Global Trade Management — September, 2007
The latest developments in global trade management

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Globalization of Supply Chains, Need for Visibility Are Driving Improvements in GTM Practices, Aberdeen Says
The increasing globalization of supply chains is causing companies to improve their global trade management (GTM) technology and business practices, according to Aberdeen Group. In the latest of a regular series of benchmark reports, Aberdeen says many companies are suffering from a lack of supply-chain process visibility, due in part to longer distances caused by the offshore outsourcing of manufacturing operations. At the same time, new customer requirements are requiring suppliers to respond more quickly to changes in demand, even as they struggle to hold down costs throughout their multi-tier supply chains. In Aberdeen's survey of more than 200 organizations, the consultancy found that companies using a supply-chain visibility platform over the past two years are twice as likely to have reduced their total landed costs; 1.7 times as likely to be able to reallocate or reroute shipments in transit, twice as likely to have reduced lead times and lead-time variability from international locations, and nearly twice as likely to experience increased budget accuracy within their supply chains. Current "on-demand" technologies for achieving visibility improve access to data by multiple parties in different locations, permit real-time updates on supply-chain events, and support networks of pre-connected carriers and suppliers. In keeping with its customary procedure, Aberdeen divides surveyed companies into three categories: Best in Class, Industry Average and Laggard, according to their ability to manage total landed cost while maintaining required customer-service levels.

Commerce Dept. Issues Ruling on Exportation of Military-Related Goods to People's Republic of China
The U.S. Commerce Department's Bureau of Information and Security (BIS) has issued a long-awaited rule on export and re-export controls for military-related shipments to the People's Republic of China. The rule sets new restrictions on the shipment of certain goods when it is known that they are intended for military end-use. It affects items that are on the Commerce Control List but do not otherwise require a license for shipment to China, according to the George R. Tuttle law office, an expert on customs regulations. In addition, the rule sets up an authorized Valid End-User (VEU) program for exports to the PRC, and revises import-certificate requirements for shipments to China that must have licenses. For the VEU program, the names of participants will be placed on an approved list under Commerce's Export Administration Regulations (EAR). In another change, exporters must obtain End-User Statements from China's Ministry of Commerce for all items requiring a license to the PRC, and for most exports exceeding a total value of $50,000. The list of items subject to the "military end-use" restriction covers some 20 products and associated technologies, including aircraft, underwater systems, lasers and airborne navigation systems.

Customs to Require Use of Electronic Manifests for Ports of Entry in Maine and Minnesota
U.S. Customs and Border Protection will require that trucks entering the U.S. through border ports in Maine and Minnesota transmit electronic manifests through the Automated Commercial Environment (ACE) program. The ruling is set to take effect on Oct. 16. Currently, the filing of ACE e-manifests is required at land border ports on the U.S. Mexico border and in the states of Washington, North Dakota, Michigan, New York, Vermont and Hampshire. The system allows Customs to pre-screen trucks and shipments, flagging suspicious cargoes for inspection before they arrive. Previously, truck drivers have presented paper manifests upon arrival at a border; the documents were then processed while the driver waited. With the addition of Maine and Minnesota, Customs said it has now required the use of ACE for transmission of electronic manifest data, or provided 90 days' notice of its intention to do so, at every land border port in which the agency originally planned to require the use of ACE, with the exception of those in the state of Alaska. Eventually, the agency said, the transmission of e-manifests through ACE will be required at all land border ports of entry to the U.S.

Customs Names Inspection Group in Year-Long Pilot of Supply Chain Security in China
Cotecna, an international inspection group based in Switzerland, has been selected by U.S. Customs and Border Protection to participate in a one-year pilot program to conduct supply-chain security validations in China. The announcement came from the agency's Office of Customs-Trade Partnership Against Terrorism (C-TPAT), a voluntary program in which members adapt certain security measures in exchange for preferred treatment by customs inspectors. The effort includes importers, customs brokers, terminal operators, carriers, and some foreign manufacturers. Under the pilot, which began on July 1, Cotecna and other selected companies will conduct on-site validations of the manufacturers that supply U.S. importers enrolled in the C-TPAT program. Currently some 10,000 companies are participating, with 6,500 certified and another 4,200 validated. Companies undergoing successful validation become eligible for enhanced benefits at the customs point of entry, including reduced inspections and expedited processing.

