03/28/2022
Strengthen Your ICP for Seamless Cross-Border Trade
Discover the key elements of an effective Internal Compliance Program and safeguard your supply chain business from regulatory risks.
International supply chains are incredibly complex. Getting supply chain management (SCM) right is essential for your business success in today's interconnected global economy. International SCMs and freight forwarders must keep goods flowing smoothly to grow revenue, control costs, and delight customers.
Now, throw in import and export regulatory controls, unexpected disruptions, geopolitical events, and rising tariffs, and we have a risk calculus in logistics that's more complicated than ever.
International trade compliance, in particular, is a moving target. Import and export regulations constantly change, making cross-border trade even more difficult. If you want to build supply chain resilience, you'll need help navigating these complex rules.
Key takeaways
- A strong internal compliance program is vital for any business engaged in global trade
- Extending compliance standards to subsidiaries and suppliers ensures end-to-end compliance
- Prioritizing compliance safeguards you from financial, reputational, and legal consequences
- Partnering with a knowledgeable 3PL like GEODIS can help you to mitigate compliance risks
Ensuring international supply chain compliance
So, how do you ensure supply chain compliance? It's a key question that can keep freight forwarders and supply chain leaders up at night. It's also a high-stakes question—non-compliance can result in fines, legal penalties, and reputational damage. Getting compliance right helps you mitigate risks and meet customs regulations.
It's an ongoing process. Compliance isn't a one-time box to check, but a continual effort that requires a proactive, vigilant approach. One way to make the most of that effort is through developing an Internal Compliance Program (ICP).
The GEODIS perspective on changing regulations
As a major international logistics company, we see a diverse range of high-volume goods crossing international borders thousands of times each day. We handle more than 1.2 million customs declarations a year, and the complex interplay of global events is increasingly impacting on businesses. Rapidly changing rules and regulatory requirements pose significant risks to cross-border activities. Supply chain companies can use proven customs and trade compliance procedures to avoid non-compliance roadblocks.
Navigating the complexities of international trade regulations can be daunting. Let GEODIS help you mitigate risks and ensure compliance.
What is an internal compliance program for international trade?
An ICP is a comprehensive framework of policies, procedures, and oversights ensuring businesses fully comply with customs and international trade regulations. Compliance is essential. It helps you avoid costly fines, shipping delays, issues with customs clearance, or reputational harm. The ICP is one of your best lines of defense.
ICPs were originally focused on export controls but now cover the full scope of customs and trade compliance. This expanded scope is central to managing risk in today's complex trade environment.
8 essential components of an effective ICP
While every ICP should be tailored to your unique business needs, certain core components provide a strong foundation for any compliance program. These components span people, processes, and technology—this comprehensive approach means things are less likely to fall through the compliance gaps.
We believe a strong ICP has eight key elements:
- An effective corporate compliance organizational structure.
- A strong transaction verification process.
- Proactive monitoring of shipment flows.
- Regular supply chain assessments and audits.
- In-depth reporting and corrective action plans.
- Company-wide compliance training.
- An efficient way to retain records.
- An ICP that regulates your supply chain partners.
We'll explore each of these in more detail.
1: Build an effective compliance organizational structure
Your first step is to establish strong oversight and accountability for your ICP. One great way to achieve this is to set up a cross-functional compliance committee. Your committee should include top company executives and senior leaders from legal, operations, and other key functions. Their involvement signals that compliance is a top priority.
Your committee will provide executive-level support and drive ICP adherence across the organization. You'll also want a dedicated ICP lead to manage the program's daily operations.
2: Introduce a strong transaction verification process
The operational heart of an ICP is a series of comprehensive, well-documented procedures that drive compliance checks on every transaction. There can be no exceptions—these procedures must cover customs classification, valuation, declarations, documentation, licensing requirements, and all other relevant customs and trade regulations.
These procedures don't just cover your own business compliance; you'll want to extend transaction verification to 3PLs, customs brokers, freight forwarders, suppliers, and others. The good news is that in addition to complying with customs regulations, rigorous verification processes also help to drive standardization and efficiency.
