Publication
Owning a multinational enterprise means conducting business across multiple jurisdictions and being subject to overlapping state and federal laws, as well as international treaties and trade regimes. Every country has its own laws, regulatory practices, and commercial norms corresponding to product standards, customs and regulatory documentation, packaging, and labeling. For example, products in Spain must be labeled in Spanish, and in many cases, must follow strict regulations for formatting and terminology displayed. The European Union (“EU”), as a whole, enforces strict laws regarding product safety and consumer protection, such as the General Product Safety Regulation, which establishes horizontal safety obligations for consumer products placed on the EU market.
Navigating these multi-layered legal frameworks requires knowledge of best practices and careful oversight in compliance. Noncompliance, including inadvertent violations, can result in penalties, goods detained at the border, and costly recalls. As of January 1, 2022, the U.S. Consumer Product Safety Commission is authorized to assess civil penalties up to $120,000 for each violation and $16,025,000 for any related series of violations. The financial and operational impact of a product recall can be severe. One example is the Takata airbag recall, which affected tens of millions of vehicles and dozens of automakers (including Toyota, Honda, and Ford). A third-party supplier produced defective airbag inflators, but because importers are legally responsible for ensuring compliance with safety and product regulation, the manufacturers were forced to recall the product. The resulting recalls exceeded $10 billion in costs and show that one misstep of noncompliance can quickly become a make-or-break issue for a growing business.
Additional challenges include navigating tariffs, duties, and trade sanctions, which require proactive compliance planning. Import tariffs and duties vary between countries and are important because they can significantly impact profit margins. Companies must accurately classify their goods with the correct Harmonized System code, as this determines how customs authorities assess duties and taxes and how much duty or tax should be charged. If a company misclassifies the good, it risks paying incorrect duties for which customs authorities may later assess the difference along with accrued penalties or fines. Trade policies often shift unpredictably, such as through a sudden increase in tariffs or new free trade agreements. With proper compliance planning and legal guidance, these regulatory challenges can be effectively managed, allowing companies to mitigate risk while capturing the substantial commercial benefits of lawful access to international markets, including increased revenue and long-term profitability.
Companies should adopt proactive compliance programs rather than reacting after violations occur. Many companies designate a compliance officer who is responsible for staying up-to-date on international laws by coordinating with legal experts. It is useful to develop checklists and standard operating procedures for product testing and certification, documentation of shipments, and screening customers or partners. Regular staff training and internal audits are also important, as employees should be knowledgeable on how to fill customs paperwork correctly, classify products, and handle restricted or controlled goods. With the right checks and teams in place, a strategic compliance program with legal guidance supports consistent compliance with customs and regulatory requirements across jurisdictions. In the long run, this not only prevents legal issues but additionally reduces delays at the border and promotes efficient international operations.