Much has been said and written about the growing importance of global trade and transportation. In fact, this subject has served as a draw card for conference attendance across the globe for the past year or so. Of further interest is the implementation of track, trace and other technologies to ensure safe and secure trade lanes – fostering brand protection, reducing counterfeiting and potential product diversion. So what else is new?
What IS of interest is the fact that most discussions tend to relate to the impact of globalization from a geographic and corporate perspective. The human element – the supply chain community – tends to be forgotten. And herein lies the rub – no matter how advanced and bullet proof the technology, unless all the players are taken into account, and all the bumps in the road are planned for, things WILL go awry.
In the past, the term ‘supply chain’ was loosely representative of the buyer/seller relationship, taking into account financial terms and conditions. Increasing outsourcing to ‘lowest cost provider’ has changed the nature of the physical movement of goods, in many cases creating the need for products to pass over a variety of geo-political boundaries. Issues related to port congestion, transportation and other delays create headaches for brand managers and logistics professionals. Currency variations can negatively impact total landed costs and profit potential – these are part and parcel of the challenges of global trade. But to use a rather hackneyed term, the ‘buck does NOT stop there!’
There are other issues that need to be taken into consideration – this time related to international laws and regulations – violation of which constitutes ‘white collar’ crime!!
A chilling thought.
Today’s supply chain executives need to be aware that dollars do not always make sense – in some cases, the ‘bargain of the week’ may just be illegal! In order to operate within the rules and regulations of global trade, it is necessary to understand the impact of U.S. laws, regulations, policies and procedures as they relate to each of the following:
- border security
- corporate tax
- customs modernization
- global sourcing
- intellectual property
Requirements for importing finished goods and specific items depend on a variety of factors, to include:
- bilateral, regional and international negotiations and agreements
- international and regional organizations
- foreign laws, policies and requirements
- specific conditions affecting the importation, exportation and transportation of goods and services.
One of the keys to unlocking the mystery of global trade compliance is having an understanding of the Harmonized Tariff Schedule (HTS) – every item is classified according to this international ‘rule book’ and assigned a classification number. Tariff determination is more an art than a science – factors that can impact the classification vary from safety, health, energy efficiency and other standards. In these cases products cannot be imported without a permit from the related government agency – an onerous process at times. Other factors include the relationship between the origin and destination countries, with a variety of constraints and incentives, for example quota restrictions, reduced rates of duty and, at the extreme spectrum, restriction from entry due to embargoes and trade agreements.
And not to forget that tricky little factor – Country of Origin! The US Department of Customs and Border Control is extremely concerned about each of the hands that products destined for sale on US soil pass through. In fact, there are regulations that make it critical that each party that has ‘added value’ in whatever form or function is identified on international trade documentation. (Added to which every item imported for use in the USA has to be physically marked with Country of Origin – a challenge for items such as flowers, gems or water!) For more on the subject, reference the following link, (2 screens down) - "Marking of Country of Origin")
And a note on the subject of intellectual property – in many cases the distribution of trademarked and copyright product is governed by contractual agreements providing specific individuals and companies sole rights. The importation of product that falls into this category could result in product seizure, fines and other legal action. Talk about a serious case of Buyer Beware!!
Understanding the pitfalls that await the supply chain manager who is extending their reach from Alabama to Asia is the first step on the road to global trade compliance. Ensuring that all participants in the chain of custody adhere to these rules takes vigilance and control. Most supply chains include many links – many of which are hidden from the ultimate buyer and consumer. However, each of these links needs to be compliant with the rules of trade in the ultimate country of destination. As such, trade documentation needs to be explicit, reflecting the many hand-offs in the end-to-end process. Global travel is accessible to those who guard the borders. On site inspections and in depth investigation of n-tier manufacturing and processing facilities are growing in regularity. Denial of entry for product is one of the consequences – however, there are worse outcomes for those who ignore the rules and regulations. Contravention can result in criminal proceedings – at both an individual and a corporate level.As the expression goes, there is no such thing as a free lunch – or a truly ‘rock bottom deal’ for premium products.