particularly suppliers in high-risk regions—to provide affidavits that their operations do not include forced labor. Climate change is also starting to influence trade policy. In October 2021, for example, the United States and European Union announced a commitment to negotiate a carbon- based sectoral arrangement on steel and aluminum trade by 2024. Among other actions, the commitment toughens enforcement mechanisms to prevent leakage of Chinese steel and aluminum into the U.S. market. To navigate the complicated, ever- expanding volume of trade regulations and agreements, importers and exporters need a “strong ecosystem of external experts,” such as brokers, attorneys, and consultants, says Ludwig. Their knowledge and insight can be particularly critical when the ownership or structure of a business or its supply chain partners changes significantly. Companies also need to map out their supply chain and identify the number and locations of their global vendors. Importers and exporters can then prioritize interactions based on location and closely monitor business partners in high-risk regions. Given the level of due diligence and recordkeeping required, digitizing and automating as many steps as possible is also critical. STREAMLINED CUSTOMS CLEARANCE Classification and valuation are two pillars of customs clearance, says Sergio Retamal, founder and CEO of Global4PL. Classification drives the tariffs and restrictions that apply to goods, while valuation is the basis for assessing duties and taxes. When determining classification, it’s crucial to know the rules governing the product and its use, among other facts. A ball bearing for a plane, for example, generally is classified differently than one to be used in a toy. Companies that incorrectly classify imports can face penalties. Moreover, while it’s prudent to ask a lawyer or broker for their informed opinion,
GLOBAL TRADE GROWTH: SERVICES SHOW SOME RESILIENCE Trends for trade in goods and services, quarterly growth, 2019-2023 Q2
Source: UNCTADstat; UNCTAD calculations based on national statistics. Note: Quarterly growth is the quarter-over-quarter growth rate of seasonally adjusted values. Figures for Q1 2023 are estimates. Q2 2023 is a nowcast.
Restricted entities often can disguise themselves as passably legitimate entities to get through shipping, although U.S. Customs and Border Protection (CBP) has been quick to catch on to the changes. Technology can also help supply chain organizations research red flags in supply entity structures so they can steer clear of potential restricted- party violations. TRADE ADVANCES HUMAN RIGHTS Like many countries, America is increasingly looking to advance human rights goals through its trade policies. One example is the Uygher Forced Labor Prevention Act (UFLPA), which went into effect in June 2022. The act helps to prohibit imports of goods that were manufactured, even in part, with forced labor from the People’s Republic of China, and especially from the Xinjiang Uyghur Autonomous Region. Since its passing, more than $1 billion in goods has been tied to forced labor, estimates Descartes.
CBP enforces the UFLPA stringently, so shippers are advised to stay abreast of the UFLPA Entity List, which the CBP continually updates. In addition, emerging discussions around stricter labor monitoring in Vietnam and Indonesia could make shipments from these countries more susceptible to withhold release orders (WROs). (CPB issues WROs when it has reasonable evidence that forced labor was used in the production of goods entering the United States.) However, new regulations have not yet been implemented, and given the upcoming election cycle, it’s unlikely this will be addressed until later in 2024 or 2025, according to Rangarajan. The upshot? “Companies need to be more diligent and transparent about what they’re doing to strengthen the security of their supply chains and eliminate forced labor,” says Jackson Wood, director of industry strategy for Global Trade Intelligence at Descartes. This includes asking all suppliers, including those beyond Tier 1—and
150 Inbound Logistics • July 2023
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