Five Cross-border compliance challenges for Manufacturers

COVID 19 changed the world’s perspective on manufacturing rather dramatically. Several countries including India have understood the consequences of singular dependency on China for manufacturing goods. India, who has been encouraging manufacturing within its borders with its Make in India initiative has seen a sudden yet strong surge in manufacturing MSMEs. Even our Union Budget is directing generous funds and incentives towards the manufacturing sector. 

However, as India attempts to become a significant part of the global value chain, there are certain challenges that are likely to slow down the country’s efforts. Because exports become a natural progression to manufacturing, here’s a quick overview of the challenges that manufacturers face and how to overcome them. 

One of the first steps to exporting your manufactured products is to ensure that the products are in line with the local compliance laws. Once your business is absolutely sure that there are no local compliance violations occurring, it can look to explore its avenues and start cross border trading. However, there are certain cross border challenges that you must keep in mind.

Exporting to different countries means you must be aware of the various trade policies and rules issued between countries. As a manufacturer and exporter, your business might need to acquire certain licenses and register at various locations or even tie up with partners across different countries to conduct business. Without the right documentation or even the right HS codes, your consignments could get stuck at customs indefinitely, causing heavy losses. For instance, a business could lose out on all their profits made from international sales simply because their products weren’t delivered on time. Employing the right software solutions can help your business be aware of the right documentation, HS codes etc while exporting products.

Because import and export laws are different for different countries, your business might have to tweak its products and its specifications. This means the products will be required to suit the laws of the country to whom it is making the export. Some products might not be considered legal unless termed as per the required specifications. Some products will need to be described and documented as per the standards followed in said country. Instances of such product variation can be seen in clothing sizes, shoe sizes etc.

Taxation rules can differ between countries as each country might adhere to a different taxation system. For instance, the deadline for filing the annual GST return in India is December 31st, but it is April 15th in Singapore. Your business must not only be aware of the various taxation rules but also be aware of tax rates, tax deadlines, tax holidays, forms, processes and documentation records etc. Obviously, it is not possible to manually manage tax details for various countries without risking errors and consequent losses. Automation software solutions can help your business ensure all of its tax and compliance related data - both domestic and international, are managed without human error. Such software also allows you to keep track of changing tax content and prepare for any changes well in advance.

Several countries often issue authorised bodies to draw up rules and specifications that become a part of import and export compliances. These bodies include the Environmental Protection Agency, Food and Drug Agency, etc. Such agencies often draw up compliances that must be followed in order to export and distribute in foreign countries. In some cases, manufacturers can be fined or even have their products black listed if they fail to comply with such policies.

It is imperative for a business to do their due diligence before partnering with vendors overseas. While it is highly beneficial to have a local partner who can take care of shipping and logistics - it is important to do a full background check to ensure your partner can deliver your products and can live up to their reputation. Some businesses are often black listed by countries and trade organisations because they are unable to keep up with compliance. These businesses then appear under Denied Party Screening databases. For instance, businesses with ties to extremist nations like North Korea are often black listed. Ensuring your business partners with the right people will go a long way in determining the degree of success in your export operations. 

With India heavily encouraging manufacturing, thousands of MSMEs are looking to jump on the manufacturing bandwagon and make a name internationally. While these challenges are not impossible to overcome, they can slow down your growth trajectory. It is best to treat compliance as a critical step in setting up a successful business than run from pillar to post trying to put out fires as they come.