At Shipping Solutions, we talk to dozens of exporters each week who are looking for information and help to grow their exports. These people typically recognize that something in their export process is broken, and they want to find a way to fix it.
But too often these people become frustrated by the pushback they get from their company leadership, their co-workers, or even their freight forwarders or customers when they try to implement changes. It reminds me of a well-known anecdote about collective behavior that illustrates how difficult change can be:
An experiment conducted in the early 1960s involved placing a pole with a bunch of bananas every day in the center of a monkey’s habitat. The monkeys would climb the pole to get the bananas, because that is what monkeys do. One day, as a monkey climbed the pole, the researcher sprayed it with water and got all the other monkeys wet, too. Every time thereafter, when a monkey tried to climb the pole, the researcher sprayed it. Soon, the monkeys learned to stop climbing.
The researcher removed one of the monkeys from the habitat after a period of time and replaced it with a new monkey to see what would happen. When the new monkey saw the bananas at the top of the pole, it started to climb up to retrieve them. The other monkeys pulled the new monkey down. After a while the new monkey learned that it shouldn't climb the pole. Over time, the researchers replaced every monkey in the habitat with a new monkey so that none of the original monkeys remained. Still, none of the monkeys climbed the pole.
Are any of these common behaviors holding your business back?
1. That's How We've Always Done It
I once spoke to an export documentation clerk who wanted to know what preference criteria to use on the NAFTA Certificate of Origin for their goods sourced from China. (This was before the USMCA replaced NAFTA.) When I explained how their Chinese-manufactured products weren't eligible for NAFTA without going through substantial transformation, he explained that it was their company's policy to complete all the export forms and then let the freight forwarder decide which ones to use.
In another case, a shipping manager insisted that their export invoice include all the packing information for their shipment including the total number of boxes on each pallet along with their weights and measures. What she didn't want on the invoice, however, was the price of the goods or their Schedule B codes. This information, she insisted, belonged on the packing list. When I asked for some sort of documentation supporting her claims, she explained that was how her predecessor had done it and trained her to do it as well.
While these two companies have apparently been successfully exporting despite what some of us might call unusual procedures, it seems like it's only a matter of time until their export shipments get held up or, worse yet, payments for their shipments get held up because of their paperwork. In addition, neither of these companies had bothered to learn U.S. export regulations and were putting their futures at risk.
Exporting is no different than most of life—things change. Companies must recognize this fact and regularly review and update their company's export procedures. This begins with training of all people who touch the export process including senior management.
Fortunately, there are many options available for training. A variety of companies provide quality export training seminars, webinars and books including those offered by International Business Training. In addition, there are several free resources available for training exporters.
In addition, export software programs like Shipping Solutions provide up-to-date versions of export forms that reflect changes in U.S. export regulations, as well as best practices utilized by thousands of successful exporters. And because Shipping Solutions gets updated when regulations change, company personnel have help staying on top of export changes. Click here to sign up for a free online demo of the software.
2. Your Export Procedures Aren't Scaled for Growth
As companies get more comfortable with the export process—and generate more revenue from their international markets—they often expand their export efforts to new markets while also expanding the number of products they export. Unfortunately, a lot of this expansion happens on the front end—international sales and marketing—while the back end—shipping and logistics—struggles to keep up.
Where once a company was able to rely on a few Word or Excel templates to generate the required export documents, the growing export volume makes these manual documentation methods slow and cumbersome and prone to errors.
Where once a company really knew their first few international customers, the growing customer base increases the chance that one of these companies—or an individual at one of these companies—appears on one or more of the dozens of denied party or restricted party lists. Multiply the number of new customers by the number of new parties added to your supply chain to service these new customers, and the risk that someone you work with appears on a bad guy list grows exponentially.
Where once it was easy to determine the proper Schedule B or Harmonized Tariff Schedule (HTS) code of their first few products, expanding the number of products you export means classifying all these new goods as well. And don't forget that the Schedule B and HTS codes get updated once or twice a year, which means you need to review and update your classifications every time the codes change.
Where once you exported to a limited number of countries, a growing international presence requires that you review your products for export license requirements for every market to which you ship a particular product. Items that you may be able to export without restriction to Canada may require an export license before you can ship it to China.
