W S B C O M P L I A N C E G T
coming from other countries in Southeast Asia has jumped: 22 seizures of goods from Thailand occurred between June 2022 and May 2023 and swelled to 918 between June 2023 and June 2024, says BSI.
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EU Forced Labor Act
Although not in effect yet, the EU’s ban on forced labor promises to be sweeping. In November 2024, the European Council approved a ban on products made with forced labor. Companies will not be able to make available within the EU, or export from it, any products made using forced labor. The regulation will apply approximately three years after publication in the Of cial Journal of the European Union. EU Import Control System 2 (ICS2) The ICS2, which initially went live in June 2024, brings European import administration in line with the other 6 major importing markets, with an identical regulatory process and data con guration, says Bryn Heimbeck, president and co-founder of Trade Tech (see sidebar). In general, the ICS2 is looking for information many other countries already collect, such as the shipper, the consignee, the vessel, and departure and arrival dates. This process will enable more precise tracking and better decision- making, ultimately boosting ef ciency, Heimbeck says.
The U.S. government is considering changes to de minimis shipments—imports valued at $800 or less that enter duty- free. With 140 million such shipments annually, policymakers are weighing adjustments to strengthen trade enforcement and safety regulations.
importers of record to produce a digital chain of custody that documents the suppliers that contributed to a product, including providers of raw materials. They then check this data against lists of known blocked entities. If a company can’t produce these records, Customs can withhold the shipment inde nitely. “If importers do not pay attention to the possibility of a withheld container months in advance of shipment, it’s already too late,” Linxwiler says. Shifting production to other areas of Southeast Asia isn’t an automatic panacea, as importers handling goods coming from these countries also need to verify that any Chinese materials within their products weren’t made with forced labor, says Tony Pelli, practice director, security and resilience, with BSI Group. What’s more, the number of UFLPA seizures of imports
For instance, companies making furniture need to know the background of every piece of wood in their products, no matter how tiny. Otherwise, an entire piece may be non-compliant, Miller says. Moreover, the directive applies to products that originate outside the EU, says Eric Linxwiler, senior vice president with TradeBeyond, a provider of solutions for global sourcing. Uyghur Forced Labor Prevention Act (UFLPA) In the United States, the UFLPA, 4 originally issued in 2022, was recently updated, and the list of companies identi ed as making products with forced labor expanded. Goods made by these companies can’t be imported into the United States. Customs of cials may randomly ask
SMART STRATEGIES TO MITIGATE TARIFF RISKS
Top of mind for many supply chain executives is the prospect of higher tariffs. The following steps can help mitigate their impact. CHECK HTS CODES. Most, if not all, of the proposed hikes will be assigned by individual tariff codes, says Damon Pike, principal and technical practice leader, national tax office customs and international trade services with BDO. Companies should confirm they’re using the correct 10-digit HTS codes. “Getting it wrong can have significant cash consequences,” he adds. VERIFY THE COUNTRY OF ORIGIN. China is the target for many of the proposed tariffs, so ascertaining the true “country of origin” will be key to minimizing them. At the same time, the U.S. imposes a “substantial transformation” test to determine the true country of origin. This is not the country where the final assembly or production takes place,
Pike says. If a product originates in China it may be subject to a tariff, even if some additional work is completed in another country. BLOCK AND TACKLE. If moving production from China doesn’t make sense, consider more conventional supply chain strategies to offset potential tariffs, such as reducing inventory on-hand and rationalizing SKUs. CONSULT YOUR CUSTOMS BOND BROKER. If tariffs jump significantly, the limit on customs bonds also will increase. Underwriters may more closely scrutinize shippers’ finances, to ensure they can pay, should it become necessary, says Dan Swartz international tax services principal with Crowe LLP. Companies should connect with their bond broker to identify strategies they can take to mitigate the potential impact from higher tariffs, he adds.
152 Inbound Logistics • January 2025
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