of the above begs the question about the human factor. Sometimes a trade compliance office falls under the responsibility of a specific area of the company because the C-level executive or vice president of that area happens to have some experience with international trade and trade compliance or simply has the bandwidth to take on the responsibility.
Wherever trade compliance is placed within the organization there will be tradeoffs. Acknowledging inherent organizational disadvantages and conflicts can help companies temper and overcome them. Each company will have to explore this road on its own and decide for itself where its trade compliance office will be most successful.
The above presumes a centralized corporate structure. What does a company do that has multiple operating groups and locations? We will discuss this in Part 2 of this article.
( linda )06 Jan,2012
| Product Model | Inside Diameter | Outside Diameter | Thickness |
| 29476E NACHI | 380 | 670 | 175 |
| 29376E NACHI | 380 | 600 | 132 |