Much of the risk in supply chain management lies at the intersection of logistics and trade compliance.
As supply chains became disrupted over the past few years, companies began sourcing products from different countries. New suppliers can introduce uncertainty about how and where products and component materials are made and assembled. With the increasing focus on trade compliance, it’s important to have a keen understanding of your supply map – from component material sourcing up through final mile delivery.
Logistics and trade compliance leaders need to manage risk and protect their companies from disruptive and expensive compliance violations. Following is a summary of 2023 focus areas for supply chain security and trade compliance – particularly in the United States.
2023 Supply Chain Security & Trade Compliance Outlook
Enforcement and audit activities of US Customs and Border Protection (CBP) ramped up in 2022 and are expected to intensify further in 2023. Importers are encouraged to revisit their compliance manuals and conduct internal audits in key CBP focus areas like classification, valuation, and Section 301 duties.- The global focus on Forced Labor is intensifying and US CBP and EU investment in enforcement is, too. The trade is encouraged to map supply chains and vet business partners carefully as more products (recently auto parts, for example) will likely be targeted in 2023.
- CBP will dedicate additional resources toward combatting Trade-Based Money Laundering (TBML) in 2023. Awareness and education of TBML should be a key component of compliance programs.
- The CTPAT program expands in 2023 to CTPAT Trade Compliance, an “AEO-like” program that folds Customs compliance standards into members’ existing supply chain security frameworks. The program requires significant investment on the part of the importer, but has some tempting benefits, including elimination from CBP’s Focused Assessment (random audit) pool.
- The CTPAT Security Program will see ramped up validations in 2023 and implementation of the new Social Compliance criteria. CTPAT members must upload appropriate documentation to their security profile to meet the new criteria and show evidence of implementation.
- Efforts to drive transformation under the 21st Century Customs Framework (21st CCF) will continue in 2023, with CBP likely delivering a proposed legislative package to Congress for inclusion in a revised bill. Proposed changes include the legal authority to reach further back into an importer’s supply chain, gaining more information earlier in a transaction, sharing information with the trade about “bad actors” and an expansion of social compliance standards.
- Experts believe it’s unlikely any strategic trade legislation will come out of Congress in the near term. Miscellaneous Tariff Bill (MTB), Generalized System of Preferences (GSP) and Section 301 exclusions are all languishing amid anti-trade sentiment. There may be some opportunity to pass more tactical measures, but the prospect for any major trade deals is dim.
- It’s unlikely the current administration will roll back the existing 301 tariffs in 2023, but certain Section 301 exclusions due to expire in December were renewed.
- New CBP regulations around Customs Broker relationships with their importer clients make it imperative that importers understand the resulting risks and rewards of the changes.
- As CBP invests in DNA testing of products, AI and data mining, they may know more about your supply chain than you. CBP is advancing the use of technology in enforcement and targeting. Stay in front of challenges to your brand by mapping your supply chain, engaging experts to help formulate risk-based compliance strategies, and carefully vetting business partners.
- The EPA recently updated the Toxic Substances Control Act (TSCA), adding new restrictions and reporting requirements on per-and polyfluoroalkyl substances (PFAS). Many states and countries around the world have also either proposed or passed similar legislation. Given the prevalence of this substance and the considerable time it will take to identify and remove it from products, companies are encouraged to take proactive measures to reduce this risk in their supply chains in 2023.
- On January 1, 2023, the German Supply Chain Due Diligence Act (SCDDA) will go into effect. This act requires that all German companies with 3,000 employees (including those that work abroad) or more (the Act tightens to companies with 1,000 employees or more in 2024) take “appropriate measures” to respect the environment and human rights in their supply chains. Companies will be required to file annual reports on due diligence activities, detail actions taken to identify risks, and detail steps taken to address those risks. Severe non-compliance penalties include fines ranging from €800,000, exclusion from government contracts, and lawsuits. Could other countries follow suit? Something to watch.
- The U.S. Securities and Exchange Commission (SEC) recently issued a proposed rule that would require public companies to provide climate-related financial data and greenhouse gas emissions in public filings. Companies should proactively prepare to meet the new requirements as the data is often difficult to gather from many different business partner sources.
- Bad actors continue to adapt to the latest technology, so protecting your company against cybercrime should be a top priority in 2023. Gartner predicts that by 2025 almost half of companies worldwide will have experienced a cyberattack. Take measures today to address this, including employing some of the free government resources available through the Department of Homeland Security.
- Drawback and other duty mitigation strategies will be strategic advantages in 2023 as supply chain managers are pressured to find savings wherever and whenever possible.
Logistics and Trade Compliance Strategy – 2023 and Beyond
2023 will be a year of uncertainty. That uncertainty makes the already difficult job of trade compliance even more challenging. To be successful in 2023, logistics and trade compliance managers will need to be resilient, focusing on effective communication, planning and hard data.
Focusing on the issues summarized in this article is a smart strategy. And partnering with expert customs brokers and freight forwarders like Dimerco Express Group brings an extra layer of support to help your company optimize in areas that will deliver the greatest impact. Contact Dimerco to start a conversation.