BIS Outlines New Guidelines on Antiboycott Penalties Under Export Administration Regulations
The Bureau of Industry and Security (BIS), part of the U.S. Department of Commerce, has published new guidelines for the assessment of antiboycott penalties against exporters. The agency lays out procedures for the handling of cases that involve voluntary self-disclosure of violations of the Export Administration Regulations (EAR). The guidelines address how BIS determines the appropriate penalty for settlement of such cases. "The Department of Commerce policy of opposing restrictive trade practices or unsanctioned boycotts, including against Israel, is clear-cut," said Mario Mancuso, undersecretary of commerce for industry and security. "Publishing the penalty and voluntary self-disclosure guidelines provides additional clarity and is a valuable part of our continuing efforts to educate U.S. businesses about their responsibilities." During fiscal year 2006, nine companies agreed to pay civil penalties totaling $95,950 to settle allegations that they violated the EAR's antiboycott provisions, BIS said.

Outsourcing to Low-Cost Countries Might Save Money Up Front, But It Raises Issues of Visibility and Control
Over the past decade, China has become the destination of choice for companies looking to slash their manufacturing costs. But newly emerging issues, particularly with regard to quality control and total landed cost, could cause executives to rethink that approach. In a recent paper on global sourcing and procurement, AMR Research, Inc. analysts Mickey North Rizza and Jane Barrett note recent changes in the corporate income tax rate and value-added tax export refund. Those developments promise to raise the cost of most items sourced from China. At the same time, companies are facing a higher degree of risk associated with such products. "More than ever," they write, "companies need to review their low-cost country sourcing decisions as part of their overall global sourcing strategies." Simply by shifting manufacturing to China, AMR says, companies can save between 35 percent and 50 percent on goods and services. But they must also factor in the risk of increased inventory levels due to longer lead times, substandard products and higher transportation costs--all of which can cause businesses to "lose more than they save." The key lies in calculating the total cost of serving a particular market, by embracing the entire supply-chain "ecosystem" from initial product concept to consumption by the end consumer. A viable strategy for low-cost outsourcing will contain many facets, say Rizza and Barrett, "and missing one element can mean the difference between profit and loss."

Congress Reacts to China-Made Toy Recalls With Series of Bills on Product Safety, Consumer Notification
In the wake of multiple recalls of toys made in China, U.S. lawmakers have introduced a number of bills that could significantly affect the business relationship between Chinese toy manufacturers and their U.S. customers. Sandler, Travis & Rosenberg, a law firm specializing in international trade law, outlines several of those measures. They include S. 1833, the Children's Product Safety Act of 2007, which would require that all toys be tested by an independent third party and bear a certificate of such testing prior to importation, and S. 1847, the Consumer Product Safety Act of 2007, which would increase penalties for failing to comply with a recall order while shortening the time for public disclosure of recalls. A third bill, H.R. 1699, would require manufacturers to provide postage-paid registration forms to consumers, and maintain records for six years, to facilitate recalls or safety alerts on durable infant and toddler products.

Calendar: Upcoming Events Related to Global Trade Management

Military Logistics Summit 2007
Adelphi, MD
Sept. 10-13, 2007

2007 APICS International Conference and Exposition
Denver, CO
Oct. 21-23, 2007

Council of Supply Chain Management Professionals 2007 Annual Conference
Philadelphia, PA
Oct. 21-24, 2007

U.S. Commerce Department Bureau of Industry and Security 2007 Update Conference
Washington, DC
Oct. 31-Nov. 2, 2007

Global Trade Compliance Benchmarking Consortium
Penn State Smeal College of Business
University Park, PA
Nov. 7-8, 2007

Past Global Trade Management Issues:
July, 2007
March, 2007

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