Cross-border compliance is a concern for many companies that are beginning to expand internationally. Regulations from both the country of origin and the target market country must be considered.
It’s also crucial to pay attention to taxes, laws, and information protection; that’s why companies are concerned about issues like invalid employment agreements, misclassification, and the absence of confidential information.
What is cross-border compliance?
Cross-border compliance refers to adhering to regulations, norms, and laws applicable to commercial transactions crossing international borders.
This includes legal, financial, and operational aspects of every business transaction. The significance of cross-border compliance lies in ensuring ethical conduct, upholding a positive global reputation in the market, and mitigating risks.
The top cross-border compliance challenges
Each country has its own border regulations, which can make commercial procedures between nations challenging. That’s why it’s important to take steps to mitigate cultural and language barriers, as well as to have the necessary documentation and guidance to conduct business smoothly.
Permanent establishment risk
When hiring cross-border employees, all required security measures must be taken. It’s crucial to establish a subsidiary in the country where the worker belongs; otherwise, the company may risk facing new taxes.
There are employer-of-record (EOR) solutions that help reduce risks and enable companies to hire local individuals without encountering legal issues.
Invalid employment agreements
To avoid issues with employee contracts, it’s vital for companies to use a global HR platform that simplifies document creation.
Additionally, it’s important for the companies hired for various services to have the required certifications and to collaborate with specialized associations. Moreover, seeking legal guidance to facilitate document formulation is imperative.
Misclassification
To prevent misclassification, it’s crucial to engage with companies that have the expertise and understanding of the contracts, terminology, and other requirements for international contractors.
Moreover, it’s important to have all documentation clearly defined to avoid fines, violations, or harm to the company’s reputation. Therefore, it’s essential to thoroughly vet who is hired for the tasks.
For example, ocean freight shipping requires specific documentation, such as ocean bills of lading. This ensures compliance with international regulations and guarantees the safe transportation of goods.
Worker ineligibility
As a company hiring a service, it’s vital to ensure that the service provider has all the required work permits and is properly endorsed. This entails checking backgrounds, visas, and other credentials.
For instance, if you need maritime transportation, seek out a company that is a licensed ocean transportation intermediary (OTI) and a Non-vessel operating common carrier (NVOCC).
Search for companies that are members of global organizations to ensure they have the necessary documentation. Furthermore, conduct thorough research before engaging their services.
Data security violations
Companies operating across borders are required to handle data and documentation more securely. Failure to strictly comply with laws can result in various fines and damage to the company’s reputation if sensitive data is compromised.
For companies, it’s ideal to use cloud-based HR platforms that comply with necessary international regulations. It’s recommended to seek security software that is SOC2 certified.
Payroll and tax compliance violations
Expanding internationally requires special attention to payrolls and tax obligations. This will vary depending on where employees are hired, as laws regarding accounts, currencies, and payment schedules can differ from one location to another.
Having programs that assist in organizing company details, such as calculating work hours, can be vital.
There are many aspects of cross-border compliance to consider when a company expands internationally. That’s why it’s crucial to seek legal advice, use efficient software to manage data, and ensure all documentation is in order.
It’s also important to be cautious when hiring companies and verify that they have all the necessary certificates and endorsements to work across borders.
At EP Logistics, we are not only specialists in cross-border logistics services but also hold the necessary certifications to offer you a secure and reliable service. Contact us to learn more about what we can do for your company.
