Industry Today – August 23, 2021
How companies must navigate today’s changing global business landscape and stay compliant amid increasing government scrutiny.
What this means for your strategic business planning.
We all know that global trade policy affects your supply chain and your ability to import and export products. Often times you have interests on both sides of an issue. You want lower costs, efficient labor sources, and quality imports. You want to be able to sell your goods and services with minimal restrictions. At the same time, growing US national security regulations impose compliance requirements on companies engaging in cross-border activities. The practical result is that managers need to be fully aware of their supply chain and all parties involved in their business, from where and who a business sources materials for importation and beneficial ownership from donors to suppliers. , customers, end users and end users. for the company’s products. Executives need to understand their supply chains, not only to ensure compliance and mitigate risk, but also to identify strategic opportunities for advantages over their competitors.
What is the planning of the Biden administration and how will it affect your business?
The Biden administration continues to slowly and steadily review specific decisions of the Trump administration, but generally stays the course. For example, Biden maintains the U.S. government’s positions on Section 301 duties on imported Chinese products, treating Hong Kong as part of China, banning imports of forced labor products, and seeking to minimize dependency on imported Chinese products. United States with respect to Chinese imports of rare earth metals and semiconductors. . Biden continues to use effective targeted sanctions against individuals and businesses as a mechanism to support US national security and foreign policy objectives; and his administration implemented a proactive “buy American” domestic policy in government contracts to boost US manufacturing capacity and growth while protecting US technology.
At the same time, the administration is working to resolve disputes with traditional allies of the United States. In June, Biden struck a deal with the EU to end the 17-year subsidies to Boeing and Airbus, ensuring no quick price wrangling for the next 5 years. Then, it will focus on resolving digital services tax disputes by working with the structure of the Organization for Economic Co-operation and Development (OECD). The administration is reconnecting with strategic partners such as the EU and Australia to reform the WTO, strengthen the Paris Agreement on climate change and promote an option to the Chinese “Belt and Road” initiative with the ‘OECD and the G-7. Congressional Recommendations on Securing U.S. National Security Supply Chains recommend similar outreach, developing processes to foster closer cooperation on the resources and investments of traditional U.S. allies as an alternative. to dependence on adversaries such as Russia and China.
The result of these actions is a standoff between the promotion of free trade and the protection of national industry. On the one hand, Biden maintained tariffs on steel and aluminum. However, to build new products in the United States, we need rare earths from China. And, the policies of openness and free trade are driving down domestic prices in the United States. So far, Biden’s policies follow what Trump started with China, but also attempt to build an international coalition to be proactive with progressive multilateral trade policies to promote U.S. domestic production and protect the national security interests of the United States. United States. The problem for the administration may actually be Congress where voters can see the benefits of countering Chinese influence but may not have the long-term vision of an open and sustainable global trade policy.
So where does that leave global manufacturing and transportation companies? What can you anticipate and how do you position yourself for the regulations to come? Expect an increase in government regulations targeting imports, exports, supply chain vulnerabilities, and foreign investment in the United States. Whether you are in the engineering, food, chemical or aerospace industries, businesses need to be leaner, more flexible, and prepared to comply with regulations and adapt to disruption in the supply chain. supply. Concretely, management must change. Supply chain and logistics are no longer a middle management issue that rarely floats to the C-Suite. Businesses that resist the new normal will be resilient. This means not only a resilient supply chain, but a resilient and open-minded C-Suite. Supply chain issues will be part of strategic planning, as will ESG issues and understanding where forced labor is used and workers’ rights are ignored. Creative thinking about the country of origin and the correct tariff codes will be key to ensuring import compliance and knowing how and where you can move production and find alternative suppliers. Always consider new suppliers, new customers, and opportunities to take advantage of changes in trade flows with shippers and manufacturers. Your experts on these topics need to sit down at the table to share their understanding of the market and their knowledge of suppliers. Your in-house legal advisor can be an important partner here – he often identifies these issues before they reach the problem level and can identify opportunities and possible options if they are included.
These considerations apply to both import and export. When was the last time you inquired about your sanctions compliance? Recent executive decrees have expanded sanctions programs targeting Russian and Chinese individuals and entities. These penalties actually impact your internal restricted party compliance procedures. Does the company conduct restricted party screening and IP address blocking to mitigate the risk of violation of US sanctions prohibiting transactions with designated persons, entities or embargoed regions such as the region of? Crimea in Ukraine, Cuba, Iran, North Korea and Syria? Who is doing this research? Are the results communicated to the legal department or to operations? Has the company conducted an internal audit of these trade compliance measures?
Even companies that do not export can be affected by these regulations if they hire foreign workers or use imported technology. The Biden administration has strengthened regulatory enforcement government-wide, from the Department of Justice to the Federal Trade Commission, the Treasury and Commerce departments, and the Securities and Exchange Commission. The continued focus on protecting U.S. technology, infrastructure, and data is part of many executive orders and policies, ranging from mislabelled imports and intellectual property infringements to the Department of Homeland Security legislative proposals that would require accountability for the foreign ownership of US companies.
The companies that will be successful in the years to come will be those that raise the level of knowledge in their C-Suites and on the board of directors. Accept these changes and listen to your employees. Follow the administration. You may need to be prepared as if you are on a swing – trying to balance yourself in the air, but having the knowledge and flexibility to adapt easily can make a significant difference in your results. Here is an example: If you are importing from China and paying 7.5 and / or 25% Section 301 import duty, and did not join the class action lawsuit, you should ask your experts, why not? The International Trade Tribunal (CIT) case is a quick and profitable opportunity to eventually get your Section 301 duty refund. It’s a no-brainer and if you don’t know, let yourself be educated and in the game. Likewise, if you receive foreign investment, or import or export goods, do you know who you are dealing with? Government enforcement in these areas is steadily increasing and companies that have not analyzed their business partners, from suppliers to customers to investors, could be caught off guard and face significant financial and reputational penalties. .
Reprinted with permission from the August 23, 2021 issue of Industry today. © 2021 Industry today. All rights reserved.