Ensuring compliance with international trading regulations is a critical activity for any business. However, for those operating in the Asia-Pacific region - whether they are importing from or exporting to these nations - this task has become significantly more complex in recent years.
A combination of stricter trade restrictions, increased tariffs due to political disputes and several new FTAs have all made compliance a more challenging activity. However, getting this right is essential if firms are to avoid costly penalties. So what do traders need to know?
Increasingly strong enforcement of regulations
Over recent years, there has been a significant increase in the number of regulations in the region that will affect both importers and exporters. In particular, there have been a number of trade restrictions put into place recently that firms will need to be aware of.
These range from tougher export controls on dual-use items in Australia to bring the country into line with its US and UK allies, to a closer focus on human rights in the US and EU. For example, the US recently toughened its Uyghur Forced Labor Prevention Act to extend to more sectors, adding to the due diligence burden on firms importing from China.
At the same time, the consequences for failing to meet these requirements have never been more severe. In the last few years, there have been several examples of companies facing large penalties for compliance failures when working in this region.
Among the most notable are the $300 million fine paid by Seagate to the US Department of Commerce for breaching export controls on shipments of hard drives to Chinese firm Huawei and a $635 million penalty levied against British American Tobacco by US authorities for breaching sanctions against North Korea.
At the same time, ongoing trade disputes and tariffs - especially between China and the US - have also made it more difficult for businesses to know exactly what duties are required when importing certain goods, which can lead to a range of issues if firms end up paying the wrong amount.
The challenges posed by diversification
Many firms are also looking to diversify their supply chains in the Asia-Pacific regions. This has been encouraged by multilateral free trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP) - the latter of which is the world's largest free trade zone by population and GDP.
Among the countries that are looking to grow their trading relationships are Vietnam, Thailand, Cambodia and Malaysia, which have all put in place measures to encourage international investment.
While this helps ensure supply chain resilience and reduces the risks of relying too heavily on traditional suppliers such as China at a time of great geopolitical uncertainty, it does mean firms will have to contend with a wider range of rules and regulations. It will be essential they are fully familiar with the requirements of these agreements in order to fully benefit from reduced or eliminated tariffs, as well as ensuring they are in compliance with differing customs regimes across multiple territories.
To do this, it pays to have the right tools. Smart, automated customs software solutions ensure firms can easily keep up with evolving rules and regulations and maintain compliance across all their activities. The ability to automatically submit required information and quickly identify what tariff relief businesses may be eligible for can greatly streamline trade, reduce the risk of delays or fines for non-compliance, and help businesses save money.