As export sales grow, make sure your team that supports these new sales has the bandwidth and training to meet this new demand. While production and shipping departments may be obvious areas of concern, don't forget pre- and post-sale compliance and customer service. These departments are often overlooked until there are obvious problems.
Export software programs like Shipping Solutions can help export staff more efficiently and accurately create their export paperwork, file their export information through the Automated Export System when required, and stay compliant with export regulations. Using software will also help standardize export procedures among all departments within the company, and allow you to document that all of your company's procedures are being followed for every export shipment. Click here to sign up for a free online demo of the software.
3. Relying on Reactive Export Procedures
Sometimes things go wrong. You miss a delivery date because a shipment didn't go out the door on time. A shipment is held up by customs in the country you're shipping to because they say you need some additional forms or certificates. Your payment is delayed because the bank says your export documents don't satisfy the terms in a letter of credit.
Solving problems is part of business. Heck, it's part of life. But if you are spending most of every day putting out fires with your export shipments rather than focusing on your normal job responsibilities, your company is heading nowhere fast. It's impossible to grow a sustainable business if your day is dictated by others.
Being reactive instead of proactive means you may miss cheaper ways to ship your goods to your international customers. It may mean you miss opportunities to take advantage of free trade agreements that could lower the costs of your goods (and make them more competitive) while also making them more profitable. And it may lead to the types of errors that result in export compliance violations that could cost your company thousands of dollars in fines, potential loss of export privileges, and, in the worst cases, jail time.
Companies that take the time to create an Export Compliance Program (ECP) take charge of their export process. A written ECP helps ensure that the entire company is on the same page from upper management to sales and marketing to shipping and logistics.
By taking the proactive step of creating an ECP, companies may find new markets for their goods, new efficiencies that could save time and money, and new assurances that they are following current export regulations. (For help creating an ECP for your company, download the free white paper, How to Create and Implement an Export Compliance Program.)
Keep in mind that a formal ECP cannot be a static document. Your products, and the parts they use and where they are sourced, can change. As I mentioned earlier, product classifications change at least once a year. Markets for your products can grow or contract, and the conditions within those markets can change. Export documents and document requirements can and do change. And export regulations can change including the organizations and people who appear on government denied party lists.
It's important to document that your export and compliance procedures are being followed for every export shipment. This allows you to ensure all employees understand and follow procedures. If that's not happening, it can help you to identify the parts of your export procedures that may need to be reviewed and refined, or identify areas and employees who need further training.
It's also important to document that your company is following its EMCP in case you ever get audited by the Office of Export Enforcement, the FBI, or some other agency that has jurisdiction over exporting. Being able to demonstrate that your company is doing its due diligence in its exports could be a "strong mitigating factor against penalties" if certain export violations are found.
Of course, a written ECP and shipment log that demonstrates it's being followed won't help a company knowingly and criminally violating export regulations, but it can be a lifesaver for companies doing their best to comply. It's particularly important for small- and medium-sized companies that export, because they would have a difficult time recovering from significant export penalties and the resulting loss of its reputation.
Shipping Solutions Professional export documentation and compliance software not only includes important export procedures like restricted party screening and export license determination, it features a shipment log that makes it easy to document that each step in your company's export process is being followed. Click here to sign up for a free online demo of the software.
Take Charge of Your Exports
If you are currently involved in your company's export process, you are probably already overwhelmed by your job responsibilities. Even if you recognize the need to take control of your company's export procedures, it's natural to want to wait until you have the time to address these issues. But, unfortunately, that time will probably never come. There's always one more fire that needs to be put out.
Instead, too many companies wait until a crisis forces their hand. An export shipment goes badly wrong, and an international opportunity that promised to result in large profits for the company turns into a big loss that puts a company and its employees at risk.
Or a compliance officer with a badge and a gun comes to the door informing you of serious and significant potential export violations that, at best, disrupt your entire company as they seize your records and audit your exports, or, at worst, result in thousands of dollars in penalties, restrictions on future exports, and maybe even jail time. (For examples of what can go wrong, download Don't Let This Happen to You!)
Don't rely on luck and crisis management as the guiding principals of your export process. By taking the time to invest in your export efforts and procedures now, you'll be setting up your company for strong, sustainable and responsible growth in your international markets.
This article was first published in July 2014 and has been updated to include current information, links and formatting.