BSM581 0813056 NAnderson

/
ABERDEEN BUSINESS SCHOOL Copyright Declaration Form

Name Email/contact tel no.: Course: Module: Dissertation Title: SupervisorlTutor: Mr Nicholas Anderson 0813056@rgu.ac.uk / 07527 971 506
MSc Degree in Purchasing & Supply Chain Management BSM581 An examination into the impact that investment in trade compliance has upon a firm's competitive advantaqe Mr Bryan McNay
Before submitting confirm: a) b) c) that the work Lderti=lken for this assignment is entirely my own and that I have not made use of any unauthorised assistance that the sources of all reference material have been properly acknowledged that, where necessary, I have obtained permission from the owners of third party copyrighted material to include this material in my dissertation.
I have read and agree to comply with the requirements for submitting the dissertation as an electronic document. I agree: That an electronic copy of the dissertation may be held and made available on restricted access for a period of 3 or more years to students and staff of the University through The Robert Gordon University Moodie. That during the period that it is accessible on Moodie the work shall be licensed under the Creative Commons Attribution-Non Commercial-Share A like 2.5 Licence to the end-user - http://creativecommons.org/licenses/by-nc-sa/2.5/ ~.~ .. f\.~.~~ Date
Signed
~./.~.I.i.1.
THE
ROBERT GORDON UNIVERSITY

ABERDEEN
FACULTY OF MANAGEMENT Aberdeen Business School Title: An examination

into the impact that investment has upon a firm's competitive advantage in trade compliance
Name: Mr Nicholas Anderson Matriculation Number: 0813056 Submission Date: 9th May 2011 Supervisor:
Mr Bryan McNay in trade compliance
Aim: An examination
into the impact that investment has upon a firm's competitive advantage.
Objectives: 1.
The Author will examine the effects of globalisation on today's oil and gas industry with hope that findings will assist in solidifying the increased role that trade compliance can and should play. The various Regulatory Bodies with acts governing numerous international markets will be assessed in relation to the ever increasing and complex role of the trade compliance function. A study of the most recent import and export compliance topics will further outline the complex nature of today's global market place. A review of published historic violations and their settlements with corresponding share price movements will provide sufficient support for/against an increased investment in trade compliance.
2.
3.
4.
5.
As a project which will run in conjunction with the dissertation, the author will conduct a harmonised tariff classification analysis. The findings of which should support an 'argument that trade compliance can offer competitive advantage. The latest information systems and technology available offering support to the trade compliance function will be reviewed.
6.
Signed: Total word count (excluding acknowledgements ,diagrams, references, bibliography and appendices) - 18,402 words. A Dissertation submitted in partial fulfilment of the requirements for the MSc Degree in Purchasing & Supply Chain Management.
I ABSTRACT
The purpose of this study aimed to uncover organisations advantage. trade compliance group would whether an investment in an
have impact
on competitive
The author has examined, trade compliance
in detail, whether greater focus and investment advantage.
in
can lead to competitive
On the flip side, the
author also examined the cost of non-compliance performance, in particular,
and its damaging effects on
share price performance.
There is evidence to suggest that trade compliance market
can, coupled with other
specific tools, offer itself as a unique selling point to the customer. itself
Evidence was found which suggested that compliance alone manifested as competitive advantage through enhanced corporate
image and customer
assurance of product delivery.
Advancements opportunity forthcoming, contributing
in
information
technology
capabilities
have
afforded
an is in
to excel in the field of trade compliance. evidence to competitive existed gain. confirming the
Assuming investment role of compliance
Through
a mixture
of primary
and secondary
research and qualitative objectives;
and
quantitative
data, the author set out capture the following
The Author will examine the effects of globalisation gas industry with hope that findings will assist
on today's oil and in solidifying the
increased role that trade compliance can and should play.
The
various
Regulatory
Bodies with
acts
governing
numerous
international markets will be assessed in relation to the ever increasing and complex role of the trade compliance function.
A study of the most recent import and export compliance topics will further outline the complex nature of today's global market place.
A review of published historic violations and their settlements with corresponding share price movements will provide sufficient support for/against an increased investment in trade compliance.
As a project which will run in conjunction with the dissertation, the author will conduct a harmonised tariff classification analysis. The
findings of which should support an argument that trade compliance can offer competitive advantage.
The latest information
systems and technology
available offering
support to the trade compliance function will be reviewed.
Accordingly, three hypotheses, surrounding the aim and objectives, were designed and satisfied.
The author concludes with recommendations.
ii
I ACKNOWLEDGEMENTS
~------------------------------------------------------------~
The author wishes to thank those who have assisted and advised during the project, with particular mention to:-
Employer, throughout.
Company
A,
for
continued
support
and
guidance
The Robert
Gordon
University
for
their
professional
guidance
and
facilities at hand.
To all persons who kindly participated the purpose of this study.
in the research undertaken
for
To all my friends during my studies.
and family
for their
continued
help and support
iii
CONFIDENTIALITY
REQUEST
The dissertation is strictly confidential and is only available for assessment purposes with all copies to be returned to the author after the assessment board has agreed the grade.
iv
I
L
TABLE OF CONTENTS
_
-------
I
No
Page
Abstract Acknowledgements Confidentiality Request iii iv
Table of Contents List of Tables
v
vii
1.0
1.1
CHAPTER 1 INTRODUCTION Aim Objectives Company A Confidentiality Statement
1 3 3
1.2 1.3 1.4 II 2.0 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 II 3.0 3.1
4
5
CHAPTER 2 LITERATURE REVIEW International Trade - The Global Marketplace
6 6 10 15 18
HTC/ECCN Classification ECCN Violation Denied Parties International Regulatory Trade - Summary Bodies Compliance Programs Case
19 20 23 31
34
Import/Export Information
Systems and Technologies
Third Party Service Providers Violations/Settlements
36
CHAPTER 3 RESEARCH METHODOLOGY Prospective Techniques of Investigation
44
44
3.1.1 3.1.2 3.1.2.1

3.2 Rationale
Secondary
Research
44 46
Primary Research Quantitative v Qualitative Research Methods
46 47 48 49
for Choice of Research Method Probing Steering Close-ended Questions Questions
3.2.1 3.2.2 3.2.3 3.2.4

3.3 3.4 3.5 1Ill 4.0 4.1 4.2
49 50 50
Open-ended Interviews Limitations Hypotheses
of Research
51 52
CHAPER 4 -DATA ANALYSIS Company A - Overview Classification Analysis Analysis
53 53 57 66 67 68
4.2.1 4.2.2
4.3 II 5.0 5.1 5.2
Kazakhstan
Australia Analysis Technology Review
CHAPTER 5 - CONCLUSIONS
& RECOMMENDATIONS
73 73 79
Conclusions and Recommendations Summary
III
Referencesl Appendix A Appendix B Bibliography 81
vi
I LIST
OF TABLES
Page
No
Table 1 Market-Adjusted Price Reactions to FCPA-Related News and Announcements
42
vii
INTRODUCTION
CHAPTER
1.0
CHAPTER 1 - INTRODUCTION
Complying with national and international trade laws and regulations is a priority for organisations operating globally.
Research has confirmed that compliance can be challenging and costly due to regulations ever changing. However, the cost of non-compliance is soaring.
Expanding
markets
have
increased the
need for
robust
compliance
structures, systems and processes.
In order for such structures, systems
and processes to be effective, compliance, the function, must have strong leadership from top down.
The author has examined, in detail, whether greater focus and investment in trade compliance can lead to competitive advantage. On the flip side, the
author also examines the cost of non-compliance and its detrimental effects on performance, in particular, share price performance.
There is evidence to suggest that trade compliance can, coupled with other market specific tools, offer itself as a unique selling point to the customer. But firstly, compliance as a tool offering competitive advantage must be sold successfully to the board room.
Advancements
in information
technology
capabilities
have afforded
an
opportunity to excel in the field of trade compliance.
Again, if this can be
sold to the board room, evidence suggests that compliance will offer an organisation competitive advantage.
Specifically in the US, the oil and gas sector has been descended on by government agencies - Customs, the Office of Export Control (commerce) and the Department of Justice. perspective,
1
The fines for violations are high. For
An examination
into the impact that investment in trade compliance advantage
has upon a firm's competitive
INTRODUCTION
CHAPTER
EXPORT ADMINISTRATION
REGULATIONS (EAR) (per violation)
Civil up to $250,000 or 2 times the value of the export Corporate Criminal - up to $1 million or 5 times value of export Individual Criminal - up to $1 million and/or 20 years imprisonment
United Kingdom Civil - Greater of 3 times the value of the goods or 1,000 Criminal - 7 years in prison and unlimited fines
China 50,000 and 250,000 yuan where the value of the transaction is less than 50,000 yuan, but between 100% and 500% of the transaction value for higher-value transactions
Antiboycott Civil - up to $250,000 or 2 times the value of the transaction Criminal - up to $1,000,000 and/or up to 20 years imprisonment Denial of foreign tax credits
(Company A, Presentation)
In the most serious of cases, a denial of export and import be sought and clearly, this would have a devastating
privileges impact
could on an
organisation
operating on the international
stage.
In recent years, Cameron, and BJ Services amongst
FMC, Weatherford,
NOV, Baker Hughes, NALCO
many others have had published export violations, review. Evidently, share at the
2
each will be looked at in more detail during the literature published violations price. Again, will have a detrimental the literature
impact on an organisations the author will look
during
review,
An examination into the impact that investment in trade compliance has upon a firm's competitive advantage
INTRODUCTION
CHAPTER
correlation penalties
between and negative
non-compliance publicity
with
trade
regulations
resulting
in
and share price movements. the importance
With huge of a smooth, can play in
efforts and focus on supply chain effectiveness, unproblematic
and reliable supply chain and the role compliance
assuring this should not be understated.
I 1.1
_-_A_-i_m
An examination firm's competitive
into what impact investment advantage.
in trade compliance
has upon a
r 1.2
With
Objectives
~----------------------------------------------------------------~ reference to the Oil and Gas service industry, as global markets
increase in size (Namibia, Coast) decrease
Falkland Islands) and in certain cases (Libya, Ivory governing international soaring, business greater
in size, the laws and regulations
trade become more complex. coupled with the damaging operations investment and impact
With the cost of non-compliance non-compliance author has on future whether
opportunities,
the
examines
in trade compliance can lead to competitive
advantage.
With
the
central
aim
of
the
dissertation advantage certain
focusing in today's factors
on
whether
trade it is global
compliance necessary operations;
can offer competitive for the author
global market, that influence
to examine
increased role that trade compliance can and should play.
INTRODUCTION
CHAPTER
The
various
Regulatory
Bodies
with
acts
governing
numerous
international
markets will be assessed in relation to the ever increasing
and complex role of the trade compliance function.
A study of the most recent import further
and export
compliance
topics will
outline the complex nature of today's global market place.
A review
of published
historic
violations
and their
settlements sufficient
with
corresponding for/against
share price movements
will provide
support
an increased investment
in trade compliance.
As a project author findings
which will run in conjunction a harmonised tariff
with the dissertation, classification analysis.
the The
will conduct
of which should support advantage.
an argument
that trade compliance
can offer competitive
The
latest
information
systems
and
technology
available
offering
support to the trade compliance function will be reviewed.
The objectives
outlined above will be achieved by examining coupled with focussed primary
the most recent the key
academic literature
research targeting
personnel and available data within company A.
E
the
CompanyA
Company A has over 13,000 employees world. The organisation is a key
in more than 75 countries part of the world's
around
hydrocarbon
An examination
into the impact that investment in trade compliance has upon a firm's competitive advantage
INTRODUCTION
CHAPTER 1
exploration and production industry.
The organisation has over 400 service
locations and, therefore, operates on a global scale.
11.4
Confidentiality Statement
In order to examine truly the impact that investment in trade compliance can have on a firm's competitive advantage the author has chosen to base the bulk of research, primary and secondary, qualitative and quantitative, on his current employer. For confidentiality reasons, the author will refer
throughout the dissertation to company A, the employer.
An examination
LITERATURE REVIEW
CHAPTER 2
I 2.0
I
CHAPTER 2 - LITERATURE REVIEW
This chapter will focus on literature gathered in relation to the aim and objectives of the thesis topic, in order to help provide evaluation and understanding around compliance functions and whether they can provide competitive advantage. Literature has been taken from Company A in-house presentations, academic journals, textbooks and websites.
r 2.1
!
International Trade - The Global Marketplace
In conjunction with the aim of this thesis and with reference to the Oil and Gas service sector, it could be argued that global markets are fluid. Most
recently, the drilling fluids industry has seen expansion in areas such as Namibia and the Falkland Islands with increased investment and focus on oil and gas exploration. In certain countries such as Libya and the Ivory Coast,
due to political troubles, markets have closed as a result of government enforced sanctions. Clearly, with new markets comes new regulations and with closed markets also comes new regulations. Therefore, the laws and
regulations governing international trade are also fluid adding complexity to the trade compliance task. With the cost of non-compliance soaring, coupled with the detrimental and impact non-compliance the author has on future whether business greater
operations
opportunities,
examines
investment in trade compliance can lead to competitive advantage.
It could be argued that the term globalisation, which still seems to be an everyday term, is something of the past. It would be more appropriate, in the world we have today, to view the term globalisation as an historic event. Everything we now have, the global market, was a result of globalisation. There is now one global market and, as earlier stated, the market has several doors which open and close at regular intervals. As each door opens, another door closes, and with each swing comes new laws and regulations
An examination into the impact that investment in trade compliance has upon a firm's competitive advantage 6
~~-------------------
LITERATURE REVIEW
CHAPTER 2
which must be digested prior to stepping in.
The trade compliance
department within an organisation operating globally has a duty to ensure compliance with each law and regulation.
As outlined by Jeffery (2002) in an article published in the UK Guardian newspaper, 'What is Globalisation?' the dictionary definition would tend to agree with the authors previous assessment regarding the term
'globalisation; ,
"Globalisation (n) is the process enabling financial and investment markets to operate internationally, largely as a result of deregulation and improved communications" (Collins) or - from the US - to "make worldwide in scope or application" (Webster)"
(www.guardian.co.uk)
Evidently, financial and investment markets operate internationally with 'at the touch of a button' communications. If we take the Webster definition, 'make worldwide in scope of application' again, we can argue that
globalisation is now an historic event.
As new markets open, for example, if the American administration lifts its embargo on Cuba, it will open up new opportunities for American business. Whether we still class these new opportunities as globalisation is up for argument. The author would argue no, this is not globalisation.
Globalisation is a past event.
Referring
back to
immediate
communications,
it
was
this
type
of
technological advancements that evolved our old world, encouraging and enabling globalisation. In our present day/state, the technology available
now can also encourage and enable the evolvement in the way organisations manage their trade compliance function. The author will discuss this
An examination into the impact that investment in trade compliancehas upon a firm's competitive advantage
UTERATURE
REVIEW
CHAPTER 2
argument in more detail during the information technology review during a later section.
As a clear example of what globalisation created, Company A, which will be studied during this report, now has over 13,000 employees in more than 75 countries around the world. Without the technological advancements this
growth would not have occurred.
Due to Company A's vast global operations, it must abide by the national and local trade laws, the import and export rules in place, and the regional trade laws governing each business unit. more detail, during the report. This also will be discussed further, in
Company A is a Multinational organisation, which put simply, is a company which has subsidiaries in various countries. The headquarters of Company A is in Houston, USA. As a U.S. organisation, the company is subject to U.S. trade laws. Resulting from a global market and operations in 75 countries, the U.S. trade laws governing the business conducted by Company A are complex.
Unique to the U.S., the American administration has re-export laws which mean that U.S. origin materials are not only controlled for export, but also controlled for re-export. As an example, if a UK company purchased U.S.
origin equipment from the U.S., it would not be free to forward the equipment to Nigeria, without abiding by the U.S. re-export control laws. An export is not always tangible; information such as technological drawings sent via email from the U.S. to the UK is also classed as an export and would also be subject to re-export laws.
The U.S. Bureau of Industry and Security (BIS) define export as;
''An export is a shipment or transmission of items out of the United States"
LITERATURE REVIEW
CHAPTER 2
And a re-export as;
"A re-export
is a shipment or transmission
of items subject to the EAR from
one foreign country to another"
And, finally, a deemed exportjre-export;
"Release of technology abroad"
or source code to foreign
national
in the U.S. or
(http://www.bis.doc.gov/complianceandenforcement/dontletthishappentoyou 2007 sm.pdf)
According to the U.S. business of industry and security;
"Most people think of an export as the shipment of a commodity the United States to a foreign country, Under the EAR, the release
from inside
but that is only one type of export. or source code to a foreign
of technology
national, even if the foreign national is in the United States, is also "deemed" to be an export to the home country or countries of the foreign national and may require a license under the EAR. Technology can be released through visual inspection, oral exchanges
of information,
or
the
application
to
situations
abroad of personal knowledge or technical experience acquired in
the United States. For example, if a graduate student who is an alien with a valid visa reviews controlled technology pursuant to a grant from a private
company that will not publicly release the study, an export license or license exception may be required because the review could be considered a
'deemed export'. "
LITERATURE
REVIEW
CHAPTER
I 2.2
HTC I ECCN Classification
In order to export,
import,
or re-export,
material
must be classified.
There
are two types of classification. Export Control Classification
Harmonized
Tariff Classification
(HTC) and
Number (ECCN).
HTC classification imported.
is the process used for describing
items being exported
"When trading internationally, you will need to find the correct commodity code for your goods so you can fill out customs paperwork accurately. The code is an eight-digit number for exports outside the EU or goods moving within the EU, but is a ten-digit number for imports from outside the EU. Once you know the commodity code, you can look up other important information such as duty rates and any import or export restrictions. "
(http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1078053656&t ype=RESOURCES)
The reasons for HTC classification country correctly of origin classified. and commodity Local customs
are very simple,
duty rates are set by that goods are paid
code so it is essential authorities
can back date under
duties for incorrectly local authority.
classified goods going back 3-5 years dependent on the while dealing with high value, high dutiable The
Clearly,
products, it makes sense to make sure that the classification first 6 digits of the HTC code are universally country aligned.
is correct.
Digits 7-10 can be of
added by the importing
which, as above along with the country
origin, sets the duty rate. additional investment in
As part of the overall aim to determine trade compliance can result in
whether
competitive
advantage, the author will conduct a detailed classification that savings can be achieved allowing competitive
analysis with hope through a
advantage
reduced total landed cost.
Total landed cost, put simply,
is the total, all in
10
UTERATURE
REVIEW
CHAPTER 2
cost, to move a product from one country to another. include the cost of material, broker fees etc. freight
The all in cost would handling, import
costs, duty and tax,
The author will conduct a classification
analysis with focus
on Kazakhstan and Australia during the primary research stage of this report.
The UK government
states that;
"Classifying your goods correctly will help ensure that you: pay the right duty and VAT know whether an import or export licence is needed
You are legally responsible for the correct classification of your goods, even if you use an agent. Incorrect classification can lead to your goods being delayed or seized and you will have to pay any duty and tax owed, plus possible financial penalties."
( http://www .businesslink.gov .uk/bdotg/action/detail?itemId = l078053832&t
ype=RESOURCES) ECCN classification is the process of describing items being exported by their
use, which is either dual-use or (single) civilian use. With regards to ECCN classification, "ECCN classification". in the U.S., it is described simply as and
In the UK, it is the "Product Rating classification"
in EU member states, the "Control Number classification".
United States
ECCN (Export Control Classification Number)
United Kingdom
Product Rating
EU-Member Countries
Control Number
11
LITERATURE
REVIEW
CHAPTER 2
The U.S. Regime governing exports is the Export Administration Regulations (EAR). The EAR hosts a list of controlled commodities, software, and
technology known as the Commerce Control List (CCl) which sets out:
The technical parameters of each controlled item; The reason for control; and The circumstances under which the item can be exported.
"Consulting the CCL and properly determining and most important step in determining
the applicable ECCN is the first
whether an export license is required
under the EAR to export a U.S.-origin item"
(Director of Trade Compliance, Company A)
ECCN classification is slightly more complex than HTC classification and distinguishes between commercial materials with no military use and dual use materials which have civilian uses but also military uses. Materials and products which have dual use, such as Teflon coated diaphragm pumps, as
described in the Wilden case below, can be used in the manufacture of chemical and biological weapons. licence prior to export. Dual use materials require an export
Materials which have no dual use have no ECCN number / Product Rating number / Control number. Every day, civilian goods only, are classified in
the US as EAR 99 and in the UK as NlR (No Licence Required).
"The Department responsible Regulations for
of Commerce's Bureau of Industry

