Trade Compliance and the Lacey Act
A large Canadian manufacturer, was able to add value to their organization by utilizing a comprehensive, integrated trade risk management strategy. With the legislation of the Lacey Act in 2008, regarding illegal wood harvesting, additional regulations were imposed on to the organization. Partnering with their customs broker, the company was able to develop a cohesive technological program designed to reduce risk and ensure compliance. By integrating their trade strategy throughout the entire organization with use of technology, this company was successfully able to create flow with trade processes, reduce time and costs, reduce risk, and heighten compliance assurance. The organization was able to save approximately $96,000 a year and reduce their production time by approximately 92%. Also, the organization is able to avoid penalties due to violation of the Lacey Act ranging up to 5 years of imprisonment and a $500,000 fine per violation, as well as forfeiture of merchandise.
The Lacey Act is a very complex program that is designed to manage species and origin of wood materials from cradle to grave to protect the US domestic market. It was a modification to the Farm Act that included a broadening of the definition of plants that the act covered. To read more about this program and it’s details, click here.
Example of how far reaching this could be: Country Time lemonade that is contained in a plastic bottle, with a plastic cap and covered with a plastic wrapper contains, among other things, glycerol ester of wood rosin. Glycerol ester of wood rosin is a common food additive and is prepared from resin acids of wood rosin harvested from the stumps of the longleaf pine. It would be covered by this law.
Integrated Trade Compliance Strategy Wrap up
The issue is clear that for manufactures of wood products it was of great concern to understand their sourcing trade data and link it to the export (sales) trade data. In this case it was a critical given the fines and penalties extended beyond financial but also prison time. This is a clear-cut case for an Integrated Trade Compliance Strategy, where the linkages between sourcing and growth were directly related and significant impact on the organization and understanding its tolerance for risk.