Trade compliance will only become more challenging for global businesses in 2024 as supply chains continue to undergo transformative change. Companies are revamping their sourcing strategies to become more resilient; technological advancements by regulators are forcing importers and exporters to follow suit; and geopolitical tensions continue to trigger sanctions and tariffs. These trends are shaping the compliance landscape and elevating the importance of a sound trade compliance strategy.
So where should you focus your compliance efforts to effectively manage risk and gain an edge over the competition? Here are the top five areas of risk and opportunity for compliance professionals in 2024.
1. A rise in anti-trade sentiment in 2023 will continue to drive trade restrictions in 2024
Expect 2024 to bring more trade restrictions – and for those actions to expand beyond China into emerging markets, too. Especially leading up to the U.S. elections in November, expect no significant movement on any legislation that might reduce duties or promote global trade.
- The U.S. Trade Representative (USTR) recently announced a “fact-finding investigation” into apparel supply chains in Bangladesh, Cambodia, India, Indonesia, and Pakistan. Similar investigations in the past have resulted in U.S. trade policy responses, like increased tariffs or trade restrictions.
- New anti-dumping and countervailing duty (AD/CVD) cases continue at a record pace, leveling the playing field for domestic industries that allege injury from unfairly traded imports. Stay informed as commodities not previously associated with AD/CVD are sometimes named in the complaints, like the new petitions targeting glass wine bottles and paper shopping bags. U.S. CBP has a helpful Q&A on AD/CVD issues.
- Watch the U.S. presidential election closely as certain candidates have indicated they would impose additional, broad trade remedy tariffs against all imported goods, irrespective of origin.
- Miscellaneous Tariff Bill (MTB), Generalized System of Preferences (GSP) and Section 301 exclusions are unlikely to move forward in 2024. And the USTR’s last announcement on 301 exclusions hinted they may not be renewed in May of 2024.
If you need to get smart fast on these and other trade compliance strategy issues, check out our article Global Trade Compliance: Understanding the Basics.
2. Diversification in sourcing strategies is driving deeper collaboration between sourcing, logistics and compliance functions in 2024
Many cargo owners are exploring nearshoring, friendshoring, and China Plus One strategies in response to rising trade remedy tariffs and to enhance supply chain resilience. Such major changes increase complexity and risk for compliance leaders. Some companies that have shifted production locations without a careful review have paid the price in unexpected logistics and compliance problems. It’s important to be methodical with such decisions and leave time to explore the implications of sourcing shifts on supply chain speed, cost, and risk. This includes the logistics implications of a China Plus One strategy.
- As retailers balance inventory and demand, lean logistics initiatives require compliance leaders to find a balance between speed to market and compliant trade practices.
- Any response to a potential longshoreman strike on the U.S. East Coast in September, along with recent spikes in labor actions globally, requires synchronization of logistics and trade compliance strategies, including a review of alternate cargo routings.
- Many companies have found that sourcing shifts haven’t delivered expected duty, time, or cost savings. Misunderstanding country of origin rules, free trade agreements, or real-world lead times can lead to unanticipated delays, costs, and compliance challenges.
- The most successful sourcing shifts are to regions with existing expertise, component material resources, and infrastructure in the product category. Partnering with a trusted supplier can be a great strategy for success.
3. In 2024, global regulators will ramp up enforcement of 2023 forced labor prevention measures
Careful attention is warranted here because this issue will remain a priority. Compliance leaders must map their supply chains right down to the component level and implement strong forced labor prevention practices to avoid delays, loss of sales, and damage to brand reputation.
- The U.S. House of Representatives Select Committee on China issued a statement urging the Department of Homeland Security to strengthen enforcement of the Uyghur Forced Labor Prevention Act (UFLPA) and to assess the use of de minimis for products from China. Expect U.S. Customs and Border Protection (CBP) to ramp up enforcement given the pressure from Congress on this issue.
- Stay connected to trade compliance updates in all your foreign markets. Align your operations with new forced labor and environmental regulations in Mexico, Canada, the UK, the EU, Australia, and special regulations in Germany.
4. Regulators are increasingly employing advanced technology for compliance enforcement and, in 2024, traders will need to follow suit
CBP is contracting with companies like mesur.io to access open-source intelligence and satellite imagery for a comprehensive view of your supply chain in real-time. They can see everything from transactions between your supplier’s supplier’s supplier to satellite images of the fields where the cotton is picked for the apparel your suppliers produce.
In this environment of technology-aided enforcement, technology-aided compliance should be part of your strategy.
Such technology can play a crucial role in streamlining and enhancing trade compliance management by automating processes, ensuring accuracy, and improving efficiency. One way is by automating the tracking and monitoring of trade regulations and requirements. These systems can provide real-time updates on changes in trade policies, tariffs, and compliance standards, helping you to stay informed and adapt quickly. AI-powered solutions analyze vast amounts of open-source data to identify potential compliance risks.
Technology can’t wholly automate trade compliance, but it can perform much of the time-consuming analysis work to help focus your limited resources where they’ll have the greatest impact.
As CBP uses technology for targeting purposes more actively in 2024, it will be difficult to meet compliance expectations without access to similar tools.
5. The rise of geopolitical tensions will impact trade regulation and supply chain dynamics in 2024
The world is a very complicated place right now, with political and military conflicts that can have a huge impact on trade compliance strategy. It’s impossible for compliance leaders to predict what will happen, but it’s essential that they monitor events closely and plan accordingly.
- Sanctions enforcement against China and Russia will continue to increase.
- Events in the Middle East and the Red Sea may spur additional trade restrictions.
- Many supply chains are caught in the complicated relationship between the U.S., China and Taiwan. Watch for signals of provocation, marked by sanctions and tariffs, or reengagement, during the May inauguration of Taiwan’s new President-elect and the upcoming U.S. presidential election in November, 2024.
Trade Compliance Strategy – 2024 and Beyond
Trade compliance managers will earn their salaries in 2024 as compliance becomes increasingly complicated and enforcement ramps up. You won’t have the time or resources to drive every important initiative. Use the guidance provided in this summary to establish priorities and focus on areas that will have the most practical impact for your business.
Remember that help is available to assist with this critically important, but often neglected, trade compliance function. Partnering with an experienced customs broker and global freight forwarder, like Dimerco Express Group, brings an added layer of expertise to your team. Contact Dimerco to start a conversation.