All businesses are impacted by International Trade, U.S. Sanctions, and big news headlines. In this post, we want to highlight examples of how ITC can affect your business and provide suggestions on how to handle these challenges like a pro. Keep reading to learn how ITC affects your sourcing, supply chain, or “purchasing” function.
Sourcing and Supply Chain, a.k.a. Purchasing- You are buying (sourcing), and your suppliers are buying (supply chain). The first requirement of understanding your supply chain is to know the product and services you are bringing to market. What many companies do not realize is, this includes the tangible and intangible inputs that make up your finished product or service. As more and more companies rely on sourcing raw material inputs, technology and services from NON-US sources the supply chain becomes more complex and difficult to manage as regulations change. You may be thinking international trade doesn’t apply to you since you do not import and do not export, but are you really sure? Here are some scenarios you might relate to.
Scenario 1: You have purchased from foreign suppliers in the past but had a hard time getting things delivered and moved through U.S. Customs. You or your team decided to have a local same state supplier purchase the goods and deliver them to your facility from your original foreign supplier. Problem solved, right? WRONG This rearranged purchasing strategy doesn’t remove the NON-U.S. origin, it simply created a middle man, added complexity, and you lost control of your shipment. Your goods are still NON-U.S. Origin and regardless of who acts as the legal importer, if you aren’t familiar with importing or don’t have a US Customs Broker working on your behalf, you will likely have the same challenges as you did originally.
Scenario 2: Your company bid and won a small business set aside contract awarded by the U.S. Federal Government. Congrats! In that contract, you will likely find language that requires you to source a certain percentage of U.S. origin content and labor. Can you meet that requirement? Do you have records from your supplier validating and documenting origin? You could be in breach of contract which can cost you the entire contract and leave you with unsold inventory or services.
Scenario 3: Your primary customer is in Canada and has requested a Free Trade Agreement Certificate. Luckily, you have kept records and sourced within USMCA countries that allow you to compete with suppliers who do not. Your customer will now enjoy duty relief at the time of import due to your strategic sourcing and supply chain practices. There is nothing better than a competitive advantage.
Our tip to #tradesmarternotharder– require the certificate of origin from your suppliers by embedding a contractual clause in your purchase order or contract. When origin has been provided, document origin against that part in your inventory, quality, or master part database. *Hint, if your paperwork says U.S. origin but your product is labeled China, you have some work to do.
There is another side to understanding your suppliers, who they do business with and what you should know. The Bureau of Industry and Security came cracking down when the Department of Commerce published regulatory changes to the Entity List by adding 38 additional Huawei Companies and affiliates. You can find more on the specifics of the notice here but in short, if any of the listed Huawei entities are a party to your transaction, you may be caught and the transaction isn’t permissible without a license. #Tradesmarternotharder by asking your IT team to search your supplier database, customer database, end-user fields, ship to, and sold to fields for the listed entities. If you find a match, contact your attorney or Trade Consultant for further guidance. If you aren’t quite sophisticated enough to have a dedicated IT team, roll up your sleeves and start reviewing your data for those parties the good old fashioned manual way. In any case, this is an example of how International Trade Compliance (ITC) can creep into even the smallest business or simple supply chain.
Finally, strategy is at the heart of the organization. ITC is your PARTNER and can help you identify opportunities to seize, and which opportunities you should avoid. As your teams look into strategic sourcing, get ITC in the room and shake out the details of how each supplier or sourcing strategy can drive efficiencies and cost reduction that isn’t tied to headcount! Your teams may be considering a deal with suppliers in China versus suppliers S. Korea. To meet quality and proprietary design requirements you may engage in technical conversation and exchange drawings or specifications. Caution– this activity may require licensing or may not be permissible with China but completely doable with S. Korea. U.S. import duties could be dutiable from one country but free from another. Think about the additional 10% duties on aluminum from Canada or 25% additional duties on steel from China. What about that online boutique you own? Do you source your clothing and accessories from outside of the U.S.? Are you the legal importer? Are you paying duties and fees in addition to the cost of your purchase?
Just remember that International Trade (ITC) applies to businesses of all sizes and industries including intangibles like IT. Small businesses may not have a sophisticated ITC program, and that’s ok. A little awareness and strategy can go a long way. Engaging an ITC advisor or International Trade Attorney can be more cost effective than paying fines and penalties for simply not knowing. Reach out to us anytime by visiting our website at www.globaltradeinnovations.com for a no-charge consultation to evaluate your business’s trade readiness and remember to #tradesmarternotharder.