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What to Include in Your Company's Import-Export Compliance Procedures Manual

John Goodrich John Goodrich | April 24, 2017 | Export Compliance

What to Include in Your Company's Import-Export Compliance Procedures Manual | Shipping SolutionsImport-export trade compliance is often characterized by trite phrases and platitudes:

  • Under promise and over deliver!
  • Less is more!
  • Do what you say! Say what you do!
  • If it isn't documented, it didn't happen!
  • It ain't over till the fat lady sings!

While trite, the above statements also contain truths. Importers and exporters have an obligation to exercise due diligence in conforming to the myriad of trade regulations.

On the import side of trade, the regulations describe a heightened level of due diligence called reasonable care. What does this mean? Essentially it means that importers and exporters have a responsibility to self regulate and to ensure they are compliant with the international trade laws.

How does an importer or exporter ensure due diligence? It all starts with a written plan. Those plans are commonly known as policy and procedure manuals. Without a documented policy and procedure manual a company may be found lacking within an audit, even if the regulators cannot demonstrate a pattern of noncompliance!

U.S. Customs and Border Protection (CBP) long ago determined that an importer without a documented policy and procedure manual is at high risk of violating regulations. CBP has posted an example of a trade compliance manual at its website.

The Bureau of Industry and Security (BIS) has followed suit with a similar policy and procedure document referred to as an Export Management and Compliance Program or EMCP.

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While the regulations dictate the do's and don'ts of international trade, they don't detail all of the specific business behaviors that are effective and result in compliance. That is left to each company to determine and is to be detailed within the respective import and export policy and procedure manuals. This is where importers and exporters can go wrong with their compliance programs and where the phrases above come into play.

Under Promise and Over Deliver

Too often the manual espouses pie in the sky dreams of how the importer or exporter would like to behave when its trade compliance programs are fully developed. The manual is not intended to be a goals and objectives document.

For example, it may be the goal of a company to do a 100% post-entry audit of all entries within 30 days of the entered date. While the goal is laudable, achieving it may be impossible. The reality will usually be something less than that goal. Instead a company might state that it reviews 50% of its entries within 90 days of entered date. To support that policy the company will need to have procedures detailing how to do a post-entry audit and how to retain documents and other records.

Of course the policy must be effective. The policy of requiring a 50% audit represents a large statistical sampling and will likely be effective in identifying any control weaknesses. A sampling of one percent, however, might not be sufficient. The actual sampling size depends on the makeup of any given program.

Less Is More

Those of us in trade compliance are characteristically tough task masters. To us under promising seems half-hearted and goes against the grain. It may seem as if we are slacking off and feel like we are settling for a C grade when we know we are capable of A work. Remember not to confuse the concept of hard work with effective work. Sometimes less truly can be more, more effective that is. By doing less of one business process you may free up resources to do more of another. The end result may be a more effective trade compliance program.

Less can also be less. There is no reason to live down to the standards in the procedure manual. There is nothing stopping you from setting business objectives that exceed the minimum standards. If you believe a standard is unreasonably low, that is an indication that the control may be insufficient and should be tightened.

Do What You Say, Say What You Do

Policies and procedures should reflect business processes as they exist. As a rule companies should avoid policies that require absolutes. Statements that include the phrases "all, 100%, never and always" are difficult standards to achieve. Instead the company should set achievable yet meaningful objectives for compliance activities.

Don't make your procedures overly specific or too vague. Your procedure manuals need to have some substance to them. At the same time they do not need to be so specific that the reader is instructed to use a number two pencil when completing field four of the record retention checklist. A work instruction simply stating that the export clerk must ensure all records are in the file is a little vague.

Don't recreate the wheel. If the company has documented procedures in some other format, it is a good practice to co-opt those other procedures by referencing them within the trade compliance manual. This is particularly helpful for ISO certified companies that maintain detailed procedures for all manner of business activities. It is helpful to include the other procedure as an appendix in the trade compliance manual.

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If It Isn't Documented, It Didn't Happen

Not only do you want to say what you do and do what you say, but you need to be able to document that you said it and did it. While it is not polite to point fingers in private life when it comes to trade compliance, we also need to document who dunnit... er, did it.

Your procedures should include sufficient details describing business records and who is responsible for ensuring they are retained. Records shoul include:

> Transactional Documents:

  • Invoice, packing list, bill of lading
  • Country of origin certificate
  • Accounts payable and receivable
  • Purchase orders and sales records

> Correspondence Files:

  • Emails
  • Letters

> Contemporaneous Notes:

  • Summaries of phone calls
  • Notes in shipment files

> Classification Justification Statements

> Audit Checklists

> Miscellaneous Items

It Ain't Over Till the Fat Lady Sings

Trade compliance manuals can seem like a Wagnerian opera. They seem to drone on forever before Brünnhilda comes on stage to sing her piece and end our misery. (Brünnhilda: aka The Fat Lady, she of horned Viking helmet, impressive body armor and intimidating spear oft parodied by Mel Brooks and arguably the inspiration for Madonna's Blond Ambition costume.)

Suffice it to say, it can seem as if the trade compliance manual will never be complete as if the fat lady will never make an appearance. Eventually Brünnhilda makes her appearance to sing but every night dies heroically on stage only to be subjected to the harsh reviews of the opera critics. The next night the diva performing Brünnhilda's part returns to the stage for another attempt to refine the role.

So it is with the trade compliance manual. We work on it until it sings gloriously. But then we must subject it to critical review. Each policy and procedure manual is a highly individualized, customized and subjective document. In a way, it never should be complete. It should be a work in progress.

Good procedures include a periodic review and updating requirement. Be cautious again about setting too tight of a standard for yourself. It may be your intent to review and update procedures on an annual basis. Life and business have a funny way of getting in the way of good intentions. If it takes you 13 months to review and update your procedures, you are now out of compliance. It might be better to state that procedures will be reviewed and updated on a two-year cycle or as needed. This allows you some wiggle room.

How can you ensure your company's manual is adequate?

The periodic review described above is the answer. You could perform the review yourself or submit the document for review by an outside attorney or consultant. Keep the following questions in mind while doing your analysis. Does the manual:

  • Require documentation evidencing your business processes and who did them?
  • Set reasonable achievable standards?
  • Set effective standards?
  • Require review, improvement and updates?
  • Describe your actual business procedures?

Otherwise stated, does it meet the following standards:

  • If it isn't documented, it didn't happen.
  • Under promise and over deliver.
  • Less is more.
  • It ain't over till the fat lady sings.
  • Do what you say, say what you do.

This article was first published in October 2010 and has been updated to include current information, links and formatting.

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