International trade community struggles to deal with tariff revisions
Keeping up with quickly fluctuating tariffs and trade policies requires good communication and the ability to act on short notice, according to speakers at the 2019 Northeast Cargo Symposium.
Contributing Editor Toby Gooley is a freelance writer and editor specializing in supply chain, logistics, material handling, and international trade. She previously was Editor at CSCMP's Supply Chain Quarterly. and Senior Editor of SCQ's sister publication, DC VELOCITY. Prior to joining AGiLE Business Media in 2007, she spent 20 years at Logistics Management magazine as Managing Editor and Senior Editor covering international trade and transportation. Prior to that she was an export traffic manager for 10 years. She holds a B.A. in Asian Studies from Cornell University.
Brenda Smith of U.S. Customs and Border Protection says the agency is workinig to make communications "as predictable and detailed as possible."
President Trump's erratic approach to the imposition of tariffs on imports from China and elsewhere is making it difficult for companies to comply with U.S. trade regulations, according to government and corporate trade officials gathered at the recent Coalition of New England Companies for Trade's (CONECT) 18th Annual Northeast Cargo Symposium in Providence, R.I. The lack of predictability and sometimes insufficient advance notice is challenging importers, customs brokers, software vendors, and even U.S. Customs and Border Protection (CBP)—the agency that assesses and collects tariff payments—to stay ahead of the changes, they said during the November 6 conference.
Choosing her words carefully, Brenda Brockman Smith, CBP's executive assistant commissioner, Office of Trade, noted in a speech to the CONECT audience that the agency is working in a "very active, changeable trade environment." Because "knowing what will happen so companies can plan is critical to U.S. economic growth," CBP is devoting resources to helping the trade community manage customs compliance in this environment, she said.
CBP is working to implement a combination of automation updates and communications to the trade community that are "as predictable and detailed as possible," Smith said. The agency has set up a special team tasked with carrying out changes related to the implementation of trade remedies such as tariffs and penalties, she also said. That unit works closely with the Office of the U.S. Trade Representative and the U.S. Department of Commerce to coordinate information about the tariffs and enforcement, she added.
Customs is also communicating to policymakers in other areas of the federal government the impact that tariff changes are having on U.S. businesses' customs-compliance efforts—"an important role CBP can play," Smith said.
Ready or not ...
Any tariff revision requires communication, process, documentation, and IT programming updates, not only for CBP but also for importers, customs brokers, and providers of trade-compliance software. In some cases, though, the exact details aren't available until very late in the game.
In a separate conference panel discussion, Geoffrey Powell, chairman of the National Customs Brokers and Forwarders Association of America (NCBFAA), cited the example of tariffs President Trump said he would impose on imports from Mexico unless that country stemmed the flow of U.S.-bound migrants. In late May, Trump ordered the tariffs to be imposed with just 10 days' notice, and then suddenly canceled them by tweet the Friday night before the Monday effective date. "We found out one [business] day prior to the effective date that they were canceled. It's hard to get everything ready in those circumstances," Powell said.
One of the most effective strategies for managing compliance in an era of fluctuating trade policies, according to one panelist, is to have a highly structured process for quickly identifying what needs to change and communicating that information to all affected parties. This is critical in a large, multinational organization, said Barb Secor, senior director, trade compliance for the technical equipment manufacturer Thermo Fisher Scientific.
Secor related how she and her team had to quickly jump into action when the U.S. issued a ban on doing business with one of Thermo Fisher's customers, the Chinese tech giant Huawei. "Our company has 18 different divisions. We had to think about who would immediately need to know about this worldwide," she said. The trade-compliance team had developed a formal process for monitoring changes and then cascading information and related company policies to the relevant functions in all of Thermo Fisher's divisions. Local managers then follow a specified procedure for alerting affected organizations further down the ladder. Everyone is also advised where to go for more information or assistance, Secor said. This methodology has also proven effective for dealing with the changes in tariffs on Chinese goods, she added.
In many cases, international traders and software vendors must wait for CBP to issue instructions and reprogram its systems before they can make their own updates. That creates challenges for trade-compliance software vendors, said Celeste Catano, global product manager for BluJay Solutions and a licensed customs broker. CBP is sometimes unable to have its programming in place early enough for software vendors to fully test and deploy the update in advance of the effective date, she noted.