3: Proactively monitor shipment flows
ICPs aren't just about ensuring you have compliant paperwork and procedures. They're important on the ground and help to streamline the physical flow of goods. Your ICP should integrate with your shipment monitoring systems, giving you full, real-time visibility into routing, handoffs, compliance, and delivery.
Just like transaction verification, share your shipment flows and processes with your supply chain partners. That way, you'll be sure that they're all handling shipments compliantly.
Streamline your global logistics with a partner who prioritizes compliance. Contact GEODIS to learn more about our end-to-end solutions.
4: Strengthen compliance with regular supply chain audits
One of the best ways to check the effectiveness of your compliance program is through periodic assessments and audits. You can use these audits to identify regulatory risks and close compliance gaps. Compliance is continuous—regular, rigorous audits by an independent third party are essential to ensuring your ICP procedures are being followed.
Your assessments should cover both internal operations and external supply chain partners. Uncontrolled third parties often pose the greatest compliance risks. We recommend annual compliance audits. They should have clear reporting, ownership, and associated corrective actions to close any gaps and strengthen the ICP.
5: Drive swift issue resolution through corrective actions
Assessments, audits, and compliance reporting are only useful if you can fix regulatory issues when they happen. That's where Corrective Action Plans (CAPs) come in. A CAP is a formal way for you to capture, track, assign ownership, resolve, and prevent the recurrence of compliance issues. A CAP has several elements:
- Identify the problem that caused the non-compliance issue, its impact, and the outcome.
- Find the root cause of that problem through investigation and root-cause analysis.
- Outline the specific steps to resolve the non-compliance issue, together with owners and tracking.
- Carry out corrective actions and provide the necessary resources, support, and communications.
- Regularly monitor and review the changes to ensure the problem doesn't recur.
- Document the entire CAP process so you can review it for lessons learned.
You will want to review corrective actions with your compliance committee and get senior leadership support where you need it. Please note that CAPs aren't complete until all remediation steps are taken and validated. Rigorous follow-up and accountability are essential.
6: Empower your team with compliance training
It's important to train all existing employees and new hires on your ICP and relevant regulatory frameworks and compliance needs. This ensures that your whole organization fully understands the latest control procedures and regulatory changes, as well as any implications for non-compliance.
7: Create an efficient way to retain records for ICP and compliance purposes
All customs and trade transactions and supporting documents must be archived and stored according to local laws. A strong, integrated records retention system is a great idea.
8: Extend your ICP to partners, subsidiaries, and suppliers
Companies need to invest time and effort to work closely with their business partners to ensure end-to-end regulatory compliance in customs and trade control in an increasingly complex world. All requirements under the ICP are equally applicable to any partners, subsidiaries, or suppliers.
This is a common problem for many multinational corporations with local subsidiaries in developing countries. They may appoint local customs brokers who lack strong processes and controls. They may not be fully aware of the importance of customs and trade compliance. Sooner or later, any leakage in global supply chain compliance due to an overseas subsidiary or supplier can have a detrimental impact on the company.
All players across the entire supply chain ecosystem should be fully aware of the importance of customs and trade compliance. Ultimately, any weak link in the global supply chain can have severe repercussions for companies, including damage to their brand reputation, severe fines, or even more dire consequences that affect their ability to operate effectively in markets.
You can avoid this through collaborating with a knowledgeable 3PL like GEODIS, who can provide guidance and support you in navigating the complexities of global trade compliance.
How GEODIS can help
GEODIS is a leading, worldwide 3PL provider with extensive experience in navigating the complexities of global trade compliance. Here's how we can support your business:
- Take advantage of our team's industry knowledge to meet your exact customs and freight needs
- Integrate your freight forwarding and customs with GEODIS transportation, warehousing, and other logistics services
- Get a full range of customs brokerage services, including classification, clearance, and compliance
- Optimize costs and duties with our comprehensive foreign-trade services
- Discover a trusted freight network of carriers to and from the U.S. and around the world
- Expect the highest standards of operations and control
- Optimize your supply chain with leading freight management technology
Contact GEODIS today to learn how we can help you strengthen your compliance program and streamline your global logistics operations.