Executive Briefings

For Traders, 2007 Will Be a Year of 'Risks and Opportunities,' JPMorgan Chase Vastera Says

Importers and exporters can be excused for worrying about a host of issues that are certain to plague them in 2007, leading to higher costs and more supply chain disruptions. Fortunately, "the news for 2007 isn't all bad," writes Bernie Hart, global product head of JPMorgan Chase Vastera. In a recent paper, he outlines the "risks and opportunities" that international traders will likely face in the coming year. The "risks" category includes a major update of the Harmonized Tariff System (HTS) by the World Customs Organization. Changes have been made to 83 out of 97 HTS chapters, at the international (six-digit sub-heading) level. But few governments have published their country-specific changes, Hart notes, "leaving businesses in the lurch and at risk of facing unknown duty increases, possible sanctions and delays in processing transactions." Meanwhile, manufacturers will confront the challenge of managing reverse logistics from low-cost sourcing countries such as Vietnam and Thailand. As the volume of manufactured goods increases from those regions, companies may not have in place the proper procedures and infrastructure to handling reverse flows. Other concerns, according to Hart, include new global environmental regulations, especially for high-tech equipment, even more pressing security issues, and the inception of mandatory filing of shipment information by U.S exporters.

In addition, he sees a trend toward "on-shoring," as some manufacturers source product closer to home in response to the growing logistics costs, quality issues, lead times, port congestion and fuel costs that are associated with the outsourcing of production to Asia and Eastern Europe. Finally, Hart turns his attention to radio frequency identification (RFID) technology, which he says "is gaining ground in supply chain systems around the world, and adoption is just going to increase." Companies should beware, however, of two potential obstacles to RFID's growth: the cost of equipment and tags, and concerns about the leaking of proprietary information.

Visit www.jpmorganchase.com/vastera.

 

Importers and exporters can be excused for worrying about a host of issues that are certain to plague them in 2007, leading to higher costs and more supply chain disruptions. Fortunately, "the news for 2007 isn't all bad," writes Bernie Hart, global product head of JPMorgan Chase Vastera. In a recent paper, he outlines the "risks and opportunities" that international traders will likely face in the coming year. The "risks" category includes a major update of the Harmonized Tariff System (HTS) by the World Customs Organization. Changes have been made to 83 out of 97 HTS chapters, at the international (six-digit sub-heading) level. But few governments have published their country-specific changes, Hart notes, "leaving businesses in the lurch and at risk of facing unknown duty increases, possible sanctions and delays in processing transactions." Meanwhile, manufacturers will confront the challenge of managing reverse logistics from low-cost sourcing countries such as Vietnam and Thailand. As the volume of manufactured goods increases from those regions, companies may not have in place the proper procedures and infrastructure to handling reverse flows. Other concerns, according to Hart, include new global environmental regulations, especially for high-tech equipment, even more pressing security issues, and the inception of mandatory filing of shipment information by U.S exporters.

In addition, he sees a trend toward "on-shoring," as some manufacturers source product closer to home in response to the growing logistics costs, quality issues, lead times, port congestion and fuel costs that are associated with the outsourcing of production to Asia and Eastern Europe. Finally, Hart turns his attention to radio frequency identification (RFID) technology, which he says "is gaining ground in supply chain systems around the world, and adoption is just going to increase." Companies should beware, however, of two potential obstacles to RFID's growth: the cost of equipment and tags, and concerns about the leaking of proprietary information.

Visit www.jpmorganchase.com/vastera.