implementing which and enforcing the the
and Security Export
(BIS) is
Administration
(EAR),
regulate
export
and
reexport
of
most
commercial items. use" items that
We often refer to the items that BIS regulates as "dualhave both commercial and military or proliferation
12
An examination
LITERATURE REVIEW
CHAPTER 2
applications
- but purely commercial
items without an obvious military
use
are also subject to the EAR"
(http://www.bis.doc.gov/licensing!exportingbasics.htm)
The Bureau of industry and security distinguish follows;
between ECCN and EAR 99 as
"ECCN, stands alpha-numeric
for Export classification
Control
Classification
Number.
An ECCN is an
used in the Commerce Control List to identify from
items for export control purposes. An ECCN is different number,
a Schedule 8
It which is
which is used by the 8ureau of Census to collect trade statistics. from the Harmonized Tariff System Nomenclature,
is also different
used to determine import duties.
All ECCNs will have 5 characters,
for example,
1A001, 48994, or 8DOO1.
There are 10 categories on the Commerce Control List. The first number of the ECCN identifies the category to which it belongs, for example, 1 =
Nuclear Materials Facilities and Equipment,
Computers,
Propulsion
Systems, Space Vehicles and Related Equipment.
However, EAR99 is a different
type of classification.
It serves as a "basket"
designation for items that are covered by the EAR, but are not specified on the Commerce Control List. EAR99 items can be shipped without a license to most destinations under most circumstances. the majority There are limitations on the
use of EAR99. However,
of the commercial
exports from the
United States fall into this category"
(http://www.bis.doc.gov/licensing/doneedaneccn.html)
Importantly,
as advised on the
us
BIS website;
13
UTERATURE
REVIEW
CHAPTER 2
"To minimize the potential diversion or misuse of licensed exports, BIS adds conditions to nearly all export licenses. License conditions may, among other things, restrict the wayan item is used after export, or it may require certain reports to be made by the exporter. The conditions are created through an interagency process that includes BIS and agencies at the Departments of State and Defense, among others. The use of license conditions allows the Government to approve license applications that might otherwise be denied. Once a license is issued, BIS seeks to ensure compliance with the conditions.
"Violations of the EAR are subject to both criminal and administrative penalties. In some cases, where there has been a willful violation of the EAR, violators may be subject to both criminal fines and administrative penalties. However, for most administrative violations, there is no intent requirement, which means that administrative cases can be brought in a much wider variety of circumstances than criminal cases. Fines for export violations can reach up to $1 million per violation in criminal cases, $50,000 per violation in administrative cases on or after March 9, 2006 (there have been no such cases that have reached a final order yet), and $120,000 per violation in certain administrative cases involving national security issues.1 In addition, criminal violators may be sentenced to prison time and administrative penalties may include the denial of export privileges. A denial of export privileges basically prohibits a person from participating in any way in any transaction subject to the EAR. Furthermore, it is a violation of the EAR for anyone to participate in an export transaction subject to the EAR with a denied person.
It should be noted that in most cases, BIS reaches negotiated settlements in its administrative cases prior to a formal administrative hearing. Those negotiated settlements are often reached as a result of voluntary
14
LITERATURE REVIEW
CHAPTER 2
se/fdisclosures considers settlements acceptance appropriate significantly
(VSDs)
of
violations
by
companies
and
individuals. when
BIS
VSDs to be a significant of administrative of responsibility cases, fines
mitigating
factor
negotiating
cases. VSDs reflect a company's or individual's for and EAR violations. other To encourage penalties VSDs, in may be
administrative
reduced as a result of the fact that BIS became aware of the penalties is
violations as a result of a VSD. Guidance regarding administrative
provided in Supplement No. 1 of Part 766 of the EAR and in chapter five of this publication. In that guidance, some factors, including mitigating VSDs, are given violations. In the
"great weight" and are viewed as significantly
following cases, VSD credit is noted where it was given.
As a standard
provtston
referenced
of BIS settlement
agreements,
the respondent
involved neither admits nor denies the charges made against it. Therefore, the violations neither in many of the summaries in this booklet have or
been proven
in court nor been admitted
to by the company
individual. Please also be aware that this letter and booklet are not intended to create, nor do they create, any right or benefit, procedural or substantive, enforceable by law against the Department of Commerce or any other part of the U.S. Government. Nor should the cases in this booklet be interpreted as
precedent in any future actions involving the U.S. Government".
I 2.3
ECCNViolation case
I
to study the below export insight into the risks involved with
It is appropriate, violation
at this stage of the dissertation,
case as it provides a valuable
export compliance.
Further cases will be studied during later chapters.
An examination
15
UTERATURE
REVIEW
CHAPTER 2
"California
Company
Settles
Charges
of
Unauthorized
Exports
to
Iran, Israel, People's Republic of China, Syria, and the United Arab Emirates.
The U.S. Department Engineering California, Co., will pay
of Commerce today announced that Wilden Pump and
LLC (Wilden),
a company
based
in
Grand
Terrace, charges
a $700,000 civil penalty to settle administrative

Regulations
that it violated the Export Administration
(EAR) in connection
with unauthorized exports of diaphragm pumps from the United States to the Iran, Israel, People's Republic of China, Syria, and the United Arab Emirates without the required Department of Commerce export licenses.
The Commerce Department's
Bureau of Industry Wilden committed
and Security (BIS) charged
that, between 2000 and 2003, Specifically, BIS found that
71 violations of the EAR. 26 violations

