Many potential issues could impact global supply chains, sourcing strategies, and the flow of working capital in 2007. If not properly addressed, importers and exporters may face substantial unexpected costs and an increased frequency of supply chain disruptions. While there are risks in 2007, if managed well, these risks also present numerous business opportunities.
1. HTS Codes. Tariff codes are adjusted approximately every five years, with the World Customs Organization updating the Harmonized Tariff Schedule (HTS) terminology at the international six-digit subheading level to reflect changes in commerce and technology.
Out of the 97 chapters in the Harmonized Tariff Schedule (HTS), 83 have undergone changes. Accurately assigning HTS codes is crucial as it determines the taxation format when products cross borders. The issue is that few national governments have issued specific changes involving all countries, leaving companies in a bind when facing unknown tariff increases, possible sanctions, and transaction procedure delays.
A possible solution to this problem is for companies to designate either internal personnel or external trade experts to track government publications in various countries, thereby staying informed about changes in a timely and detailed manner and being prepared to immediately adjust product categories when changes occur.
2. Reverse Logistics. As companies increasingly take advantage of sourcing opportunities from low-cost countries such as China and India in the Asia region, it is expected that procurement of goods from Asian manufacturers will lead to a strong growth in reverse logistics.
However, taking Vietnam and Thailand as examples, despite the potential for significant cost benefits in these countries, one concern remains: how can manufacturers effectively manage reverse logistics originating from this region? Additionally, as more goods flow out of the region, what procedures, processes, and infrastructure exist to manage repairs, returns, and warranties?
From the perspective of each country, businesses will only succeed if they excel in managing the complex network of warehousing, distribution, personnel, and compliance with government regulations.
3. Global Environmental Regulations. In 2007, manufacturers of electrical and electronic equipment will continue to face more environmental restrictions. Manufacturers must be able to demonstrate compliance with these environmental regulations. Non-compliance with these directives can result in lost sales, fines, and damage to corporate reputation.
The EU's RoHS directive came into effect on July 1, 2006, thereafter restricting manufacturers from using lead, mercury, cadmium, hexavalent chromium, polybrominated biphenyls (PBB), and polybrominated diphenyl ethers (PBDE). Similar to the EU RoHS, Japan's RoHS also took effect in July in Japan. The EU's WEEE will soon come into effect, setting recycling targets for discarded electrical products and electronic waste. Electronic waste refers to components in devices considered toxic and non-biodegradable.
Other upcoming restrictions on harmful substances and their effective dates include:
- California’s Electronic Waste Recycling Act in the United States (effective January 1, 2007);
- China RoHS (effective March 1, 2007);
- EU's REACH (effective spring 2007);
- Electrical/Electronic Products and Automobile Resource Recycling Law (Korea RoHS) (effective July 1, 2007);
- EU EUP (effective August 11, 2007).
4. Logistics Security. More than five years after the September 11 attacks, security remains a significant issue for businesses, which must be properly addressed to ensure the safe and smooth flow of products in the global supply chain while complying with increasingly stringent government regulations and restrictions.
The methods to ensure supply chain security must be more diversified than before, starting from the top of the command chain led by chief executives, implementing and executing effective compliance plans, extending all the way down to frontline personnel who directly interact with customers. At the most basic level, those assisting with shipments are responsible for addressing the following questions: Who is the shipper? Who is the recipient? What goods are being transported?
To obtain accurate information in a timely manner, close communication between all parties in the supply chain—manufacturers, service providers, and consignees—is essential. Initiatives like the U.S. Container Security Initiative (CSI) require companies to have the ability to quickly integrate new requirements into their supply chains.
Mismanagement could lead to failed transactions or increased pressure on target delivery dates downstream in the supply chain. The challenge posed by security issues is balancing the need to secure borders against threats from a few bad actors while encouraging smooth commercial circulation and travel for the vast majority of law-abiding individuals.
5. Government Mandatory Policies and Orders. Besides the aforementioned four points, various mandatory policies and regulations regarding imports and exports that may be issued by governments worldwide will also affect the supply chain.
Take the U.S. government's mandatory filing of export shipment information through AES (Automated Export System) as an example. AES is an electronic computing system used to track and control export information and facilitate coordination among federal agencies. This filing requirement will begin implementation in the first quarter of 2007.
U.S. exporters must prepare effective compliance processes to meet the new AES filing requirements, otherwise they will face severe civil and criminal penalties, with fines per violation ranging from $1,000 up to $10,000.
Source: http://www.scsally.org.cn/
SCSA Supply Chain Security Alliance