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2014 Media Kit
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Global supply chain: 2007 risks and rewards

By: | at 07:00 PM | International Trade  

By Bernie Hart, Global Product Head, JPMorgan Chase Vastera

When considering the global trade environment in 2007 there are a number potential issues looming that can disrupt global supply chains, sourcing strategies, and the flow of working capital. If not properly addressed, importers and exporters may face significant unexpected costs and increased disruptions to their supply chain. But the news for 2007 isn’t all bad. A number of promising opportunities exist as well.

Risks

2007 Tariff Code Changes—Approximately every five years, the World Customs Organization updates the Harmonized Tariff System (HTS) nomenclature at the international (6-digit sub-heading) level to reflect changes in trade patterns and technology. Of the 97 HTS chapters, changes were made to 83. Accurate HTS code assignment is critical as it determines the manner in which a product is taxed when shipped across borders. The problem: Very few international governments have published their country-specific changes, leaving businesses in the lurch and at risk of facing unknown duty increases, possible sanctions and delays in processing transactions as the industry scrambles to comply. The solution: Assign dedicated personnel or outside trade experts to monitor international government publications for timing and detail changes, and be prepared to make adjustments to your product classifications as soon as changes become available.

Reverse Logistics from Asia

We continue to see strong growth from manufacturers sourcing goods from the Asian marketplace. Businesses increasingly are looking for low cost country sourcing opportunities within and beyond China and India. As Vietnam and Thailand, for example, have potential to bring great cost benefits, a problem continues to cause concern - How will manufacturers effectively and efficiently manage reverse logistics from this region of the world? As more goods flow out of the region, what procedures, processes and infrastructure are in place to manage repairs, returns, and warranties? On a country by country basis, businesses will succeed only if they can excel at managing a complex web of warehousing, distribution, personnel, and government compliance issues.

Global environmental regulations—Manufacturers of electrical and electronic equipment will continue to face additional environmental restrictions as 2007 progresses. Non-compliance with such directives can result in lost revenue, fines and damage to corporate reputation. Companies must be able to demonstrate compliance with these initiatives. In 2006, we saw the European Union’s Restriction of Hazardous Substances (RoHS) directive go into effect on July 1st in which manufacturers were restricted from using lead, mercury, cadmium, hexavalent chromium, polybrominated biphenyls and polybrominated diphenyl ether in their products. The Japan RoHS, a similar directive, went into effect in Japan in July as well. By year’s end, the European Union’s Waste Electrical and Electronic Equipment Directive (WEEE) will go into effect, setting collection, recycling and recovery targets for broken or unwanted electrical goods and “electronic waste”—components of such equipment that are considered toxic and are not biodegradable.

Pending restricted substances regulations include The Electronic Waste Recycling Act, California, United States (effective January 1, 2007); Article 11 (China RoHS), China (effective date: March 1, 2007); Registration, Evaluation and Authorization of Chemicals (REACH), European Union (effective date: spring 2007); The Act for Resource Recycling of Electrical/Electric Products and Automobiles (Korea RoHS), South Korea (effective date: July 1, 2007) and the Directive on the Eco-Design of Energy-Using Products (EUP), European Union (effective date: August 11, 2007). How do these impact your manufacturing operations?

Security

More than five years after 9/11, security continues to be a bigger concern for businesses in order to keep products running safely and smoothly through t