by exporting
Wilden committed
diaphragm pumps without the required licenses. In connection with 22 of the exports, Wilden violated that violations the EAR by transferring diaphragm pumps with
knowledge
of the EAR would occur. BIS also charged that on
Wilden committed
23 violations of the EAR by making false statements
export control documents.
The size of the penalty assessed to Wilden is due to the significant number of violations, many of them with knowledge that the shipments country. The diaphragm pumps exported were destined by Wilden are Regulations and Regulations. The
to an embargoed
subject to Department the Department
of Commerce's Export Administration Treasury's Iranian Transaction
of the
majority
of the pumps that were exported are controlled for export and re-
export due to concerns that they could be used in chemical and biological weapons proliferation.
"This investigation
demonstrates
the Commerce Department's
commitment
to vigorously pursue those who knowingly
violate U.S. export control law,"
said Wendy L. Wysong, Acting Assistant Secretary for Export Enforcement.
An examination
has upon
firm's competitive
16
LITERATURE REVIEW
CHAPTER 2
Wilden also agreed to be subject to a three-year denial of export privileges for items on the Department's Commerce Control List. The denial will be suspended for two years provided that Wilden does not commit any
violations of the EARduring the suspension period.
Acting Assistant Secretary Wysong commended the Special Agents of BIS's Office of Export Enforcement, Los Angeles Field Office, for their work on this investigation. "
(http://www.bis.doc.qov/news/2005/winden.htm)
This case visibly correctly. controlled organisation dependent However, It
illustrates
the importance to distinguish 99 / civil
of classifying between bucket. is going
exported
material is an but,
is important into the
whether Quite
material clearly,
or falls
EAR
NLR
suffering
a $700,000
penalty
to be hurt
on the revenues in question,
a recovery privileges
is likely to be possible. could have been lost, business. The global
as was almost the case, export
which would have had a catastrophic market
affect on future
which is now in place undoubtedly
offers more buyers than a local there will be increased as
market. In this case, going forward post the violation, government scrutiny which is never welcome.
Also, published violations,
it was with this case, (all information
taken from the U.S. Bureau of industry share are
and security website) will have a negative impact on the organisations price, as will be proven during a later study. Furthermore,
violations
published in the Wall Street Journal. with violations will be studied
Share price movement
in conjunction but, quite traded
in more detail
at a later stage
clearly,
as the share price is the number
one driver
of a publicly
company,
it will impact current and future investment. with joint ventures and strategic
In an industry which the negative
is now filled publicity
partnerships,
which surrounds an export violation further
emphasises that export
violations should be avoided at all costs.
17
UTERATURE REVIEW
CHAPTER 2
Whether
investment
in the trade compliance is obviously disputable,
function
could have prevented
the case of Wilden
"Wilden violated the EAR by
transferring diaphragm pumps with knowledge that violations of the EAR would occur".
operating However, it does go without saying that organisations
in the new world, the post 9/11 world with ever increasing trade
security measures, who are heavily reliant on exports, should invest in trade compliance dissertation simple as a protective preventive whether measure. trade compliance more in terms Nonetheless, the
hopes to determine protective Although,
can, rather than of competitive in itself a joint of
basic
prevention, perhaps,
offer
advantage.
it could be argued that prevention As an example, organisation before entering
does create competitive venture,
advantage.
it is likely that a compliant
would seek assurance
compliance within the proposed partner, thus creating competitive over a peer with poor compliance history and commitment.
advantage
~I ------------
2.4
Denied Parties
l
1
Also falling
into the category
of export
controls,
as was mentioned
in the
Wilden case, is Embargoed countries.
The International legal authority
Emergency for etc.) most
Economic Powers Act (IEEPA) is the primary sanctions programs (Iran, Syria, Sudan,
Burma/Myanmar and permanent
The sanctions aliens
apply to American anywhere in the
citizens/companies world and an
resident
individual/company,
regardless of citizenship,
when in the U.S.
The Trading
with the Enemy Act (TWEA) is the primary The application
legal authority
for
Cuba and North Korea.
is much like IEEPA, but also applies
to foreign organised subsidiaries of U.S. companies.
An examination
18
LITERATURE REVIEW
CHAPTER 2
The EU, with regards to other sanctions and embargoes on other countries, generally follow the U.N. General Assembly Lead. EU sanctions generally
apply to Member State nationals, wherever located, along with ships and airplanes flagged under member state.
The U.S. and various other governments impose trade sanctions and export controls that prohibit Company A from transacting business with various countries (e.g., Cuba, Iran), organisations (e.g., AI Qaeda or named narcotictraffickers), and persons (e.g., the late Osama Bin Laden). The Bureau of Industry and Security (BIS) will stop items subject to the EAR, including items not on the Commerce Control List, from being exported, re-exported or transferred (in-country) when there is an unacceptable risk that such items will be used in, or diverted to, any of the following proliferation activities nuclear end-uses, certain rocket systems and un-manned air vehicle enduses, certain chemical and biological weapons end-uses.
12.5
International Trade - Summary
Without a doubt, the Global market presents numerous prospects for an organisation such as Company A which holds the resources to capitalise on opportunities. However, as identified by reviewing the most basic of export
regulations, controlling the operations required to succeed within the global market are made complex by the simple export and re-export trade laws governing them. It is the aim of the report to review in further detail the
regulations governing international trade and whether investment in trade compliance can lead to improved operations - whereby improved operations offer competitive advantage. In order to satisfy this argument the author But firstly, the regulatory
must examine and review a number of factors.
bodies with their acts which govern the global market where Company A operates must be reviewed.
An examination
19
LITERATURE REVIEW
CHAPTER 2
l2.6
Regulatory Bodies
In order to understand the complexity surrounding international trade as a direct result of the laws set out governing international trade, it is important that the author acknowledges the many acts, regimes, laws and treaties having influence over trade.
Firstly, the export regimes of almost every country are based upon the dictates of several different treaties.
The treaties which dictate the laws set out by the numerous export regimes are noted below;
Wassenaar Arrangement arms/munitions) .
(dual-use items, conventional
Australia Group (chemicals and biological agents).
Nuclear Suppliers Group and Zangger (nuclear material).
Missile
Technology
Control
Regime
(missiles,
Unmanned
Aerial
Vehicles (UAVs), and related technology).
Export Administration Security re-export
Regulations
(EAR) - Bureau
of Industry
and
(BIS), Department
of Commerce - regulates the export and
of dual-use goods, software, and technology.
International
Traffic
in Arms
Regulations
(ITAR)
Directorate
of
Defense Trade Controls (DDTC), Department export and re-export technologies.
of State - regulates the
of defense articles, defense services, and related
20
LITERATURE REVIEW
CHAPTER 2
Country-Specific
Economic & Trade Sanctions
- administered
by the
Office of Foreign Assets Control (OFAC), Department restrict trade, investment, and financial transactions
of the Treasury by U.S. citizens, and, in some
U.S. companies, non-U.S. branches of U.S. companies,
instances, U.S. -owned or controlled subsidiaries with certain countries, entities, and individuals.
Antiboycott administer
Laws - both antiboycott
the Treasury and Commerce
Departments
laws.
These laws apply directly to U.S. -owned to counter Arab
or controlled
subsidiaries
and are designed primarily
country boycotts of Israel and Israeli goods. (Internal, Company A presentation)
Other U.S. agencies involved in export transactions
are:
Census Bureau's collecting export
Office of Foreign trade statistics
Trade Statistics Electronic
charged
with
from
Export Information
(EEl).
U.S. Bureau of Customs and Border Patrol - review exports and assist with enforcement
of U.S. export control laws.
Environmental exportations
Protection
Agency
(EPA)
charged
with
ensuring
provide proper notification
of certain chemical agents.
Nuclear
Regulatory
Commission
(NRC) - issues export
and import
licenses for radioactive materials.
Non-U.S. member
Export Regimes - many countries, countries, Japan,
such as the U.K., EUamong others,
China, Canada, Australia,
have export regimes similar to the United States.
21
LITERATURE REVIEW
CHAPTER 2
Import Transactions - U.S. Customs and Border Protection (CBP) is an agency of the U.S. Department of Homeland Security charged with the management, control, and protection of U.S. borders, collection of import duties, and enforcement of regulations related to international trade, drugs, immigration, and supply chain security.
Non-U.S. Import Regimes - Almost every country has regulations intended to control imports and addressing the collection of import duties.
(Internal,
Company A presentation)
The BIS states;
"A number of executive branch agencies have responsibilities for regulating exports from the United States. The Department of Commerce is responsible for controlling goods and technology, which are capable of being used for commercial purposes but which also present foreign policy or national security concerns. BIS implements export controls for the Department of Commerce through the Export Administration Regulations (EAR). Other federal agencies with a role in export controls include the State Department, which controls arms exports and re-exports, the Department of Energy, which controls exports and re-exports of technology related to the production
of
special nuclear materials and the Department
of
Treasury, which
administers certain embargoes"
It is worth noting, with regards to company A and the
u.s.
EAR, that the
export control regime of the United States is one of the most complex in the
22
LITERATURE REVIEW
CHAPTER 2
world
and
is
regulated
under
several
different
statutes;
The Export Administration
Act
The Arms Export Control Act The Emergency Economic Powers Act The Trading with the Enemy Act
(Journal of Institute and Exports, 2006)
of Management and Administration,
Managing Imports
Pupkin, as cited by Hansen (2004), states that;
"Given the complexity of the US regulatory regime, it is important that U.S. exporters take seriously the enforcement of export control laws. "
(Export Regulations and Compliance, Hansen 2004)
Considering exporter,
this statement
further,
it is clear that, as Company A is a U.S. Due to
the enforcement
of export laws should be taking seriously.
the complex nature of the very simple U.S. export laws as discussed earlier, the role compliance essential. must play in assuring full compliance is difficult, but
In order for the author to further
understand the complexity
of the
compliance processes, import and export compliance laws must be studied in further detail.
r;-----------------I
2.7 Import / Export Compliance Programs
-----------------------
Exports and imports fall under some form of export/import Imbriani (2008) acknowledged
control.
Robert
that export controls can be very general, such countries, or very specific,
as not dealing with denied parties or embargoed
23
LITERATURE REVIEW
CHAPTER 2
such as requirement destination.
for an export
license for
a specific product or
Of interest, The Aberdeen Group presented research during 2007 which found that enhancing trade compliance and global supply chain visibility were two of the key themes dedicated to improving global trade management. The study found that companies had veered away from viewing import and export compliance as merely a way to reduce penalties, but as a tool that could reduce total landed costs by maximising the use of various free trade zones and preferential trade agreements. The study found that improving total landed cost was ranked as the number one initiative around trade compliance (Aberdeen Group, 2005).
Total landed cost was discussed earlier and, with the help of the planned classification analysis to be conducted during the primary research stage of the dissertation, the author hopes to be able to reduce the total landed cost of a number of imported products through duty minimisation. If successful,
firm evidence will exist confirming the role compliance can play in reducing total landed cost, through duty minimisation enabling competitive advantage. Clearly, in order to conduct a classification analysis, investment must be forth coming. With the primary aim of the thesis striving to examine the link between the impact of investment in the trade compliance function and competitive advantage, it should be proved, assuming saving through investment in trade
reduced total compliance
landed cost can be achieved, that will lead to
competitive
advantage.
In line with this theory and the aim of the thesis, the key findings from the latest research into export compliance programmes, conducted by MK Technology (2009), found that;
"Compliance programmes
are now being viewed as a contributor
to profit
as well as a legal obligation.
An examination
24
LITERATURE REVIEW
CHAPTER 2
An effectively managed export company's competitive position.
compliance process can improve a Conversely, a badly designed and
implemented process can lead to lost sales, disappointed customers and damage of a company's reputation as a reliable supplier and in many cases carry heavy fines and other penalties.
Participating companies concluded that export compliance programmes contribute to profitability and enhance the corporate profile.
Many companies closely guard their internal compliance procedures as "Proprietary" with the conviction that they provide a competitive
advantage in the global marketplace. "
(Thales
MK
Technology
ECBP
Report)
Brown
(2006)
with
described prevention,
compliance detection,
programme
as
programme but that
concerned failed to
collaboration
and enforcement research,
mention,
as uncovered
by the
MK Technology
compliance programmes and an enhancement
could be a contributor of corporate image,
to profit, competitive which together,
position as
viewed
proprietary,
enables competitive
advantage.
Brown (2006) stated that;
"It is a system of policies and procedures developed to assure compliance with and conformity to all applicable federal and state laws governing the organisation"
(Journal
of
Health
Care
Compliance,
2006.
Brown)
Research undertaken
by the Aberdeen Group (2005) found that inside small, within two thirds of the companies surveyed,
medium and large companies,
An examination
has upon
firm's competitive
25
UTERATURE REVIEW
CHAPTER 2
improving global trade management was among their top three corporate initiatives. If the reasons for improving global trade management within the
companies surveyed by the Aberdeen Group are in line with the findings uncovered by MK Technologies, (compliance can contribute to profit,
competitive position and enhancement of corporate image) there is good reason to improve global trade management.
In order to improve global trade management, from a compliance stand point, there should be a number of internal programs contributing to the function.
Mckenzie (2006) identified nine key elements that belong in any effective internal export compliance program;
"Statement of corporate compliance commitment from the highest levels of corporation
Identification of resources (internal and external) for export compliance advise and resolving
Questions and disputes about export controls Product/technology/country classification matrix Order entry procedures that include export control analysis Transactions export license analysis against the classification matrix Destination/end use/end use/diversion risk screening Shipping hold until all problems/issues identified and resolved Recordkeeping procedures Procedures for investigating, correcting, and reporting (if applicable) export compliance problems and violations. "
(Mckenzie 2006, Managing Imports and Exports)
Gleason (2006) outlined the following five-point customs compliance best practises programme;
26
LITERATURE REVIEW
CHAPTER 2
1. Take
control
of your
related
parties
- audit,
implement
internal
controls, and train.
2. Watch
the
documents triggers
created
in (e.g.
the
United
States
that
are of
independent origin).
of liability
SED and NAFTA certificate
3. Do
not
make
unnecessary
or
inaccurate
statements
on
other
documents
sent abroad (e.g. tariff classification on invoices, generic
on invoices, valuation or origin with no
inconsistencies basis).
certificates
4. Do not change tariff
classifications
or value just
because you are
requested to by a foreign buyer (related party or not).
5. Strive for global customs consistency,

