A compliant supply chain is an exporter’s best friend

This article first published in the Australian Industry Group (Ai Group) Exporters Guide 2017 – 2018.

Sadly, the importance of complying with the requirements of the agencies at the border (which govern the export and import of goods) is often last on a long list of considerations of an exporter – if it appears at all.

The importance is especially significant in the case of small and medium sized enterprise (SME) operators, who are often so exhausted by the creation of a product – its development, packaging, financing and sale – that there is no thought given to the requirements imposed by a wide range of government agencies that have a bewildering array of acronyms such as DIBP, ABF, DAWR, DECO, DFAT and OTS.

It’s also important to remember that the compliance regime for exporters is not just about exports. The majority of goods exporters need to import inputs to enable their manufacture, which exposes them to another compliance regime that is probably more rigorous than the regime for exports, and administered by many of the same agencies.

Whether for export or for import there is a bewildering range of obligations: to report the movement of cargo, and its origin, value or its tariff classification; or to ensure that the appropriate approvals are in place, both in Australia and in the target market overseas.

In the majority of cases, liability can be imposed for inadvertent breaches of the law and even without the need for prosecution. By way of example, the Australian Border Force (ABF), as part of the Department of Immigration and Border Protection (DIBP), has a sophisticated regime providing for the issue of infringement notices, backed up by the extensive powers of audit, search and seizure. This includes the right to compel the answer to questions, and the provision of commercial documents, which all parties in the supply chain are obliged to retain. None of those require the intervention of a court and, in the majority of cases, there is little direct recourse available.

But even the rigorous ABF and DIBP regime recognises the merits of self-regulation and informed compliance. The regime also rewards ‘voluntary disclosure’ of breach or errors which, of course, requires an ability to recognise such breach or error and address it properly with the DIBP or ABF, and offers a series of ‘rulings’ to clarify obligations.

The other ‘border’ agencies such as the Department of Agriculture of Water Resources (DAWR), the Department of Defence Defence Export Controls (DEC) Outreach Program, Department of Foreign Affairs and Trade (DFAT) and Office of Transport Security (OTS), all have similar regimes that reward compliant behaviour and punish non-compliance. This could be by way of prosecution, penalty or infringement notice, or more directly through intervention in the supply chain, which threatens the movement of goods and, as a consequence, the validity of the business.

In all cases, there is little to be gained by hoping that ‘all will be well’ and ignoring the compliance risks. All the agencies require the retention of reports and commercial documents, together with powers of audit, search and seizure. Others in the supply chain also have an obligation to report errors or breach to the agencies, and are rewarded for doing so. That means that the risks of ignoring compliance requirements are very high and not of the type that should be adopted, especially when insurers will not cover liabilities created by behaviours which are reckless or ignorant of risks and obligations, which also jeopardise commercial contracts.

Proper informed compliance also has other benefits. A number of the border agencies have programmes which reward ‘compliant’ or ‘fit and proper’ operators through expedited clearance of goods, preferred treatment in the supply chain, deferred payment of duty, reduction in processing charges and recognition in similar programmes overseas. Examples can be found on the DIBP Australian Trusted Trader programme website; through the DAWR ‘approved arrangement’ regime, which allows benefits in handling of goods arrangements; and the ‘Known Consignor’ scheme, which is conducted by the Office of Transport Security to facilitate the export of cargo by air to the United States.

Further, all of our Free Trade Agreements (FTAs) and other preferential arrangements such as Tariff Concession Orders, Duty Drawback, the Tradex Scheme and Export Market Development Grants can assist both importers and exporters, but they all require compliance with the law relating to import and export, as well as the law relating to the terms of those arrangements
All things considered, compliance with legal obligations in an informed manner holds rewards in many ways: not just in avoiding financial liability or intervention in the supply chain, but ensuring that you stay in the ‘good books’ of the agencies, reducing the risk so far as is possible.

So, how does a party become a compliant exporter or importer in an informed and practical manner, taking into account that there is no obvious profit in the steps that need to be taken, but merely in the avoidance of risk, delay, costs and penalties?

In short the answer starts with some ‘due diligence’ (or what I call ‘homework’). Although a lot of lawyers such as myself spend time in disputes with border agencies here and overseas, we would much rather have parties do their homework at the front end. This avoids as many problems as possible in dealing with the agencies before disputes arise, as many of them are of a type that does not support the expense of legal fees and are not covered by insurance.

There are many such sources, some of which can be summarised as follows:

• The best place to start is with the Australian Industry Group (Ai Group), as it provides a range of services and assistance to help any supply chain. Ai Group also actively engages with governments here and overseas, and its agencies, to assist members.
• All of the border agencies have extensive websites, which provide significant, free resources which can often be accessed readily.
• DFAT and the Export Council of Australia provide the ‘FTA Portal’ and ‘FTA Tool’ respectively, which are wonderful sources of assistance on free trade agreements.
• The Australian Trade and Investment Commission (or Austrade) provides significant levels of resources in overseas markets, which are available both for free (at a basic level) and at cost (for more detailed information).
• The Export Finance and Investment Corporation (EFIC) can provide assistance, most importantly with finance products which may not be available through normal trading banks.
• Consider retaining proper expertise here and overseas from those providing logistics for movement of goods through the supply chain – air and sea cargo companies and, in particular, licensed customs brokers and freight forwarders who have relevant experience. They can also assist with securing rulings that clarify obligations and protect against liabilities. Contact industry associations in the CBFCA and AFIF for recommendations

Ultimately, even the lawyers aren’t setting out to make life difficult or detract from the commercial opportunities. It is in the interests of everyone, including the agencies, to ensure that parties are compliant and seek to identify and manage risks from the beginning. The resources are readily available, and the benefits are clear.

Of course, if pain persists, consult your lawyer!