Is the Compliance Department Just a Cost of Doing Business?

Posted by Jim Conrad
Blog originally posted on 13/02/2014 11:21 AM

redinkIn most operations, the compliance department audits and approves the duty bills as part of its responsibilities. The good news is that the U.S. government will accept many forms of payment for import duty and fees:

  • U.S. currency and coins
  • Bank drafts
  • Cashiers' checks
  • Certified checks
  • Personal checks drawn on a U.S. financial institution
  • Domestic travelers' checks
  • U.S. Governments checks endorsed by the payee to the U.S. Customs and Border Protection
  • Money orders (U.S. Postal, bank, express or telegraph)

The bad news is that there’s no clear way for an international compliance group to show that these every-day compliance processes improve the bottom line. Or is there?

A company’s sales group is considered to be a “black ink” department since it generates direct revenue.  Many other corporate employees are likewise considered “black ink” for either their direct or indirect revenue generating capacity.  The traffic manager negotiates transportation rates that affects the bottom line for all to see….. And is rewarded for his or her efforts through bonuses and salary increases that are often based upon defined metrics.  The accounting staff uses the nuances of state and federal tax law to avoid (legally of course) a litany of tax and fee assessments that a corporation faces each year – another “black ink” group.  The purchasing department’s primary responsibility is to buy the best product, component or accessory at the lowest possible price – again saving money that accrues to the bottom line.  Those “blank ink” groups are rewarded for their positive impact to the bottom line because they can document revenue or savings. 

Unfortunately, when management reviews its compliance operation, the general perception is that expenditures for compliance staff are a “red ink” outlay; a cost of doing business. Little notice is taken to the effort of compliance to protect a company’s brand. Many toil for years, under-resourced and frustrated. They keep all ten fingers in the colloquial dike, trying to keep their companies out of trouble, exasperated by the seemingly unrecognized value of a sound compliance program. There are ways that you can demonstrate your group’s profit contribution ability. There are opportunities if you know where to look and in many cases, those opportunities can be realized without hiring additional staff. These are not new programs and savings areas but ones that have been underutilized for many years.

It takes some effort but there are ways to help you change that “red ink” perception (and maybe enhance your own profile with management).  It’s likely that you’ve heard of at least a few from the below list. 

  • First Sale for Export Valuation – when you can’t reduce the duty rate, reduce the import value. Pretty large savings for high duty, high value or high volume imports.
  • Free Trade Programs – there are currently 20 free trade programs and others in the discussion phase.  It’s your money!
  • Penalty Mitigation – receiving a penalty notice does not necessarily mean that you have to pay the full amount
  • Duty Drawback – another huge area of savings for companies that both import and export. Savings in places you’d never suspect.
  • VAT Recovery – perhaps the most misunderstood tax, with a lot of money unnecessarily left in the hands of the government
  • Temporary Legislation Duty Reduction – targeted duty reductions and even retroactive savings are sometimes available
  • Tariff Engineering – the act of designing and marketing a product with a tariff (and duty) in mind.  We see this in the footwear, apparel and consumer goods industries in particular. 
  • Brand Protection – export penalties matter. Beyond the lost penalty amount, penalty bulletins and loss of export privileges in the news may enhance your credibility regarding the need for export auditing.

There are many legal, revenue producing and cost saving strategies that are available that will help your company’s bottom line and promote the value of compliance within your company. With a little fact finding and planning we can help change that “red ink” to “black”.


If you have any questions, please reach out to our compliance experts at Tradewin.

Jim Conrad

Written by Jim Conrad

Jim joined Tradewin in 2009, continuing a successful career in international logistics and trade compliance that began in 1980. He has spent more than three decades in leadership roles overseeing international trade compliance including the positions of corporate Director of Operations and as Chairman of the Board of Directors for a large U.S. shipper’s association. Jim’s technical background covers a wide range of international trade areas including harmonized tariff classification, valuation, anti-dumping and risk analysis. Jim is a graduate of North Shore Community College and majored in Business Administration at Salem State University. He is a member of the International Compliance Professionals Association and a U.S. Licensed Customs House Broker.