possible and act to protect yourself.
but recognise when that is not
Imbriani
(2006) states that;
"implementing
a programme
of compliances
best practices
protects
you
against fines and penalties,
it also helps you avoid delays and prevent Other benefits include efficiency and job costs. rr
competitors from gaining a tool to use against you. improved satisfaction, customer satisfaction, and increased
employee
reduced
transactional
(Solomon 2006, managing Imports and Exports)
Imbriani
(2006) presented an 18 step programme programme (EMS);
for developing an export
management
27
LITERATURE REVIEW
CHAPTER 2
Determine all employees involved in export and import functions and their roles
Appoint a compliance administrator Establish training programmes and records
Review export and import control documents and retention Using the regulations, formalise written procedures
Review your companies order entry process from the point of the shipment or importation
Create a flow chart that visually displays the process Develop procedures for the screening of export clients Create 'hold,' 'release' and 'authority' functions
Develop procedures for proper classification of your products under the harmonised tariff
Understand the ECCN classification system and determine classify products being exported
steps to
Access to the regulations and rulings Determine involvement exports and imports of other government agencies with your
Develop procedures to determine imports
proper valuation of your exports and
Country or origin marking requirements Power of attorney procedures requirements handled by your
Export and Import documentation
Identify types of exports, imports, and re-exports company.
Pupkin, as cited by Hansen, believes that;
"A solid and workable export compliance programme is one that is tailored to an individual company's procedures. For a compliance programme to work, it must be practical. "
An examination
into the impact that investment in trade compliance has upon advantage
firm's competitive
28
UTERATURE
REVIEW
CHAPTER
Pupkin states that, as a minimum, an export compliance programme should be inclusive of the following; A person responsible for ensuring export
compliance at the company, possibly a dedicated lawyer from the company's office or general counsel. A statement of corporate compliance signed by the company president and distributed to the staff and, also, the presence of an understandable export compliance manual or handbook that can be used by employees to identify problems and provide preliminary advice concerning compliance.
Ballantine and Clark, as cited by Hansen (2004) advised executives to review their compliance programme for what they described as the following basis elements;
Policy statement issued by senior official
Overall responsibility for the compliance programme
Allocation of particular compliance responsibilities among company officers and employees
Compliance procedures and safeguards
Compliance manual or other documentation informing employees about compliance programme requirements
Training, education and updating regarding legal requirements and compliance programme requirements
29
LITERATURE REVIEW
CHAPTER 2
Processesfor employees to secure compliance guidance and to report suspected violations
Internal compliance audits/reviews
It is argued that the way in which Export Management System (EMS) goals
are accomplished can vary significantly markets in which they operate.
between organisations and the
The actual commodity, technology, or
services provided by a company will affect its programme (lmbriani 2008, Managing Imports and Exports).
Imbriani (2008) states that;
"A company's export compliance programme should be tailored to its specific exports and structures. It would incorporate not only compliance
procedures, but also the company's best business practices for export. When establishing an EMS, a company should aim to implement a basic control plan as quickly as possible, covering all key compliance issues applicable to its exports. A continual improvement process should then be put in place to expand and improve the procedures on an ongoing basis."
(Imbriani 2008, Managing Imports and Exports)
It
is worth
noting that
Williams (2004)
states that
as a compliance
programme matures, each element must be reviewed to ensure processes, procedures, and structure have evolved appropriately (Journal of Health Care Compliance, Williams, 2004).
The importance
is highlighted
during
investigations
into violations
of
compliance whereby the existence of a functioning compliance programme
30
LITERATURE REVIEW
CHAPTER 2
can be a mitigating Compliance (Imbriani
factor.
Export Management titles for
Systems (EMS) and Export such written and programmes. Exports).
Procedures 2008,
are common Managing
Imports
Clearly,
as has
been
uncovered
during
the
review
of
import
export
compliance Research compliance reduction profitability,
programmes, uncovered
there is a vast amount within the global
of literature market,
on the topic. now view A
that,
many
as a tool offering in total were landed all found
something
more than
basic prevention. image,
costs,
enhanced
corporate to the
increased of the
to be linked
closely
activities
compliance function. should entail
The various theories on what a compliance programme and will now be compared, during the
have been reviewed
primary research stage of this thesis, to the functioning in place within Company A. However, prior to
programme the
which is primary
disclosing
research on this topic, it is important systems and technologies
to review the present day information offering a backbone to the
which are available,
compliance programme
and overall function
2.8
Information Systems and Technologies
--~
Firstly, as stated by Brynjofsson Salam (2008) the relationship advantage, and Hitt (1998) and as cited by Vannoy and have long sought to understand systems, co~petitive
academics and practitioners between investments
in information
and firm performance.
Although dating from 1985, Rackoff et al systems had performed support systems in
(1985) believed the principal role that information the past was one of operational more recently companies competitive and management
but argued that strategically to
were using information advantage (Information
reap significant Advantage:
Systems For Competitive As
Implementation
of a Planning Process, Rackoff et ai, 1985).
stated, this theory dates from 1985 but the author feels that the statement
31
UTERATURE
REVIEW
CHAPTER 2
holds truth today as the information systems capabilities from 1985 pale in comparison to current information systems.
Again, the aim of this report is to study whether a strong compliance programme, through increased investment in trade compliance, can prevent violations and offer a competitive lead. As a direct result of what Porter
(1985) described as the information revolution, the author will examine whether advancements in information technologies, if utilised proactively, can lead to competitive advantage.
The Aberdeen Group (2005) argued that a $1 billion company could free $10 million to $40 million in cash by improving basic trade processes as a direct result of improvement in information systems. Without doubt, a saving such as this offers a competitive gain.
The research found that the number one pressure compelling firms to improve global trade processes was the avoidance of customs and other regulatory fines and penalties (Aberdeen Group, The CFO'sAgenda for Global Trade Benchmark Report, 2005).
Porter
(1985)
believed that
the
information
revolution
has affected
competition
in three vital ways;
It changes industry structure and, in so doing, alters the rules of competition;
It creates competitive advantage by giving companies new ways to outperform their rivals;
It spawns whole new businesses, often from within a company's existing operations.
32
LITERATURE REVIEW
CHAPTER 2
(How Competition Gives You Competitive Advantage, Porter and Millar, 1985)
With
regards to the
trade
compliance function,
assuming that
trade
compliance can provide more than basic prevention, it could definitely be argued that investment in trade compliance, through utilising emerging
technologies, would provide opportunity to outperform the competition.
Damianides (2005), Journal, states that;
as referenced in the Information
Systems Control
"One of the main concepts incorporated into IT governance is the need to align IT with the overall business strategy. Organisations should take
advantage of emerging technologies to drive and execute the business strategy"
(Damianides, Information systems Management, 2005)
Advancements in the use of emerging technologies within Company A will be discussed during the primary research section of the dissertation. to the research gained interviewing key employees of According
Company A,
particularly the Trade Compliance Manager, the Apple I phone was being considered to host various trade compliance applications. Interestingly, the
Trade Compliance Manager, Company A, when asked about his thoughts on emerging technologies and whether they could enhance the trade compliance function, believed they truly could and as an example of his forward thinking, suggested that the organisations IT group work with the Apple I phone (the organisations choice of business phone) to create a trade compliance
application which would allow denied party screening, dual-use / ECCN classification lookup and a harmonised classification search tool. will be discussed in more detail during the primary research stage. This topic
33
LITERATURE REVIEW
CHAPTER 2
According to Fox and Noble (2003) and again, as cited by Damianides (2005), building a strong internal control programme within IT can help to gain competitive advantage through more efficient operations (Damianides, Information systems Management, 2005).
Again, referencing the Apple I phone idea, as suggested above, it is clear that, if possible, it would create efficiencies in the denied party screening operation, the ECCN/ dual use look up operation and also the HTC search operation - all of which could be conducted while travelling, out of the office, out of hours etc, adding, as Fox and Noble (2003) argued, competitive advantage to an organisation. These are clearly day to day operational
activities and although improved efficiencies in each would be beneficial, collectively they will not generate the competitive advantage this thesis aims to capture. Coupled with further advancements in technology, should an
organisation be willing to invest, there is definitely an argument for investing in emerging technology and thus creating a competitive improvement.
L2.9
Third Party Service prOv_i_d_e_rs
It is important to study the role that third party service providers have in assuring compliance.
The BIS state that;
"Primary responsibility for compliance with the EAR generally falls on the "principal parties in interest" in a transaction, who are usually the U.S. seller and the foreign buyer. However, freight forwarders or other agents acting on behalf of the principal parties are responsible for their actions, including the representations they make by signing an export declaration or other export control document. To help avoid liability in an export transaction, agents and exporters must decide whether any aspect of the transaction raises red flags,
34
An examination
LITERATURE REVIEW
CHAPTER 2
inquire about those red flags, and ensure that suspicious circumstances are not ignored. Both the agent and the principal party are responsible for the accuracy of each entry made on an export document. Good faith reliance on information provided by the exporter may excuse an agent's actions in some cases, but the careless use of pre-printed "No License Required" forms or unsupported entries can get an agent into trouble."
(http://www.bis.doc.qov/complianceandenforcement/dontletthishappentoyou 2007 sm.pdf)
Reynolds regulatory
(2009)
suggests
that,
as a result with
of increased
scrutiny and
from
agencies, to
combined
the numerous rules business more from and
regulatory globally service
requirements operating providers
conduct
international expect
transactions, third freight party
organisations such as
should customs
brokers
forwarders.
"Service providers should be more things to more people especially in the area of compliance, education and training and informed compliance. International trade participants, who are preparing service provider reviews or selection criteria need to incorporate the concept of increased service offerings from service providers to match the increased scrutiny that regulatory agencies are placing on the trade community"
(Reynolds (2009),
Managing Imports and Exports)
Company A argued that;
"A review of freight forwarder export procedures to ensure compliance was essential"
(Trade Compliance Manager, Company A)
35
LITERATURE REVIEW
CHAPTER 2
Raia (2009)
states that;
"Regardless of whether it's an import or export, ensure your service provider calls you with any question as to the shipment and does not make any entry or export decisions on your behalf - A compliant importer/exporter chooses compliant service providers"
(Raia 2009, Managing Imports
and Exports)
With regards to customs brokers and logistics service providers,
Company A
should have controls in place to monitor the work that the third parties do on their behalf, as the acts performed by third parties concerning the
organisations
goods are legally the acts of the principal.
2.10 Violations/Settlements
l
there are various regulatory markets.
As detailed
in section 2.6 of this dissertation,
bodies governing trade within international
In recent years, FCPA violations
have increased steadily.
Since 2002, there involving more
has been over USD 1.2 billion in settlements than 30 countries (Conroy and Wong 2009).
and penalties
The FCPA prohibits the bribery of foreign official and requires that a company retain accurate books and records.
FCPA regulations
are enforced
by the Securities of Justice (DOJ).
and Exchange Commission
(SEC) and the U.S. Department
36
LITERATURE
REVIEW
CHAPTER
Conroy through
and Wong (2009) to 2008.
reviewed
FCPA settlement
statistics
from
2002 USD
The 10 largest
regulatory
settlements
ranged from
16m to USD 800m.
As identified
by Conroy and Wong (2009) the number of settlements
per year
had generally increased.
As referenced stated that
by Conroy and Wong (2009), had substantially
during
March, 2008, the DOJ its focus on FCPA
the department
increased
violations.
"Following the trend of settlements recent statements
over the past five years, and considering going
made by the DOJ, the total number of settlements
forward may continue to increase"
(http://www.nera.com/extImage/Pub
FCPA Settlements
0109
FinaI2.pdf)
There are a number of reasons for the increase in US export enforcements which have resulted Assistant in increased Secretary violations and severity Enforcement of the penalties. (2007) states the
Jackson, following;
For Export
"The attacks of September 11 were deadlier than Pearl Harbor. World events since then demonstrate that the United States and its allies continue to face
the threat of terrorist attacks. In August 2006, a plot to use a combination of chemicals and explosives on multiple transatlantic flights from the United
Kingdom was disrupted by U.S. and British authorities. osmium tetroxide, destructive fortunate. targeted has a legitimate
One of the chemicals,
use in scientific research, but is highly we are not always so terrorist bombings
to the eyes, lungs and skin. Tragically, On July
7, 2005,
a series
of coordinated
system, killing
London's public
transportation
over 50 innocent
people and injuring
over 700. It was the deadliest attack on London since
An examination
37
LITERATURE REVIEW
CHAPTER 2
World War II.
These and other events remind us that we must remain
vigilant in the ongoing war against terror. Many products exported from the United States are classified as dual-use. They are intended to be used for commercial purposes, but can also be used by terrorists, or in weapons of mass destruction or conventional weaponry. The U.S. export control laws help foster legitimate trade in dual-use items, while simultaneously keeping our most sensitive goods and technologies away from those who seek to cause us harm. Achieving both of these objectives is crucial. Our economy depends on the development of high technology and legitimate trade in dualuse items. President Bush has said that, "The role of our government is to create an environment in which the entrepreneur can flourish, in which minds can expand, in which technologies can reach new frontiers. " That is especially true when it comes to doing business in the global economy, which involves exports. To remain competitive in today's global business environment, we must continue to open more global business markets and maintain a business environment that encourages entrepreneurship and innovation. Yet, in today's complex world, our innovation has become a tool that our enemies seek to use against us. As the President has stated, "The same technology and global openness that have transformed our lives also threaten our lives. The same innovations that make it easier to build cars and computers make it easier to build weapons of mass destruction." As we engage in legitimate trade, we must not allow that to happen. Denying weapons of mass destruction to countries of concern and their terrorist allies is a key
component of the 2006 National Security Strategy. By understanding and complying with our U.S. dual use export control system, you playa vital role in protecting our national security. This booklet is designed to help you do so. Herein are examples of the serious consequences of violating our export regulations. Each chapter contains actual closed criminal and administrative cases representing violations of particular controls set forth in the Export Administration Regulations (EAR). All parties involved in export transactions have responsibilities under the EAR, including exporters, freight forwarders, carriers and consignees. Serious sanctions are imposed on violators,
An examination
38
LITERATURE REVIEW
CHAPTER 2
including prison terms, substantial fines, and denials of export privileges. Such violations can also damage the reputations of companies and their executives.
The Bureau of Industry and Security (BIS) will continue working to keep the most sensitive goods out of the most dangerous hands. We will vigorously pursue enforcement actions against those who violate U.S. export and antiboycott laws. Our national security demands nothing less. But industry compliance is the first and best line of defense in protecting our national security. Indeed, by forging a partnership in compliance, government and industry can protect our national security and promote prosperity. welcome you as our partners in that effort. " We
The
penalties
for
violations
of
international Chapter 1.
trade
laws are
severe,
as
demonstrated
in the introduction,
Referenced below is a short list of export violations penalties.
and their corresponding resulting from in
The list gives precedent to the severe penalties A larger list of U.S. export violations
non-compliance. Appendix A.
can be found
2009 FMC Technologies, Inc. - $610,000 settlement related to 78 unlicensed exports of butterfly and check valves classified under ECCN2B350 to various countries.
2009 DHL - $9.4MM joint settlement with BIS and OFACregarding allegations that DHL unlawfully aided and abetted the illegal exportation of goods into Syria, Iran, and Sudan and failed to comply with record keeping
requirements of the EARand OFACregulations.
39
LITERATURE REVIEW
CHAPTER 2
2009 BJ Services - $800,000 voluntary self-disclosure
civil penalty
for 72 violations
of the EAR -
regarding
exports of valves classified under ECCN
2B350 to 11 countries without export licenses
2005 BJ Services - $142,450 destinations
settlement
for exporting
chemicals to various
without the required export licenses and with knowledge that a of SEDs and in AES submittals.
violation would occur; made false statements
2003 OTS Refining Equipment settlement oil-field and industrial of export privileges; equipment
- exports and attempted
exports of
to Iran in 1997 and 1998 - 20-year denial sentenced to 51 months in prison
OTS President
(embargo violation)
2003 Omega Engineering
settlement
- exports of laboratory and administrative
equipment fines;
to
Pakistan in 1997 - $500,000
in criminal
Vice-
President sentenced to 10 months in prison (licensing violation)
2003 Honevwell
settlement
- unlicensed
exports
of hydrogen
fluoride
to
Mexico from 2001 to 2002 - $36,000 fine.
2005 Parker Hannifin settlement
- unlicensed exports of fluid control valves
to Taiwan and China - $185,000 fine.

(Company A, Presentation)
In many of these cases, there
would be an argument
that
investment
in
trade compliance could have prevented the violation from occurring. doubt, investing of the violation in trade compliance function occurring. A
Without
would have minimised the risk internal export / import
functioning
management
control program,
IT systems capable of managing global trade would have minimised
and education of the personnel within the organisation
An examination
40
LITERATURE
REVIEW
CHAPTER
risk;
however,
all of this would require investment. investment in trade compliance
The thesis aimed to competitive
study whether advantage.
could generate
If it is argued that trade compliance, over trade non compliance, advantage through corporate enhancement, it can be
generates competitive
argued, in the simplest of terms that investment to competitive advantage.
in trade compliance will lead
Export violations, such as above, are published in the Wall Street Journal and made aware to investors through corporate notifications organisations share price is immediately influenced to the market. market An is
when the
informed of the violation. exporting
DHL, as above, were fined $9.4M for unlawfully In addition to the settlement,
goods into Syria, Iran, and Sudan.
DHL agreed to improve its compliance program, and hire an outside auditor to mon itor com pliance (http://www.joc.com/government-regu lation/dh 1-
pays-94-million-export-violation). The share price of DHL, on news of the violation, 15.93 USD to a low of 6.64 USD. dropped drastically, the share from price of the given
Post settlement,
recovered, penalty
which suggests the market viewed the potential the violation as more severe than the
severity penalty
for
(http://ir2.flife.de/data/dpwn/dpwn 415&ir charttype=LINE&ir gd1=0&ir
dhl kujchart
e.php?width=600&height= got id bench2=0 tage=1095
got id bench1=0&ir ind=&ir
&ir got id bench3=0&ir
got id bench4=0&ir exc id=258&ir
ind2=&ir
&ir sec id= 1000253911&ir
name).
The below table has been adapted from research undertaking Wong (2009) world, violation and published in their article,
by Conroy and its a small
FCPA settlements,
The figures in the table detail the negative impact which news of a can have on an organisations share price. It also details the
settlement figure.
41
LITERATURE REVIEW
CHAPTER 2
Figure 1 Market-Adjusted Announcements Price Reactions to FCPA-Related News and
Company
Date of First News of Potential FCPA Action
MarketAdjusted Price Reaction 1 -44.95%
MarketAdjusted Market Cap Impact ($M) (343.17)
Total Regulatory Settlement ($M) 0.50
Syncor Internationa I Corporation Willbros Group, Inc Immucor, Invision Technologies, Inc Schnitzer Industries, Siemens Aktiengesellschaft BJ Services Baker Hughes, Inc Statoil, ASA Chevron Corporation Inc Steel Inc
6/11/02
16/5/05 2/11/04 30/7/04
-39.04% -19.21% -14.37%
(133.95) (176.38) (121.80)
32.30 0 1.12
1/12/04
-12.71%
(145.45)
15.23
28/10/05
0.18%
8.36
800
10/3/04 13/6/03 10/9/03 11/9/03
-5.01% -3.90% -2.59% -0.45%
(350.35) (461.55) (529.84) (349.22)
0 44.08 21 55
(http://www.nera.com/extlmage/Pub
FCPA Settlements
0109
FinaI2.pdf)
As detailed above, the news of the potential the share price of Syncor International with the share price dropping clearly, -44.95%
FCPA violation severely affected and Willbros Group, Inc respectively. of a publicly Baker Quite traded Hughes
Corporation
and -39.04% one driver
as the share price is the number it will impact current
company,
and future
investment.
witnessed a relatively market capitalisation.
small percentage Interestingly,
drop but still lost $461.55M from its suffered the

