(2 min read)
Recently, EMW’s Managing Director, Ken Wasylik, and International Business Development Associate, Larissa Stenglein, attended the International Trade Symposium hosted by BMO Harris, and supported by the Wisconsin District Export Council (WiDEC) and the Madison International Trade Association (MITA). Attendees from both supply chain and international trade alike shared their current challenges with compliance—namely, the absence of standardized methodologies or the sheer lack of document saving, sharing, and reporting across multiple players.
The direction of compliance and regulatory auditing, a theme reiterated frequently at the event, makes the above challenges particularly problematic. Compliance is no new concept; however, the level of detail and audit, once formerly reserved for high-level exports such as of the military classification, is now required of a much wider export segment. Compliance at the primary level does not suffice, but rather applies at secondary and tertiary levels. Knowing the destination country is not enough. Knowing the vendor is not enough. The vendor’s vendor and the end-uses therefrom must be known and documented by the seller. To comply with this boosted oversight, companies must set up a more robust system for documentation and internal audit.
The United States Customs and Border Patrol (CBP) laid out a comprehensive strategy for 2024-2028, emphasizing the importance of audits to ensure compliance with trade laws. The strategy aims to enhance the efficiency and effectiveness of trade audits, allocating $16.6 billion for the 2025 fiscal year (FY) for technology and HR training. Similarly, the U.S. auditing services market is projected to reach a valuation of $50.24 billion for 2024, leaving an obvious hole in the market for startups and technologies who achieve the above goals. As the landscape of compliance and consequence become stricter, what is trending in the expectation of U.S. businesses?
Data Protection and Privacy
First and foremost is the increased focus on data privacy and protection. With data privacy laws in Europe (GDPR), California (CCPA), and elsewhere spilling over into general data governance, businesses are under increased pressure to ensure the security of their organization and client’s data. This requires investment into new technologies & trained staff to manage consent and personal information. Likewise, with nearly 4,000 new cyberattacks occurring daily and stories about widespread company hacks frequenting our news, the question becomes not ‘if’, but ‘when’. Cybersecurity regulations, like from the New York Department of Financial Services (NYDFS) for FSI firms, are tightening as cyber threats become more sophisticated.
Geopolitical Extension
According to the International Trade Administration’s (ITA) website, “The U.S. participates in various multilateral export control regimes to prevent the proliferation of weapons of mass destruction and prevent destabilizing accumulations of conventional weapons and related material.” These days, with tensions amplifying with Russia and China, American exporters must ensure that their products do not become a component in anything seen as foreign military aid—whether software, technology, or mere commodities—or face serious penalties. The ITA posts guidances to “Know Your Customer” to discover and prevent possible violations. U.S. Department of Commerce’s Bureau of Industry and Security (BIS), the administrator and enforcer of the Export Administration Regulations (EAR), requires businesses to apply for export licenses and classify their products using the Export Control Classification Number (ECCN). More details on the EAR will be available in the next blog post, “Procedures and Red Flags in Export Transactions”.
Standard Harmonization
With a reinvigorated emphasis on transparent supply chains and ethical business practices, CBP is taking an aggressive stance on everything operating in, entering, or exiting American borders—which comprises but 1 of 195 national borders. As adherence to the regulatory rules of each country becomes a particularly complex navigation for multinationals, a movement is trending towards harmonizing global compliance standards, stemming largely from the International Organization for Standardization (ISO).
Conclusion
Moving forward, continuous monitoring and the ability to report in real time are crucial to prove regulatory compliance and avoid hefty penalties. Organizations must stay proactive in adapting their regulatory strategies and technology upgrades to increase efficiency and accuracy in reporting.
It is crucial to work with a compliance specialist. Contact EMW for more information or to be connected to a compliance expert.
