It's critical to be able to prove where goods moving in global commerce originated, and where they’ll end up, says Linardakis. A product might be manufactured in the U.S., pass through a distribution hub in Hong Kong, move on to Dubai and end up in the hands of a buyer from an embargoed country. When regulators begin determining whether the original shipper knew of the illegal transaction, the party in question needs to be able to track each point at which the goods stopped. "If you can show due diligence, you won’t be implicated," says Linardakis. "That's a huge mitigating factor."
Understanding the total landed cost of a product can help manufacturers to decide the best location for making the goods. Fuel charges, geographical risks, port strikes, labor costs and “Buy American” strictures all figure into the mix. With all of those factors in mind, one client decided to build its product in Mexico, even though the up-front labor costs were slightly higher than those in China.
Free trade agreements offer a high degree of value to traders if they’re fully utilized, especially from a supply chain and procurement standpoint. Proper use of an FTA can help the importer to gain a competitive edge through reductions in duties and taxes.
As with any international transaction, there’s a substantial amount of risk to take into consideration. Exporters face “a regulatory minefield,” says Linardakis, in the form of regulations governing exports, customs clearance and international trafficking in arms. In the case of the last, oversight has to be especially intensive, to guard against illegal transactions as well as the hijacking of shipments.
Ideally, says Linardakis, the global trade compliance effort within a company should be reporting directly into the office of the general counsel. At the same time, there needs to be a close relationship with the supply chain group. “That’s absolutely critical in building a compliance program,” he says.
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