42
Siemens Aktiengesellschaft
UTERATURE
REVIEW
CHAPTER 2
highest ever FCPA settlement news of the potential 0.18% increase.
which totalled
$800M and on the date of the stable, at
FCPA violation,
the share price remained
Conroy and Wong (2009) believed that;
"The table indicates that in some instances the implication of an alleged FCPA violation is considered serious by the market, over and above what one fines, or penalties
might expect given the magnitude
of any disgorgements,
paid. For example, when Syncor International public that it was investigating violated adjusted
Corporation announced to the in Asia that may have
suspicious payments
the FCPA, its stock price plummeted basis, implying a loss of $343
almost 45% on a marketin market capitalization, with the
million
despite the relative small amount paid in its eventual settlement SEC and the DOJ"
(http://www.nera.com/extImage/Pub
FCPA Settlements
0109
FinaI2.pdf)
An examination
has upon
firm's competitive
43
RESEARCH METHODOLOGY
CHAPTER 3
CHAPTER 3 - RESEARCH METHODOLOGY
This chapter will focus on the subject of research methodology and aims to discuss the research methods surrounding the aims and objectives of the thesis. used. Further to this, why and how the chosen research methods were Justification and rejection for the most appropriate approach of Lastly, to conclude, the chapter will
methodology will also be discussed.
assess certain limitations of the research.
r-3~i-------P~ospective Techniques
~
of Investigation
The potential research methods available will be identified within this section, which the author feels could be used for the purpose of the thesis.
3.1.1
Secondary Research
Malhorta (1993) explains secondary research involves the gathering of data for a purpose other than just the particular problem at hand. It allows the expansion of opinion when reading about the subject as opposed to one single definitive answer. As explained below secondary research is based...
"with someone else's rationale and assumptions about what is important. That is, if they carry the possible risk of constraining your freedom to interpret findings because of the authors emphasis or selectivity. "
(Jankowicz 2005, p.60)
Secondary research is valuable and reliable when used in certain perspective to support and confirm an argument, links theoretical assumptions to specific circumstances and adds critical assessments to one's work (Cameron 1999).
CHAPTER 3
With secondary research being easily accessible, relatively quick to collect and inexpensive it makes this type of research very beneficial to any researcher. Malhorta (1993) states it further helps to recognise a problem,
enhance definition of a problem, build a method to solving the problem, formulate an suitable research design, answer specific questions and
examine, understand and evaluate primary data to then prove objectives more insightfully.
The main types of secondary information used by the author within this thesis came from resources available in the Georgina Scott Sutherland library at The Robert Gordon University. internet from research companies The journals obtained were from the including Aberdeen Group and MK
Technology.
Further to this journals were obtained from the The Robert
Gordon University's Athens database which comprises; Mintel Reports, FT Intelligence, Keynote, Business Source Premier and Emerald. The author
was also lucky enough to take advantage of the internal presentations submitted within Company A on the subject of compliance.
Although the author understands that while journals
provide up-to-date
opinions of business leaders and journalists, the support of textbooks will provide the thesis with academic backbone. However, early data gathering would imply that detailed secondary research in the form of academic textbooks, directly linked to the aims and objectives of this report, will be limited and therefore the need for detailed primary research is essential.
Careful investigation was allowed with the huge collection of secondary information, however time was needed to ensure only relevant data was selected on the subject of the thesis. The author was then able to develop on academic theory to provide a basis for evaluation and discussion, supported by each kind of secondary research gathered.
45
CHAPTER 3
When satisfied with concluding the search of secondary research, the author was then readily prepared to build a basis for the start of primary research.
"Examination
of available secondary data is a prerequisite
to the collection of
primary data. "
(Malhorta 1993, p.118)
3.1.2
Primary Research
A simple definition of primary research is given below;
"primary data comprise information
collected or generated by the researcher at hand. "
for the purpose of the project immediately
(Weiers 1988, p.64)
Ultimately collection of new data has been gathered for the topic of this thesis. This type of research can be time consuming in comparison to The primary research
secondary research, proving more challenging.
gathered coupled with the key findings within the literature review will provide discussion for the data analysis chapter.
Primary research falls into two categories; Quantitative techniques.
and Qualitative
3.1.2.1
Quantitative vs. Qualitative Research Methods
Quantitative is typically expressed in numerical form incorporating facts and figures that can be counted and measured.
46
CHAPTER 3
"A research methodology
which seeks to quantify
the data and, typically,
applies some form of statistical analysis. "
(Malhorta 1993)
Qualitative research is, as described by Dibb et al (1997), research that deals with information believed to be too complex to quantify, for example opinions and value verdicts. As opposed to quantitative research, qualitative focuses on understanding rather than measurement.
"Research which blends detailed understanding open-ended questioning often very revealing.
rr
with quantitative
measures
by providing
a more
of customer demand. and probing.
Qualitative
techniques involve
The data is rich, human, subtle, and
(McDaniel Marketing Research Essentials, 1995)
Individual advantages and disadvantages can be drawn from each type of primary research type. For example, quantitative research generalises
results from a large sample to the population of interest, it is structured, statistical and the outcome easily recommends a final course of action. Whereas qualitative comes from a smaller sample of unrepresentative cases, it is unstructured, non-statistical and the outcome helps develop an
understanding. appropriately objectives.
Therefore the author must best employ each method for the types of answers required to prove the thesis
Rationale for Choice of Research Method
____ I
As the author is an employee of Company A, a vast amount of data, both qualitative and quantitative is readily available. When using quantitative
47
CHAPTER 3
data,
the
author
collected
numerical
information
mainly
being
HTC
classification data which in turn allowed the author to reference the levels of duty attached to each classification which then allowed review into the volume and cost of products, ultimately looking for savings. This information is helpful and easy to conclude answers on the thesis topic, as the data is structured and statistical.
Further to this key personnel within Company A will be interviewed with the aim of generating rich amounts of qualitative data which will include the employees of the following departments; compliance, legal counsel, research and development brokers. (technicians), country specific managers, agents and
From the entire collection of research, a best practice can then be
recommended to the countries being affected by classification variances, and with help of information technologies available to Company A, ideas will be put forward for the implementation system. of a globally reaching classification
Several techniques can be used when conducting interviews, which will now be discussed.
3.2.1
Probing
To help acquire significant answers and concealed issues, probing is a technique which allows the author to push for opinions that are specifically required on the thesis subject.
"A motivational
technique
used
when
asking
questions
to
induce
the
respondents to enlarge on, clarity, or explain their answers. "
(Malhorta and Birks, 2000)
An examination
48
CHAPTER 3
For example, questions such as, "Can you explain why you say this?" "Is there a specific reason why this is the case?" "Would you like to add anything to your answer?"
Whilst the interviewer must achieve responses on the matters important to their aims, the respondent must be given the opportunity to answer the questions in full, allowing them to say all that they have to say on each question. The interviewer, using the 'probing' technique, must use it in a in a respondents answer, giving a more
way of seeing the potential illustrative reply.
3.2.2
Steering
Steering can ultimately dictate the direction of conversation, providing a guide through the question asked and comments made by the respondents (Jankowizc 2005).
In order for the respondent to answer in the correct context, steering is an intelligent skill to prompt and direct answers wanted.
"The exact way which you phrase your question can have a significant
on the answers you are given by the interviewee.
H
effect
(Cameron 1999, p.265).
3.2.3
Close-ended Questions
Quantitative research mainly uses the technique of close-ended questions giving short and to the point answers, in the manner of 'yes' or 'no.' are instances were qualitative research can also utilise There
close-ended
questions. However, for the subject of this thesis, the author did not feel this
49
CHAPTER 3
technique was appropriate in trying to achieve the aim and objectives, therefore were avoided where possible.
Malhorta and Birks (2000, p.326);
"Questions that pre-specify format. "
the set of response alternatives
and the response
3.2.4
Open-ended Questions
Open-ended questions leave respondents open to express replies in their own words, as stated by Kent (1993). They facilitate in respondents being able to convey their own casual attitude and beliefs towards the questions being asked. The researcher benefits richer insights as Malhorta and Birks (2000) suggests a lot less influence is given to the type of response given by the respondent, with non-biased questions allowing for a non-structured answer, that close-ended questions give.
13.3
Interviews
There are two characteristics of interviews, as described by Tull and Hawkins (1990), which are structured and unstructured. For the purpose of meeting
the central aim of the thesis, unstructured interviews were appropriate. However, during investigation into interview techniques the author Smith
discovered that Smith (1972) referenced semi-structured interviews. (1972) stated;
"an interview guide is usually provided in order that information about the same topics can be obtained from all respondents but the order in which the information is elicited and the extent of the probing and exploration depends on the interviewer.
If
50
CHAPTER 3
(Smith 1972, p.120).
Taking the view of Smith (1972) into account it could be argued that the interviews undertaken with the key personnel within Company A were semistru ctu red.
3.4
Limitations of Research
Compliance is viewed as proprietary
With regards to primary data, as compliance operations are viewed as proprietary, it was near impossible for the author, taking account of the aim of the thesis, to gather the data necessary to achieve the aim. As a result, the primary data available was limited to Company A. Secondary literature was also limited as trade compliance is a relatively new subject with few studies focussed on investment and competitive advantage. It would have
been beneficial to compare Company A with a peer but, due to the sensitive nature of the topic, this was not possible.
Time Restraints
Each area covered during the literature review could have been studied in greater detail had there been more time. Essentially, as the subject of trade
compliance is fluid, each of the topics studied during this project could have potentially had their own in-depth study and analysis. With regards to the
classification analysis, the author only managed to analyse the data covering two countries due to the time and effort taken to retrieve the available data. With more time, the author would have achieved greater depth to the results.
51
CHAPTER 3
Location Restraint
As the Author was based in Aberdeen and the Company A's compliance group were based in the US, face to face interviews were not possible. However, telephone interviews sufficed. The data gathering for the classification
analysis would have been made simpler had the author direct access to the Australian and Kazakhstan facilities but, with the help of email
communications and shared systems, it was possible to conduct the analysis.
Cost Restraints
Linked with location constraints, cost constraints prohibited direct access to the locations under review. interviews impossible. Costs restraints also made face to face
13.5
Hi
Hypotheses
The author designed the hypotheses as follows;
Increased investment competitive advantage.
in the field of compliance will lead to
H2
Information systems can facilitate an internal globally reaching classification programme.
H3
In certain cases, a products total landed cost will be reduced as a result of greater efforts in classification.
An examination
has upon
firm's competitive
52
DATA ANALYSIS
CHAPTER 4
CHAPTER 4 - DATA ANALYSIS
Within this chapter the author will take key findings from secondary research from the literature review and linked with the primary research (both
quantitative related
and qualitative)
will provide discussion for the reason of proving Important outcomes and analysis will
objectives
and hypotheses.
enable the author to then provide suitable conclusions.
14.1
Company A - Overview
During interviews
with the key personnel,
Company A, it was important
to
gather their personal thoughts function could offer Company A.
on what they believed the trade compliance
The main points are noted below;
Avoidance of penalties and seizures Customer's assurance of product delivery Customer assurance of compliance
It is clear from these responses that Company A believe trade compliance can offer customers' competitive assurance advantage. of product Avoidance delivery and edge. of penalties customers' and seizures, assurance of
compliance definitely
generate a competitive
Company A argued that there was a potential government only suspects a violation
for severe penalties, or might
even if
has occurred
occur (fines
and/or imprisonment);
53
DATA ANALYSIS
CHAPTER 4
"There would be disruption
to business during
investigation,
loss of
reputation, loss of government contracts, loss of export privileges and most importantly, an impact on stock value based on corporate governance. "
Again, as discovered and discussed during the secondary research, non compliance and a negative share price movement are entwined. positive that Company A are aware of this fact. It is a
Also, the study conducted
by MK Technologies found that efforts in compliance could enhance corporate image, so, when the Trade Compliance Manager speaks of a loss of reputation, it is in-line with the MK Technology study. something which many market As reputation is
leaders rely on, a compliance program In line with
offering protection should be a sought after as an internal tool. this thought, the Trade Compliance Manager stated the following;
"Our customers are assured of product delivery through our commitment to compliance. "
This statement provided further evidence that the work of the compliance department within Company A assures the customer of product delivery through a commitment to compliance. As touched on during the introduction to the thesis - with huge efforts and focus on supply chain effectiveness, the importance of a smooth, unproblematic and reliable supply chain and the role compliance can play in assuring this should not be understated. First hand,
primary evidence now exists supporting the role of compliance in assuring an effective supply chain, and, clearly, an effective supply chain offers
competitive advantage.
An examination
54
DATA ANALYSIS
CHAPTER 4
During the literature review, the author discovered that the most basic US export regulations were extremely complex and there were numerous
regimes governing global trade. A, stated;
The Trade Compliance Manager, Company
"Creation of Company A's trade compliance group with responsibility for overseeing the Company's trade compliance program was to insure business unit compliance with the export regimes of all countries in which Company A operates or with which the company has business interaction. This trade
compliance program includes training and site assessment methodology for Company A business units"
In order to be fully compliant with the various and varying trade laws, from a purely protective preventative stand point, (which, however, contributes to competitive advantage, through, as previously stated by the Compliance Manager, customer assurance of product delivery) the investment Company A makes advantage. in its compliance program does contribute to competitive
With regards to controlled, dual-use technologies, as discussed earlier, products with either a US ECCN Classification number, a UK Product Rating number or an EU Control Number, the compliance manager within Company A believed;
"There is a competitive strength in answering our customers concerns affirmatively, that we will not contaminate their supply chain with controlled goods. I am curious how our peers approach this. Our strategy is to keep controlled goods out of the Company A inventory list. For example, our centrifuges on the ES side are not controlled at this time, and we are doing
An examination
55
DATA ANALYSIS
CHAPTER 4
our best to keep them this way. In the chemistry, we deliberately use "DEA" instead of TEAsimply to keep our goods clear of controls"
(Compliance
Manager, Company A)
From
this
response,
it
is clear
that thought
Company
A are
qivmq
the
trade with
compliance respect.
role some calculated
and clearly view the function technologies from their
The decision to exclude controlled of a commitment advantage
supply
chain assures the customer generates researched minimises controlled the competitive
to compliance, on above
which not only but also, as
touched
during the violations the risk of potential technologies.
section of the literature export violations through
review,
completely of
export / import
Although the risk
excluding of
controlled
technologies with the
from the supply chain minimises regimes governing controlled
non-compliance
technologies, following high;
the Trade Compliance
Manager,
Company
A, argued that the risks were still
new changes highlighted
that the export compliance
"Dramatic increases in number and magnitude of administrative cases by the 815 and DOTe. (focus on freight forwarders).
Increasingly aggressive criminal enforcement/theories of prosecution.
New regulations
on exports
to
China which control previously
uncontrolled items if they are destined for a military end use.
Lifting of U.S. sanctions on Libya in 2004 and removal of AT designation on August 31, 2006. New sanctions against Libya 2011.
56
DATA ANALYSIS
CHAPTER 4
Significant new sanctions imposed on Syria (May 2004). Accountability Act. rr
Syria
It is clear that investment in trade compliance minimises the risk of non compliance and compliance creates competitive advantage through
customer's assurance of product delivery and customer's assurance of compliance, which was highlighted within both the primary and secondary research. Within Company A, to the extent of generating a compliance program, it is evident that investment to do so had taken place, which, as stated by the Compliance Manager, gives Company A a competitive edge. However, it is difficult to quantify a competitive advantage through customer satisfaction as a result of compliance. Company A have had no export
violations which could be quantified as a competitive advantage over their peers. However, the author decided, in order to quantify competitive
advantage within Company A for the purposes of this examination, it was important to conduct a classification analysis which would hope to find reduction in total landed cost through duty minimisation.
14.2
L
Classification analysis
.J
sets the rate of duty. Incorrect
Classification and country
of orrqm
classification affects duty rates, value added tax rates, origin, labelling, permit requirements, license requirements, and export controls (Customs, Kerr 2009).
In order to understand the importance of classification compliance, it should be recognised that where goods have been incorrectly classified, it can be
An examination
57
DATA ANALYSIS
CHAPTER 4
possible to reclaim duties going back three years. On the same hand, it is possible for customs authorities to also claim back duties.
Holly
(2004)
states
that;
"Many organisations
are unaware
that the classification
of their imported to freight agents,
goods can be so important. acting on their behalf, goods are. responsible freight It
They leave the classification
who may not be fully aware of what the imported to bear in mind classification that the importer is legally
is important
for the correct tariff
of their goods, and not the
agent.
In a worse case situation,
customs can severely penalise duties"
companies
underpaying
(Store
Manager:
Import
Duty,
Holly
2004)
Compliance in this area is of vital importance as U.S. customs and border protection's office do conduct yearly 'focussed assessments'. A focus
assessment (FA) is the largest audit conducted by customs and will involve a review of customs tariff codes. FA's can and often do result in large revenue recoveries for customs (The journal of Commerce, Pisani).
Although reducing total landed costs and increasing competitive advantage is a common theme this covered by various report researchers, will academics the and
organisations,
section of the
investigate
use of
Harmonised Tariff codes (HTS) within Company A as a means of reducing total landed cost through duty minimisation.
As previously stated Company A has locations in more than 75 countries and employs approximately 13,000 persons in over 400 service locations around the world. The trade compliance function must ensure compliance in each of the 400 service locations.
As discussed, a big part of trade compliance is ensuring HTC harmonisation.
An examination
58
DATA ANALYSIS
CHAPTER 4
In order to tackle global HTC harmonisation, investment must be made.
In an operational reality, as a result of lower oil and gas prices, many of the world's largest oil and gas producers are cutting costs and actively searching for cost reductions. Service companies such as Company A have found
2009/2010 to be significantly more challenging than previous years with revenues and profits down. contracts and re-tendering Many operators are now reviewing existing expired deals. As the industry remains In times
competitive, aggressive tendering has become common practice.
such as these it has never been as important to have ways and means of gaining competitive advantage.
Harmonised tariff codes or commodity codes as they are also referred to, drive duty rates and make up a substantial part of the products landed cost wherever the material there is imported. Although the codes are labelled
"harmonized," differences
are, as the author from country
has uncovered, wide ranging to country.
The negative impacts associated with inaccurate trade documentation are increased duty payments, inaccurate declarations, discrepant letters of credit charges, and expediting costs due to customs clearance delays.
From a U.S. stand point, the author has gathered the codes Company A have been using throughout Kazakhstan and Australia. The codes have been
gathered for products which are important to the organisation by dollar and by volume and they will then be compared to those used for U.S. imports. The codes used for U.S. imports have been verified by the company's trained scientists and chemists.
The quantitative data will be carefully analysed with the hope that variances in codes can be identified and opportunities to argue for better codes at destination, based on the codes already in use within the U.S., implemented.
59
DATA ANALYSIS
CHAPTER 4
Where high dollar savings possibilities are found, the changes will be discussed with the significant stakeholders. As a direct result of the
qualitative data gathered, the information systems available to the company will be examined, and plausible strategies will be recommended to
management with the hope that the systems can incorporate a fully functional, globally reaching classification programme.
The codes which Company A have used for U.S. imports have been analysed with the companies specialist scientists, and there is a consensus that the codes being used are correct and also to advantage. Importantly, the codes are accepted by U.S. customs. It is apparent, within Company A, that there is a need for global control concerning classification. As an employee of
Company A, based in the U.K. and responsible for exporting materials to a vast amount of countries, the author can confirm that no such controls currently exist.
Interestingly,
Imbriani, along with Mckenzie and Gleson (2008),
suggest
that developing procedures for the proper classification of products be part of an export management programme. Qualitative research will attempt to
uncover whether there are procedures in place to correctly classify the exported materials. It should be highlighted at this point that Company A
and its employees are not classifying, for example, woollen jumpers and cotton shirts, they are, in fact, classifying complex manufactured drilling solutions containing many components. To illustrate the ambiguity
commonly faced with customs tariffs, Holly (2004) provides an excellent example of a case whereby 10% of the total landed costs were saved through a reduction in duty charges.
It involved an organisation operating within the furniture industry. The code for (cushions - parts of furniture) attracts a 2.7% duty rate whereas the tariff code for (cut and sewn fabric cushion) attracts a 12% duty rate. It is clear that while operating within a global market, taking into consideration
An examination into the impact that investment in trade compliance has upon a firm's competitive advantage I
60
DATA ANALYSIS
CHAPTER 4
language
and cultural
differences;
it would
be easy to use either
of the
classifications. successfully furniture
In this case, the organisation
in question was able to argue
with customs that the cushions should be classified as parts of duty, Holly,
and charged a 2.7% duty rate (Store manager, Import
2004).
The central
aim of this thesis, evidence resulting is forthcoming. in that
if successful, links
will provide
the reader with with
unquestionable compliance, investment
information competitive
management advantage,
notable
assuming
Although, consultants
as the
author
found to take
during control
the
classification
review,
outside
are pushing
of an organisations
classification
analysis programme,
most of which request a 15% cut on the savings found,
dating back 3-4 years, this exercise was conducted in-house and not with the use of an outside consultant. saving current on a high volume market, if the It could be argued, successfully, that a 5% in the with time
/ high cost product is conducted
would
be beneficial 5% diluted
analysis
in-house.
consultant
fees may not be cost effective.
This was not a hugely
consuming project as the HS codes were already in place.
Also, it is important
that globally, the organisation
is operating correctly with to self audit
regards to classification. the various possible to import/export harmonise
This project also offers an opportunity
business units - until a time comes where it is (at least the first 6 digits) globally within the
organisation, opportunities prevention, savings.
this will always be a worthwhile are obviously an added bonus.
compliance Again,
project. than
Savings simple costs
rather
evidence exists supporting
competitive
advantage through
By conducting
the exercise
in the manner
set out above, the chances of was zero. The author would
disclosing confidential/proprietary
information
61
DATA ANALYSIS
CHAPTER 4
be handling HS codes and although confidential in the sense that Company A would not want their competitors to gain access to a list of utilised HS codes, it was conducted in-house. The disclosure of proprietary information was a worry for Company A which links well with the research conducted by MK Technology. proprietary. The compliance programme, as a whole, is now viewed as
During the interview, when asked about a potential classification analysis project, aimed at proving the latest research by the Aberdeen Group and MK Technologies correct, in that compliance can in fact reduce total landed costs creating competitive advantage, the Trade Compliance Manager, Company A, stated;
"1 think the issue is optimising landed cost by duty minimisation, which can only be accomplished by serious efforts at classification, in the destination country. However, it isn't practical to expect all import points to have the resources to classify (chemists, engineers, customs geeks) so an effort emanating out from excellence centers (or HQ, regional or otherwise) can bring serious savings to the field offices.
1 think there is also a way to enjoin classification efforts with supply chain security initiatives. The harmonised codes are now being used by
governments for visibility into ocean containers (preventing WMD,monitoring Haz Mat, etc)."
As stated earlier, the disclosure of proprietary information was a worry for Company A. During an interview with the Intellectual Property Counsel,
Company A, the following was noted;
62
DATA ANALYSIS
CHAPTER 4
"Many of our flagship products have proprietary formulations. The ownership of the intellectual property associated with a specific formulation may vary depending upon the circumstances surrounding the development of the product. Thus, each product will have to be looked at individually to
determine what (if any) legal obligation may encumber the disclosure of that formulation.
I would recommend that this process of evaluation for cost savings begin with the preparation of a prioritised list of products. We can then engage in a systematic determination as to the legal obligations that may preclude disclosure.
I fully support the initiative and drive to reduce costs associated with our products. However we must engage in this process in a way that manages the legal and business risks in an appropriate manner. Or perhaps put in plainer terms, it does not make good business sense to save $50,000 in tax tariffs only to incur $250,000 in legal expenses because in our efforts to save money we breached a confidentiality obligation."
(Intellectual
Property Counsel, Company A)
When pressed further disclosure responded;
on whether the analysis would be possible without the compositions, the Intellectual Property Counsel
of the chemical
"This type of detailed chemical composition is normally not disclosed, as very often it is the property of the chemical manufacturer - not of Company A.
Where there is a legal requirement we can obtain permission to disclose the composition from the manufacturers but this can be a lengthy process in some cases.
An examination
63
DATA ANALYSIS
CHAPTER 4
Do you have a comprehensive list of what materials we are talking about here?
We do have a trade compliance group in Houston who (using a trained PhD Chemist) initially evaluate the detailed chemistry of each of our products and based on this assign the correct tariff codes that are used for import/export. "
(Legal Counsel, Company A)
In order to move forward, within the legal scope desired by the Intellectual Property Counsel, it was important to discuss and outline a plan with the Trade Compliance Manager.
The following was decided;
"The purpose of the exercise is twofold - depending on who you are, you can rearrange the priority of these: A) Look for savings B) Compliance (which now includes cargo security).
You are right that our systems are synchronised, and yes, they carry the US codes. This, coupled with feedback from the destination countries, is enough to begin a comparison. Then, looking at differences, especially on products with high volume, high cost, can really make a savings impact (and foster compliance).
Singapore I believe has GSTat 7% - that is kind of like your VAT.
There are countries this project won't help - if a country says everything is 'free,' there is nothing to save (however they may need 'compliance' help).
One of the efforts Company A has advocated is to compare in country Harmonised Customs Classification use with what we know to be the
64
DATA ANALYSIS
CHAPTER 4
American codes - not saying codes in Australia,
for example, are wrong, but
there could be differences and we should take a look. Since we have access to the chemists and mechanical engineers here in the Houston HQ, we are able to generate transportation confident classifications, but due to lack of one unified Worldwide, the
system, our lists of codes may not be in sync.
codes tend to be harmonised out to 6 digits - which is a very good place to begin the comparison. An example of reviewing codes during a tender, a
Statoil tender in Brazil a couple of years back, my assistant and I looked at the high value / high volume items involved, at the codes our Rio office was applying, the comparative US code to its equivalent the US codes we are confident in, and mapped our in Brazil, to see if we could find savings. In the a 12% savings opportunity, among
example of Conqor 404, we identified
others. And Conqor 404 is a very expensive product.
So the approach for this project
would be to assemble the list of items you
import, sorted by high value / high volume, and the harmonised classification codes applied by your broker to each item. (Your broker can likely run this report, easily).
We will then compare to the US choices, looking for differences. find differences, possibly increase) we will report back, noting
Where we - or
the duty rate (savings
It will be up to your office in Australia to decide to apply
which code; it is always up to the importer of record.
An importer has discretion to choose its codes. If customs issues a challenge, then information on composition can (with permission from legal) be
disclosed to the authority
as confidential
(I am sure AU customs would treat Two things that will help us of PhD chemists in our own
it as such) and/or a lab sample can be taken. avoid going down this road are our involvement
labs & not going back and chasing any refund money - we just fix the code going forward, is my suggestion. Don't anger Customs by chasing money we paid in error.
65
DATA ANALYSIS
CHAPTER 4
So where changes are found, we will support you with reasoning that justifies choice of harmonised code. Internally, our scientists know the confidential makeup, and they give us the code. Most often they can describe why a code is picked without disclosing composition.
The end game here is what I've underlined. Don't give out the makeup of the goods. We tackle the project in the manner above - which is what I've been suggesting to x.
Keep in mind, the metric everyone is eager for is to show savings. So the ensuing measures will be "how much of each item @ what price is coming in", what is forecast" and this will be multiplied by old & new duty rate to show (and claim) dollars saved.
It is a good project - let's just do it the smart way. Also, the reason AU would be focused on first, is because like the US, UK, Canada, there are very automated systems brokers use with Customs and reports are easy to run. rr
4.2.1
Kazakhstan Analysis
Savings Opportunity - $328305
There are savings to be made if Company A in Kazakhstan
implement the
codes used in the US, however, there are instances where Company A in Kazakhstan have been saving on duty payments as the codes they have been using do not match those used in the US. For the purpose of this exercise,
the author will exclude the codes used in Kazakhstan which differed from the US codes which attracted a higher duty date. If Kazakhstan were to begin
An examination
66
DATA ANALYSIS
CHAPTER 4
utilising the codes used in the US which differ from the codes in place which attract a lesser duty, the Company could save $64.661 / year. As this can be dated back 3-5 years, there is a substantial saving opportunity.
32 products were selected for review due to their high value and high volume. Of the 32 products selected, there were 8 variances found totalling A 25% variance in codes between country to country,
25% of the sample.
the US and Kazakhstan, proves the worth of this project from a purely protective preventative compliance perspective. bonus. The savings are an added
Throughout this report it must be remembered that compliance in
itself allows for competitive advantage through preventative action which manifests itself in customer assurance.
4.2.2
Australia Analysis
Savings Opportunity - $425,000
The data gathered in Australia differed from that gathered in Kazakhstan as the codes in use for the high value high volume products were in line, 100%, with the codes utilised in the US. However, within Australia, there are many free trade agreements in place and what is known as Tariff concessions. The Tariff concession system is described below;
How the Tariff Concession System Works
A Tariff Concession Order (TCO) will be granted on imported goods if substitutable goods are not produced in Australia. Substitutable goods are Australian-made goods which have a use corresponding to a use of the imported goods. It is important to note that, in determining whether
substitutable goods are available, the assessment does not consider whether the Australian goods compete with the imported goods in any market. A local
An examination
67
DATA ANALYSIS
CHAPTER 4
manufacturer may object to the making of a Tca and can request an existing TCa be revoked, as described later in this document .
(http://www.customs.gov.au/webdata/resources/files/commerOl.pdf)
During the classification analysis for Australia, although the codes in place were harmonised with those in the US, it was found that for one particular product an applicable TCa was not being utilized. This resulted in a potential for $85,000 per year which has a potential to date back 5 years, totaling $425,000. Company A has submitted an application to the Australian
customs authority for a refund.
The classification project, both for Australia and Kazakhstan, has proved worthy, and has provided excellent, first hand evidence, backing the theory that investment in trade compliance will lead to competitive advantage.
r 4.3
Technology Review
With regards to technology, and whether Company A were aware of any in which could contribute to their compliance task, the Compliance Manager suggested the following;
"Would it be a crazy idea to ask your iphone/ped App developers to consider helping us make a simple TCC app. It would be an easy to use portable
compliance tool that would do the following things:
Denied Parties Search
Dual Use/ ECCNclassification lookup
68
DATA ANALYSIS
CHAPTER 4
Harmonized Classification Search Tool (US Census Schedule B version for reference)
Since it relies on paid access to two of the three sites, it would be for internal employee use only.
And since we are just
making
neat looking
hyperlinks,
I doubt
we'd be
getting a patent, but I always like to CC a lawyer with crazy ideas"
As discussed during the literature and, as cited by Damianides
review, according to Fox and Noble (2003) (2005), building a strong advantage internal through control more
programme
within
IT can help to gain competitive (Damianides, Information
efficient operations
systems Management,
2005).
Again, referencing that, if possible,
the Apple I phone idea, as suggested it would create efficiencies
above, it is clear
in the denied party screening and also the HTC search out of the office, competitive
operation, operation
the ECCN / dual Use look up operation
- all of which could be conducted while travelling, etc, adding, as Fox and Noble (2003)
out of hours
argued,
advantage to an organisation.
There are providers Oracle commanding of the International
of global the majority
trade
management
software
with
SAP and
of the market.
As the author is a member Association (ICPA), it
Trade Compliance
Professionals
was possible to reach out to the membership management software possibilities.
for their views on global trade for one particular reason
Unfortunately,
- the software capabilities
are extremely
new, the responses were sparse.
A summary of the responses are noted below;
"While
SAP developed
their
GTM module
6-7 years
ago,
Oracle just
introduced
their first module (export)
last year. It took Oracle 2-3 years to