CBP's Smith acknowledged that it's difficult for all of the players to program, test, and implement changes on short notice; she advised any party that is not ready by the time tariffs or other trade-related policies go into effect to discuss their situation with CBP. "We will work with you if we know you are trying to comply and will try to help you find a solution," she said.
When asked how CBP has been affected by frequent changes in leadership at the agency as well as its parent Dept. of Homeland Security (DHS), Smith said that it's a challenge to navigate the interplay of government and politics, especially in the "very interesting times" the agency is working in now. She noted that former CBP Acting Commissioner Kevin McAleenan's move to Acting DHS Secretary—a position he later resigned—had caused some disruption internally (current Acting Commissioner Mark A. Morgan is the second to take that position since McAleenan went to DHS in April 2019), but that everyone recognizes the need to "evolve and change to deal with change." CBP's new leadership, she added, recognizes the agency's internal expertise and trusts the staff and career officers to "keep on going ... and get the job done."
Residents and businesses along the Florida panhandle today are keeping a close eye on Tropical Storm Helene, which is forecasted to strengthen into a major hurricane by the time it strikes the northeast Gulf Coast on Thursday.
Hurricane and storm surge watches are already in effect for that area, which could see heavy rain and flash flooding across portions of Florida, the Southeast U.S., Southern Appalachians, and the Tennessee Valley, according to predictions from the National Hurricane Center.
The storm would come a month after Hurricane Debby delivered drenching rainfall for days over Florida in August and after Hurricane Beryl hit Houston in July, knocking out power across the region.
As Helene continues to gather strength from the warm waters of the Gulf of Mexico, experts are warning that the storm’s impacts could include the Port of New Orleans, agricultural operations throughout the Southeast, and additional citrus and fruit farming business in Florida, according to a report from Everstream Analytics’ chief meteorologist Jon Davis.
From a supply chain perspective, additional disruptions could include rail and road transportation stoppages, closures of interstate highways I-10 and I-75, widespread power outages, and shutdowns of offshore energy operations in the eastern portion of the Gulf of Mexico, Davis said.
As the third potential hurricane to hit the area within as many months, the arrival of Helene shows that extreme weather events aren’t just anomalies, but rather they’re the new normal for shipping companies and port authorities, according to Frank Kenney, Director of Industry Strategy at the technology consulting firm Cleo.
To cope with that constant battering, businesses need to adopt a new mindset, he said. “The only way to keep supply chains running smoothly is to build resilience into every aspect of operations. This starts with diversifying logistics strategies. If a shipper is dependent on a single route or port, they’re setting themself up for trouble. Instead, it’s crucial to have multiple backup routes and options ready to deploy when the unexpected happens,” Kenney said.
Following that strategy, inland ports such as Savannah and Macon, Georgia, will likely gain importance in coming years since their locations offer proximity to ocean ports while also providing access to major highways and some protection from coastal flooding. “In short, the storm isn’t going away, but by embracing diversification, leveraging technology, and ensuring supply chain visibility, U.S. ports and shipping companies can stay ahead of the curve. The companies that prepare for these challenges now will be the ones that continue to thrive, no matter how extreme weather events rock the boat," Kenney said.
A coalition of freight transport and cargo handling organizations is calling on countries to honor their existing resolutions to report the results of national container inspection programs, and for the International Maritime Organization (IMO) to publish those results.
Those two steps would help improve safety in the carriage of goods by sea, according to the Cargo Integrity Group (CIG), which is a is a partnership of industry associations seeking to raise awareness and greater uptake of the IMO/ILO/UNECE Code of Practice for Packing of Cargo Transport Units (2014) – often referred to as CTU Code.
According to the Cargo Integrity Group, member governments of the IMO adopted resolutions more than 20 years ago agreeing to conduct routine inspections of freight containers and the cargoes packed in them. But less than 5% of 167 national administrations covered by the agreement are regularly submitting the results of their inspections to IMO in publicly available form.
The low numbers of reports means that insufficient data is available for IMO or industry to draw reliable conclusions, fundamentally undermining their efforts to improve the safety and sustainability of shipments by sea, CIG said.
Meanwhile, the dangers posed by poorly packed, mis-handled, or mis-declared containerized shipments has been demonstrated again recently in a series of fires and explosions aboard container ships. Whilst the precise circumstances of those incidents remain under investigation, the Cargo Integrity Group says it is concerned that measures already in place to help identify possible weaknesses are not being fully implemented and that opportunities for improving compliance standards are being missed.