69
An examination
DATA ANALYSIS
CHAPTER 4
develop the functionality. Sun Microsystems who they eventually acquired was a beta site for the past year. "
"The single biggest issue with the ERP GTM modules is that they are data shells and all the regulatory rules need to be configured by the business team. For example on the licensing side, you have to set-up the licensing matrix with the country of origin/destination and export control (rules) for their system to work. Our system intuitively does the licensing determination and license management for you. This involves additional headcount
considering compliance management and keeping abreast of the regulations is now your responsibility. "
"Oracle took 2-3 years to develop their export module, they do not have a import and Trade Agreements module. How long would it take them to add import and trade agreements. Imagine SAPhas been at export for 6-7 years and still does not have Import or Trade Agreements. "
"Trade management is not their core competency compared to vendors such as us. In the past, management has deviated resources to other projects considered to be of higher priority. "
"Oracle like SAP does not offer integrated regulatory content. That is a key issue considering Stryker has no choice but work with their 3rd party vendors to integrate content. If there are issues, Oracle will look to point fingers at the content vendor and vice versa. Also, they work with several different content vendors depending on the regulations and that only adds to the complexity. "
"Oracle only offers behind the firewall solutions. It is not a good fit for It teams that do not have the resources to support the application in-house. It is further complicated by working with 3rd party content vendors and dealing
I
An examination
70
DATA ANALYSIS
CHAPTER 4
with content updates. Unless they have a push system, Stryker would need to assign resources to pull the content at designated time intervals. rr "Oracle uses 3rd party integrators to configure and implement the solutions. Between Oracle, the content vendor and integrator there are several 3rd parties involved With Obama proposing to rewrite the laws to create a single unified licensing agency for both commerce and state shipments, how long would it take companies like Oracle to recode the rules in their system. Don't depend on them for their flexibility and nimbleness. Trade is not a priority like it is the 'only' priority to us."
"Considering they use 3rd parties to configure and integrate the software, Oracle's implementations are extremely expensive and take a long time as compared to best of breed vendors such as us. From a comparison standpoint their implementations are 2-3 times our costs and end up always being a + 2 year project.
rr
"We have been building trade solutions for 20 years. Oracle has been at it for the last 2-3. Imagine the depth and breadth of our functionality versus what they offer. No Comparison. Other Oracle users are speaking to them but they are not considered a serious contender at least in the near future. That's not to say they will not be but not in the short term. You will need to engage their partner eco-system for setting-up the trade configs, system integrator for integration and then multiple partners for content integration. "
(ICPA Membership)
71
DATA ANALYSIS
CHAPTER 4
Hypotheses
The author designed the hypotheses as follows;
HI
Increased investment in the field of compliance will lead to competitive advantage.
H2
Information systems can facilitate an internal globally reaching classification programme.
H3
In certain cases, a products total landed cost will be reduced as a resuIt of greater efforts in classification.
With regards to hypotheses 1, 2 and 3 the author believes that they were proved to be correct.
An examination
72
CONCLUSIONS
AND RECOMMENDATIONS
CHAPTER 5
15.0
i
CHAPTER 5 - CONCLUSION
AND RECOMMENDATIONS
The underlying principle of this chapter is to conclude on previous chapters and provide appropriate recommendations from the specific findings from the literature review and primary research for the purpose of proving the aim of the thesis; 'An examination into the impact that investment in trade
compliance has upon a firm's competitive advantage.'
5.1
Conclusion and Recommendations
Without a doubt, the Global market presents numerous prospects for an organisation such as Company A which holds the resources to capitalise on opportunities. However, as identified by reviewing the most basic of export
regulations, controlling the operations required to succeed within the global market are made complex by the simple export and re-export trade laws governing them.
It was the aim of the report to review in further detail the regulations governing international trade and whether investment in trade compliance could lead to improved operations. In order to satisfy this argument the Firstly, the regulatory
author examined and reviewed a number of factors.
bodies with their acts which govern the global market where Company A operates. The number of bodies, regimes and acts governing international
trade was immense. The number of laws a multinational organisation must adhere to was also staggering. Investment in trade compliance should be of primary importance within Company A.
It is a competitive advantage to be compliant.
Global organisations seek
compliant partners. Therefore, evidently, from the vast amount of research undertaken, a functioning compliance program will allow an opportunity for competitive advantage, through basic preventative actions.
CONCLUSIONS
AND RECOMMENDATIONS
CHAPTER 5
The primary aim of compliance should be preventive, protective action. However, rather than simple preventative tasks, with further emphasis
placed on the capabilities of the compliance role coupled with further investment, the function can, and should, do more to create a competitive edge. In order to accomplish competitive advantage and further the scope of their compliance group, the author would recommend that the structure of the department within Company A be broken into reactive and proactive groups.
The proactive responsibilities,
group
should focus on and
policies, a
standards, of
guidelines, all existing
procedures,
finalise
review
policies/guidelines.
The group should develop materials to communicate the The reactive
compliance role in customs matters to area management.
group should formalise a process for rolling-out compliance changes and updates and develop a recognition program for compliance as a business enabler.
The reactive group should establish a process to capture compliance costs (shipment aversion) delays, fine/penalties) they should and savings (penalty reduction, risk
also advance the
global
classification
projects
regarding ECCNand HTC. Company A should dedicate a resource to address compliance work with IT to modify systems and software to reflect
compliance controls. They must develop a process for handling Denied Party Screening for those business units with activities in embargoed destinations.
Again, referencing the Apple I phone idea, as suggested above, it is clear that, if possible, it would create efficiencies in the denied party screening operation, the ECCN/ dual use look up operation and also the HTC search operation - all of which could be conducted while travelling, out of the office, out of hours etc, adding, as Fox and Noble (2003) argued, competitive
74
CONCLUSIONS
AND RECOMMENDATIONS
CHAPTER 5
advantage
to an organisation.
There is definitely
an argument advantage.
for investing
in emerging technology
and thus creating competitive
The Global HTC Classification improved customs processing,
Project will result reduced entry
in reduced duty
payment, broker with a
errors,
and improved in conjunction
relationship.
HTC classification
should be conducted
global duty recovery effort which will:
Identify
overpayment
of duties and seek refunds (where
applicable) Determine where TCOs can be used to reduce or
eliminate duties Confirm country of origin and eligibility for trade
preference programs Significantly eliminate Company A's import exposure
Within Company A, new products tend to evolve from older versions. is, therefore, a possibility to retrospectively clean up classifications and significant
There
on legacy
items - as needed. opportunities
A review for mismatches globally.
duty savings
should be conducted,
The correct countries;
codes & justification
support
should
be offered
to importing
outside counselor
in country customs experts available to support
change with local customs should be called upon.
The business investment, straightforward;
case for which
a global in
classification turn create
effort,
which
would
involve is
would
competitive
advantage,
A Harmonised Tariff Code HTC is required for every product that is imported or exported determine from a country. The HTC is used by customs agencies to
the product being imported and the applicable rate of duty.
An examination
75
CONCLUSIONS
AND RECOMMENDATIONS
CHAPTER 5
Use of incorrect HTCs can result in the overpayment of duties (and possible underpayment). Failure to identify the correct country of origin can result in
an inability to take advantage of various duty reduction programs.
All customs agencies require the HTC and the COO be correctly identified on all applicable import/export documents. Submitting incorrect import/export
documents to customs agencies is a violation of the law and can result in civil fines/penalties and, in certain cases, criminal penalties.
Imports or exports that incorrectly identify controlled materials or sensitive items (e.g., explosives, certain chemicals, etc.) are viewed as a national security risk. Penalties/fines for incorrect HTC and/or COO are very high
(e.g., in the U.S. the penalty can be up to three times the entered value of the goods plus additional fines).
The business need is also clear;
Global HTC classification will allow Company A to take advantage of all available duty savings opportunities and implement a process which
significantly reduces import compliance risk and exposure.
Opportunity exists to significantly increase import compliance and identify global duty savings however, problems exist with:
Company A's ability to take advantage of various duty savings programs;
Company A's ability to comply with customs agencies requirements for import/export;
Company A's ability to reduce overall compliance risk related to imports; and
76
CONCLUSIONS
AND RECOMMENDATIONS
CHAPTER 5
Company A's ability to populate the HTC and COO in all existing systems to ensure compliance.
There should be accurate HTC classifications that are populated in all systems as necessary to ensure import compliance. A full optimisation of
duty savings through correct HTC classification and utilisation of preference programs, foreign-trade zones, temporary imports, and duty drawback, as applicable, should also be implemented. As a result, there should be a due to classification or
reduction in customs' detention of imports/exports
origin issues (including detention for failure to provide sufficient product descriptions on the import documentation).
Currently HTC and country of origin are populated within the local U.S. systems but efforts must be focussed on expanding the scope and education surrounding the global effort. At the moment, from the sample data
gathered during the literature review, the classifications are inconsistent, not verified, and often times incorrect. As a result, Company A is, in certain
instances, paying more duties than would be ordinarily owed if classified under the correct HTC. Further, without the correct HTC and COO, Company A is unable to take advantage of various duty savings programs. Company A's inability to correctly provide the HTC and COO results in the filing of import/export documents that are incorrect. Incorrect HTC and COO
information results in significant compliance exposure.
This is a global issue that has only been addressed on a country-by-country basis until now.
Company A have an ongoing effort to identify the export control classification number (ECCN) for all their made and sourced products. The HTC project is an essential compliment to the ECCN project in order to ensure full Company A
compliance on both import and export side of their transactions.
must address this issue now because customs agencies are focusing on the
An examination
77
CONCLUSIONS
AND RECOMMENDATIONS
CHAPTER 5
oil and gas industry and the exposure is too high.
Note, in the U.S., for
example, if Company A continue to use incorrect HTC's after they were aware of the mistake then they are subject to heightened penalties and/or jail time for making knowing fraudulent filings with the government.
This effort should be implemented globally. As the codes are verified within the U.S., the first stage should begin in America and then be replicated globally. The trade compliance team and key personnel within the supply chain should be the responsible parties for the global project.
Company A has a number of strengths, but also weaknesses threats and opportunities;
Strengths: Senior management commitment Experience within the trade compliance department Function support from legal, R&D, Supply chain
Weaknesses: Requirements for trade compliance are not embedded in culture
Opportunities: Integrate with functions Demonstrate value of trade compliance to operations (Compliance is a business enabler) Compliance can be sold to the customer.
Threats: Changing regulations Government enforcements Emerging markets Higher scrutiny

An examination
78
CONCLUSIONS
AND RECOMMENDATIONS
CHAPTER 5
Business growth Misperception that 'it won't happen to us'
I
I
5.2
Summary
During the introduction,
the author set out the following objectives;
increased role that trade compliance can and should play. The author global trade. reviewed the term 'globalisation' and its influencing function effect on to
It is clear that the trade compliance
is strategic
effective supply chain management.
The
various
Regulatory
Bodies
with
acts
governing
numerous
international
markets will be assessed in relation to the ever increasing
and complex role the of the trade compliance function. Evidently, regimes function as a result governing of the vast amount the of bodies, role of the treaties, trade acts and compliance
international
trade,
is complex and, again, must be given respect in that it can assure resulting in customer assurance and competitive
supply chain effectiveness advantage.
A study of the most recent import
and export
compliance
topics will
further outline the complex nature of today's global market place. The author focussed on is satisfied, through a comprehensive that study of the literature on trade
import/export
compliance, edge.
efforts
focussed
compliance will provide a competitive
79
CONCLUSIONS
AND RECOMMENDATIONS
CHAPTER 5
A review of published historic violations and their settlements with corresponding share price movements will provide sufficient support for/against an increased investment in trade compliance.
The serious nature of a violation,
in terms of loss of reputation
and
importantly share price reaction provide sufficient support for investment in trade compliance.
As a project which will run in conjunction with the dissertation, the author will conduct a harmonised tariff classification analysis. The
findings of which should support an argument that trade compliance can offer competitive advantage. This project proved its worth as savings were achieved. It is clear that, if
conducted on a global scale, the project alone can offer competitive advantage.
The latest information
systems and technology available offering
support to the trade compliance function will be reviewed. Secondary and primary research proved that investment in technology can lead to competitive advantage.
An examination
80
L--
REFERENCES
/ BIBLIOGRAPHY
http://www.guardian.co.uk/world/2002/oct/31/globalisation.simonjeffery.
KERR, T., 2009, ramping up customs compliance reviews, March-April, pp,48-S1. Available from: www.chinabusinessreview.com.
HOLLY,A., 2004, Store Manager: Import Duty, Don't Be Flattened by Codes, July, pp.13. Available from: http://web.ebscohost.com/ehost.
LENOK, N., 2009, Managing Imports and Exports, ten key responsibilities of newly appointed trade compliance manager, June, pp-S-8, Institute Management and Administration Journal. Available of
from:
http://web.ebscohost.com/ehost.com/ehost.
RICHER, S., 2009, Global Logistics, 5 steps to upgrading your compliance program, March, pp36-39, Available from
http://web.ebscohost. coml ehost/www.logisticsmgmt.com .
BROWN, J., 2006, Journal of Health Care Compliance, Who really needs a compliance program? July-August ppSl-SS.
RAIA,
K.,
2009,
Managing Imports
and
Exports,
Relying
on
your
forwarder/carrier
for export compliance, September, pp9. Available from
http://web.ebscohost.com/ehost.
RAIA, K., 2009, Managing Imports and Exports, AES compliance for 2009, April, pp-7-8. Available from http://web.ebscohost.com/ehost.
RAIA, K., 2009, Managing Imports and Exports, creating SOPs in trade compliance, April, pp2-3. Available from http://web.ebscohost.com/ehost.
81
HANSEN, F., 2004, Export Regulations and Compliance, June, pp47-50. Available from http://web.ebscohost.comiehost.
REYNOLDS, ., 2009, Managing Imports and Exports, expectations from your S service provider - -import export compliance, May, ppll, http://web.ebscohost.comiehost. Available from
REYNOLDS,S., 2009, Managing Imports and Exports, basic export controls, don't be left in the dark, September, pp6. Available from
IMBRIANI, R., 2008, Managing Imports
and Exports, ask the experts,
September, PP15. Available from http://web.ebscohost.com/ehost.
GRIGNOLI, J., 2009, Managing Imports and Exports, the history of the US customs and border protections: 220 years and still changing!, October, pp-57, Avaialable from http://web.ebscohost.com/ehost.
EDMONSON,R., 2009, The Journal of Commerce, customs, January, pp70. Available from http://web.ebscohost.com/ehost. YOUNG, c., Journal of Health Care Compliance, compliance prfesionals often have to focus their resources on areas that pose greater risk, May-June, pp61-63. Available from http://web.ebscohost.comiehost.
LEON, C & PISANI, R., The Journal of Commerce, assessing the customs audit, pp53. Available from http://web.ebscohost.comiehost.
DAMIANIDES, M., 2005, Information systems management, Sarbanes-Oxley and its governance: new guidance on control and compliance, pp77-85. Available from http://web.ebscohost.comiehost.
82
VANNOY, A,S., Information Grounded
SALAM, F.A., Managerial Interpretations
of the Role of
Systems in Competitive Theory Investigation,
Actions and Firm Performance: A PP 496-515. Available from
RACKOFF, N., WISEMAN,
c.,
ULLRICH, A., W., Information
Systems for
Competitive Advantage: Implementation
of Planning Process, PP 285-294.
Available from http://web.ebscohost.com/ehost.
FADEL, J., BROWN, A., Communications of the Association for Information systems, pp108-126. Available from http://web.ebscohost.com/ehost.
ABERDEENGROUP,2005, how companies control global sourcing and selling to improve cash and profitability, September.
MK TECHNOLOGY, 009, Export Control best practices Act. 2
www.guardian.co.uk
http://www.bis.doc.gov/complianceandenforcement/dontletthishappentoyou2 007 sm.pdf.
http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1078053656&ty pe=RESOURCES.
http://www .businesslink.gov .uk/bdotg/action/detail?itemId pe=RESOURCES.
= 1078053832&ty
http://www.bis.doc.gov/licensing/exportingbasics.htm
http://www.bis.doc.gov/licensing/doneedaneccn.html.
83
http://www.bis.doc.gov/news/2005/winden.htm.
http://www.bis.doc.gov/complianceandenforcement/dontletthishappentoyou2 007 sm.pdf.
http://www.nera.com/extImage/Pub
FCPA Settlements
0109
FinaI2.pdf.
JANKOWICZ, A.D., 2005. Thomson.
Business Research Projects.
4th
Edition.
London:
MALHORTA, N.K. & BIRKS, D.F., 2000. Approach. Essex: Pearson Education Ltd.
Marketing
Research;
An Applied
CAMERON,
S.,
1999.
The
Business
Students
Handbook;
Developing
Transferable Skills.
Harlow: Pearson Education Ltd.
MALHORTA, N.K., 1993. Jersey: Prentice-Hall.
Marketing
Research; An Applied Orientation.
New
WEIERS,
R.M.,
1988.
Marketing
Research.
2nd Edition.
New Jersey:
Prentice-Hall.
DIBB, S., SIMKIN, P., PRIDE, J.e. & FERRELL, J., 1997. and Strategies. Boston: Houghton Mifflin.
Marketing:
Concepts
MALHORTA, N.K. & BIRKS, D.F., 2000. Approach. Essex: Pearson Education Ltd.
Marketing
Research;
An Applied
KENT, R., 1993.
Marketing Research in Action.
London: Routledge.
84
SMITH, P.R. & TAYLOR, J., 2004. Approach.