By the numbers, overall retail sales in August were up 0.1% seasonally adjusted month over month and up 2.1% unadjusted year over year. That compared with increases of 1.1% month over month and 2.9% year over year in July.
August’s core retail sales as defined by NRF — based on the Census data but excluding automobile dealers, gasoline stations and restaurants — were up 0.3% seasonally adjusted month over month and up 3.3% unadjusted year over year. Core retail sales were up 3.4% year over year for the first eight months of the year, in line with NRF’s forecast for 2024 retail sales to grow between 2.5% and 3.5% over 2023.
“These numbers show the continued resiliency of the American consumer,” NRF Chief Economist Jack Kleinhenz said in a release. “While sales growth decelerated from last month’s pace, there is little hint of consumer spending unraveling. Households have the underpinnings to spend as recent wage gains have outpaced inflation even though payroll growth saw a slowdown in July and August. Easing inflation is providing added spending capacity to cost-weary shoppers and the interest rate cuts expected to come from the Fed should help create a more positive environment for consumers in the future.”
The U.S., U.K., and Australia will strengthen supply chain resiliency by sharing data and taking joint actions under the terms of a pact signed last week, the three nations said.
The agreement creates a “Supply Chain Resilience Cooperation Group” designed to build resilience in priority supply chains and to enhance the members’ mutual ability to identify and address risks, threats, and disruptions, according to the U.K.’s Department for Business and Trade.
One of the top priorities for the new group is developing an early warning pilot focused on the telecommunications supply chain, which is essential for the three countries’ global, digitized economies, they said. By identifying and monitoring disruption risks to the telecommunications supply chain, this pilot will enhance all three countries’ knowledge of relevant vulnerabilities, criticality, and residual risks. It will also develop procedures for sharing this information and responding cooperatively to disruptions.
According to the U.S. Department of Homeland Security (DHS), the group chose that sector because telecommunications infrastructure is vital to the distribution of public safety information, emergency services, and the day to day lives of many citizens. For example, undersea fiberoptic cables carry over 95% of transoceanic data traffic without which smartphones, financial networks, and communications systems would cease to function reliably.
“The resilience of our critical supply chains is a homeland security and economic security imperative,” Secretary of Homeland Security Alejandro N. Mayorkas said in a release. “Collaboration with international partners allows us to anticipate and mitigate disruptions before they occur. Our new U.S.-U.K.-Australia Supply Chain Resilience Cooperation Group will help ensure that our communities continue to have the essential goods and services they need, when they need them.”
A new survey finds a disconnect in organizations’ approach to maintenance, repair, and operations (MRO), as specialists call for greater focus than executives are providing, according to a report from Verusen, a provider of inventory optimization software.
Nearly three-quarters (71%) of the 250 procurement and operations leaders surveyed think MRO procurement/operations should be treated as a strategic initiative for continuous improvement and a potential innovation source. However, just over half (58%) of respondents note that MRO procurement/operations are treated as strategic organizational initiatives.
That result comes from “Future Strategies for MRO Inventory Optimization,” a survey produced by Atlanta-based Verusen along with WBR Insights and ProcureCon MRO.
Balancing MRO working capital and risk has become increasingly important as large asset-intensive industries such as oil and gas, mining, energy and utilities, resources, and heavy manufacturing seek solutions to optimize their MRO inventories, spend, and risk with deeper intelligence. Roughly half of organizations need to take a risk-based approach, as the survey found that 46% of organizations do not include asset criticality (spare parts deemed the most critical to continuous operations) in their materials planning process.
“Rather than merely seeing the MRO function as a necessary project or cost, businesses now see it as a mission-critical deliverable, and companies are more apt to explore new methods and technologies, including AI, to enhance this capability and drive innovation,” Scott Matthews, CEO of Verusen, said in a release. “This is because improving MRO, while addressing asset criticality, delivers tangible results by removing risk and expense from procurement initiatives.”
Survey respondents expressed specific challenges with product data inconsistencies and inaccuracies from different systems and sources. A lack of standardized data formats and incomplete information hampers efficient inventory management. The problem is further compounded by the complexity of integrating legacy systems with modern data management, leading to fragmented/siloed data. Centralizing inventory management and optimizing procurement without standardized product data is especially challenging.
In fact, only 39% of survey respondents report full data uniformity across all materials, and many respondents do not regularly review asset criticality, which adds to the challenges.