4th
Marketing Communication; An Integrated
Edition. London: Kogan Page.
85
Criminal and Administrative Case Examples
HITTITE MICROWAVE CORPORATION The Violation: Hittite Microwave Corporation, Chelmsford, Massachusetts, on six
occasions, exported microwave solid state amplifiers and related equipment, including downconverters, from the United States to Russia, China and Latvia, without obtaining licenses from the U.S. Department of Commerce. In addition, on one occasion, Hittite made a false statement to the U.S. Government on a Shipper's Export Declaration (SED). The Penalty: Hittite agreed to a $221,250 administrative penalty.
AVIACSA AIRLINES The Violation: Between February 2002 and May 2003, in conjunction with exports of aircraft parts to Mexico, Aviacsa Airlines on 75 occasions failed to file with the U.S. Government the SEDs required by the EAR. The Penalty: Aviacsa agreed to administrative penalties totaling $450,000, of which $225,000 was suspended.
ASHER KARNI The Violation: Asher Karni, a South African businessman, conspired to violate and violated U.S. export restrictions arising out of unlawful exports to Pakistan and India of U.S.-origin goods controlled for nuclear nonproliferation reasons. Humayan Khan, of Islamabad, Pakistan was indicted for conspiring to violate and violating U.S. export restrictions on goods controlled for nuclear nonproliferation reasons. Khan arranged, through Karni, the purchase and export to Pakistan of U.S.-origin triggered spark gaps, which can be used as nuclear weapons detonators. Khan falsely indicated that the goods were intended for medical use. The Penalty: On August 4, 2005, Karni was sentenced to three years' imprisonment. On April 8, 2005, Khan was indicted for his role in diverting the controlled goods. On
August 1/ 2006/ BIS issued a 10-year denial of export privileges against Karni and related parties/ Pakland PMECorporation and Khan.
SCP GLOBAL TEc:HNOLOGIES,
INC.
The Violation: Between May 2003 and January 2005/ SCP Global Technologies/ Inc. ("SCP") made 45 exports of controlled pumps and valves to Taiwan/ China/ and Israel/ without the required export licenses. The items are controlled for their potential use in chemical and biological weapons/ and would have required a license for shipment to Taiwan/ China/ or Israel. SCP had previously received a Warning Letter for the unlicensed export of controlled pumps. The Penalty: SCPagreed to a $264/000 administrative penalty.
METRIC EQUIPMENT SALES The Violation: On March 21/ 2005, Metric Equipment Sales pled guilty in the Northern District of California to one felony count of exporting digital oscilloscopes controlled for nuclear nonproliferation reasons to Israel without a BIS license. The oscilloscopes, with sampling rates exceeding 1 GHz, are capable of being utilized in WMD development and missile delivery fields. The Penalty: Metric was sentenced to a $50,000 criminal fine. Metric agreed to a $150,000 administrative penalty and a five-year suspended denial of export privileges.
VALTEX INTERNATIONAL The Violation: Vladimir Alexanyan and his company, Valtex International, committed export violations and made false statements in connection with the attempted export of satellite/missile insulation blankets to the Chinese Academy of Space Technology in Beijing. BIS had previously rejected Valtex's application for an export license for these items. The Penalty: Alexanyan was sentenced to pay a $12,000 criminal fine, to serve three years' probation, and was barred from any international activities or trade for the term of his probation. Valtex was ordered to pay a $250,000 criminal fine. In addition, Alexanyan agreed to an $88,000 administrative $77,000 administrative penalty and Valtex agreed to pay a
penalty. Alexanyan's and Valtex's export privileges to China
were denied for five years. Valtex also agreed to implement an export management system.
WILDEN PUMP AND ENGINEERING The Violation: Wilden Pump and Engineering Co., LLC (Wilden), a company based in Grand Terrace, California, violated the EAR in connection with unauthorized exports of diaphragm pumps from the United States to the Iran, Israel, the People's Republic of China, Syria, and the United Arab Emirates without the required Department of
Commerce export licenses between 2000 and 2003. In some cases, Wilden transferred diaphragm pumps with knowledge that violations of the EAR would occur. Wilden also made false statements on export control documents related to these transactions. The Penalty: Wilden agreed to a $700,000 administrative penalty. It also agreed to be subject to a three-year denial of export privileges for items on the CCL. The denial was suspended in its entirety for two years provided that Wilden did not commit any violations of the EARduring the suspension period.
JOHN CARRINGTON The Violation: and John a Carrington, former North the former president State of Sirchie illegally Fingerprint exported
Laboratories approximately
Carolina
Senator,
$1.2 million dollars in crime control equipment
to China through
intermediaries in Italy and Hong Kong.
The Penalty: In the criminal case, Carrington was sentenced in March 2006 to 12 months' probation and agreed to pay an $850,000 criminal penalty. In the related administrative case, Carrington accepted a fiveyear denial of his export privileges. penalty and accepted a five-year
Sirchie also agreed to a $400,000 administrative suspended denial.
BJ SERVICES COMPANY The Violation: Between 1999 and 2002, BJ Services Company of Tomball, Texas committed 37 violations of the EAR in connection with 13 exports of items controlled for chemical and biological weapons reasons to various destinations without obtaining the required export licenses.
The Penalty: BJ Services agreed to a $142,450 administrative penalty and to perform an audit of its internal compliance program to be submitted to BIS. Mitigating Circumstances: BJ Services voluntarily self-disclosed these violations and cooperated fully with the investigation.
NING WEN The Violation: Ning Wen and Hailin Lin used a business called "Wen Enterprises," which they operated from their home in Wisconsin, to ship semiconductors and other controlled electronic components with radar and satellite applications, both military and civilian, to Jian Guo Qu and Ruo Ling Wang at Beijing Rich Linscience Electronic Company in China. For most of these transactions, Lin obtained the restricted
technology from a United States manufacturer or supplier based on a request from Wang or Qu; falsified shipping documents at
the direction of Qu by concealing the true nature of the shipments and stating that a
license was not required for the shipments; and then shipped the product to Wang and/or Qu in China, without obtaining the required export license. The Penalty: In 2005, Qu was sentenced to 46 months' imprisonment (later reduced to 22 months based on his cooperation in the prosecution of the co-defendants), a $2,000 criminal fine, and two years' supervised release. Lin was also sentenced in 2005 to 42 months in prison and a $50,000 fine for her role in these unauthorized exports. In 2006, Wen was sentenced to five years in prison, a $50,000 fine and two
YCCII-=:>'=:>upcrvi=:>cd I-CICCl=:>C.AdditiOIlCllly, tne COUI\:
oruereu
tile
rorrerture or
tile
norne or
Wen and Lin and over $329,000 in cash.
MANTEN ELECTRONICS The Violation: Four former employees of Manten Electronics, Weibu Xu, aka Xu
Weibu, aka Kevin Wu, Hao Li Chen, aka Ali Chan, Xiu Ling Chen, aka Linda Chen, Kwan Chun Chan, aka Jenny Chan, illegally exported millions of dollars of sensitive national security controlled items, with applications in radar, electronic warfare and
communications systems, to state-sponsored institutes in China. On September 13, 2005, Kevin Wu pled guilty to violating the Export Administration Act and the Arms Export Control Act. Wu and the other defendants also pled guilty to conspiracy charges.
The Penalty: On May 1, 2006, the four defendants were sentenced. Specifically, Kevin Xu was sentenced to 44 months in prison, and two years' probation; Ali Chan was sentenced to 30 months in prison and two years' probation; Linda Chen was sentenced to 18 months in prison and two years' probation; and Jenny Chan was sentenced to six months' home confinement and two years' probation. The defendants also agreed to forfeit $391,337, their profits from the illegal exports.
ELAN PHARMACEUTICALS The Violation: Between May 2000 and April 2002, Elan Pharmaceuticals, Inc. (Elan), of San Francisco, California, made four exports of a synthetic conopeptide MVIIA medical product, ziconotide (trade named PRIALT) to Belgium, without the required export licenses. PRIALT is the synthetic equivalent of a nontoxic peptide that is a component of the venom produced by the marine cone snail. Elan was studying and developing PRIALT as a new therapy for pain management. PRIALT is controlled for chemical and
biological chemical warfare, and anti-terrorism reasons. The Penalty: Elan agreed to a $31,000 civil penalty, and to perform an internal audit of its export compliance program one year from the date of the agreement. Mitigating Circumstances: Elan voluntarily self-disclosed these violations and
cooperated fully with the investigation.
EMD BIOSCIENCES, The Violation:
INC.
EMD Biosciences, Inc. (EMD) of San Diego, California exported
biological toxins to Canada in violation of the EAR. Between June 2002 and July 2003, EMD committed 134 violations of the EAR in connection with 67 exports of biological toxins to Canada that were made without obtaining required Department of Commerce export licenses. The Penalty: EMD agreed to a $904,500 civil penalty and to a two-year suspended denial order.
ZHAOXIN ZHU The Violation: On May 6, 2004, Zhaoxin Zhu of Shenzhen, China pled guilty to conspiring to purchase controlled satellite and radar technology for illegal export to China. Zhu negotiated with undercover federal agents to purchase a variety of
sensitive goods, including traveling wave tubes with satellite and radar applications, for export to China. The Penalty: Zhu was sentenced to twenty-four supervised release. months in prison and three years'
STOELTING COMPANY The Violation: Stoelting Company, of Wood Dale, Illinois, and its president, LaVern Miller, illegally exported polygraph machines to China without required export licenses. These items are restricted to China for human rights reasons. The Penalty: Stoelting was sentenced to two and a half years' corporate probation and a $20,000 criminal fine. Miller was sentenced to two and a half years' probation, including six months of electronically monitored home confinement, 500 hours
community service and a criminal fine equivalent to the costs of his probation and monitoring, estimated to be $18,000. In addition, Stoelting and Miller each agreed to $44,000 in administrative denial of export privileges. penalties, and Stoelting agreed to a five-year suspended
BASS PRO, INC. The Violation: Bass Pro, Inc. exported gun sights to a variety of destinations without a license in violation of the EAR. Gun sights are controlled pursuant to U.S. treaty obligations, as well as for human rights and antiterrorism reasons. The Penalty: Bass Pro agreed to a $510,000 administrative penalty.
DR. THOMAS BUTLER The Violation: On January 14, 2003, Dr. Thomas Campbell Butler, M.D., a professor at Texas Tech University in Lubbock, Texas reported to the FBI that thirty vials of a potentially deadly plague bacteria, Yersinia pestis (the causative agent of human plague), were missing and presumed stolen from his research lab. The report sparked
a bio-terrorism alert in west Texas and President Bush was informed of the incident. However, investigation proved that Dr. Butler had illegally exported the Yersinia pestis, which is a controlled item under the EAR and cannot be exported without the required export licenses from BIS. On January 15, 2003, Dr. Butler was arrested. Dr. Butler was found guilty of numerous charges at trial, two of which were export control-related: making false, fraudulent and fictitious statements
regarding the exports to federal agents and making an unauthorized export to Tanzania. The Penalty: Dr. Butler was convicted of forty-seven counts of a sixty-nine count indictment that stemmed from BIS's investigation. He was sentenced to two years in prison on March 10, 2004, and he resigned from Texas Tech. On October 24, 2005, the U.S. Court of Appeals for the Fifth Circuit affirmed his earlier conviction. In the administrative case, Dr. Butler agreed to a $37,400 administrative penalty and to
accept a denial of his export privileges for a period of ten years.
OMEGA ENGINEERING
INC.
The Violation: Omega Engineering Inc., of Stamford, Connecticut and its former Vice President, Ralph Michel, violated the EAR by exporting certain laboratory equipment to Pakistan in 1997 after BIS had denied a license for the same shipment earlier that year.
The Penalty: In the criminal cases, Michel was sentenced to ten months'
imprisonment and fined $50,000, and Omega was sentenced to a $313,000 criminal penalty and five years' corporate probation. In the administrative cases, Omega agreed to a $187,000 penalty and to a five-year denial of export privileges to Pakistan. BIS also denied Michel's export privileges to Pakistan for five years.
[APPENDIX
-MOO05243 MOO06565 MOO06151 MOO03620 MOOO0954 MOO03526 MOO05038 MOO01021 MOO02944 MOOO0461 MOO01674 MOO05249 MOO03025 MOO02048 MOO01452 MOO03154 MOO04077 MOO05105 MOO02155 MOO04193 MOO02118 MOO06215 MOOOO448 MOO01597 MOO07677 M0016447 IM0007239 MOOO0160 MOO09451 mOO04952 mOOO6420
_, lIU3,!a~i"~il!.
2508100000
blanked blanked blanked blanked blanked blanked blanked blanked blanked blanked blanked blanked blanked blanked blanked blanked blanked blanked blanked blanked blanked blanked blanked blanked blanked blanked blanked blanked blanked blanked blanked
3824.90.9290 Znl:<.14.0000 3,,12 31.(100 3824.90.9290 2919.90.5050
5%
191814QOO()
391.: 5% 5% 0% 3811900000 (5%) 1.(:,100 5% 5% 5% 0% 0% 5%
3811900000 3811900000
3403999000(5%)
20% 0% 5%
,3505109000
(20%)
3505109000 3824909900 2905499000
20% 5% 5%
0% 5% 0% $12,792.26
;19, ~%::Jl;O
5% 2923.10.0000 3824.90.9290 3403.99.0000 2933.69.6050 5% 5% 5% 5% 3824903500(5%) 1404900000 (15%)
(!;'
3824909900 3824909800 1404900000 3824909900 3824903500
5% 5% 15% 5% 5%
0% 0% 10% 0% 0% $19,230.40
1404900000 2909.49,6000 3912.31.0010 3906.90.5000 5% 5% 3403999000 (5%)
1404900000 3403999000 3912310000 39069090 15% 15% 10%
~ ~-l8'16.511,()OOC
2iB
,S'1.uUJ
381H900
3824.90.9290 2",65u.OOOO 3505.10.0020 3912.31;0090 20% 0% 14049000 5%
381,1900
3824909900 15% 10%
283" "Oil
3505109 3912310000 14049000 20% 0% 0% 0% I I I 1$65,661.90

BSM581 0813056 NAnderson

Hochgeladen von

Dokumentinformationen

Originalbeschreibung:

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

BSM581 0813056 NAnderson

Hochgeladen von

Copyright:

Verfügbare Formate

/

ABERDEEN BUSINESS SCHOOL Copyright Declaration Form

ROBERT GORDON UNIVERSITY

FACULTY OF MANAGEMENT Aberdeen Business School Title: An examination

The author has examined, trade compliance

in detail, whether greater focus and investment advantage.

can lead to competitive

On the flip side, the

author also examined the cost of non-compliance performance, in particular,

and its damaging effects on

share price performance.

There is evidence to suggest that trade compliance market

can, coupled with other

image and customer

assurance of product delivery.

Advancements opportunity forthcoming, contributing

Assuming investment role of compliance

research and qualitative objectives;

data, the author set out capture the following

on today's oil and in solidifying the

increased role that trade compliance can and should play.

The latest information

systems and technology

support to the trade compliance function will be reviewed.

The author concludes with recommendations.

To all persons who kindly participated the purpose of this study.

in the research undertaken

To all my friends during my studies.

help and support

Table of Contents List of Tables

CHAPTER 1 INTRODUCTION Aim Objectives Company A Confidentiality Statement

CHAPTER 2 LITERATURE REVIEW International Trade - The Global Marketplace

Systems and Technologies

Third Party Service Providers Violations/Settlements

CHAPTER 3 RESEARCH METHODOLOGY Prospective Techniques of Investigation

3.1.1 3.1.2 3.1.2.1

Primary Research Quantitative v Qualitative Research Methods

for Choice of Research Method Probing Steering Close-ended Questions Questions

3.2.1 3.2.2 3.2.3 3.2.4

Open-ended Interviews Limitations Hypotheses

CHAPER 4 -DATA ANALYSIS Company A - Overview Classification Analysis Analysis

Australia Analysis Technology Review

Conclusions and Recommendations Summary

structures, systems and processes.

In order for such structures, systems

opportunity to excel in the field of trade compliance.

Again, if this can be

The fines for violations are high. For

into the impact that investment in trade compliance advantage

has upon a firm's competitive

REGULATIONS (EAR) (per violation)

operating on the international

In recent years, Cameron, and BJ Services amongst

NOV, Baker Hughes, NALCO

impact on an organisations the author will look

between and negative

and share price movements. the importance

With huge of a smooth, can play in

efforts and focus on supply chain effectiveness, unproblematic

and reliable supply chain and the role compliance

assuring this should not be understated.

An examination firm's competitive