Tag Archives: trade content

Understanding the Recent Ruling on Conflict Minerals

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Existing Global Trade Management and Supply Chain Technology will need to Adapt to these Regulations

The US Securities and Exchange Commission (SEC) has proposed regulations that require US and certain foreign companies to report the use of “conflict minerals” from the Democratic Republic of the Congo (DRC) or adjoining countries in their products.

Conflict minerals are mined under conditions of armed conflict and human rights abuse. Areas notably affected are in the eastern parts of Africa, where various armed rebel groups within the DRC are largely responsible for using these natural resources to finance continued fighting, but neighboring countries such as Burundi, Rwanda and Uganda have also profited significantly. Conflict minerals mined in the DRC are typically passed through various intermediaries before being finally purchased.

At present, four minerals are listed as conflict minerals:

  • Columbite-tantalite, or commonly known as Coltan – used primarily in the production of capacitors, hearing aids, pacemakers, airbags, GPS, ignition systems, anti-lock braking systems, laptop computers, mobile phones, video game consoles, cameras, etc.
  • Cassiterite – used in production of tin, a common component of biocides, fungicides, high performance paint manufacturing, etc.
  • Wolframite – an important source of tungsten, used in fishing weights, dart tips and golf club heads, in addition to use in other metalworking tools.
  • Gold – used in jewelry, electronics and dental products.

In practical terms, what does this ruling mean for companies whose products use these minerals? According to the National Retail Federation, the regulations will apply not only to manufacturers but also to retailers considered to be “contracting to manufacture” private-label merchandise.

A retailer simply placing its brand on a generic product would not be covered, but those that have “some actual influence over the manufacturing of that product” would be covered, NRF explained. Retailers selling only third-party merchandise under the product’s own brand rather than the store’s brand are not affected. Companies are able to avoid the disclosure rules if they use recycled or scrap minerals.Companies will have until May 31, 2014, to make their first disclosures about whether the minerals they use are “conflict free,” meaning they did not finance or benefit armed groups in Central Africa. And for two years — four years for smaller firms — companies will be able to disclose simply that they could not determine whether the minerals were helping to finance fighting in the DRC.

Final Thoughts

Existing global trade management and supply chain technology will need to adapt to these regulations. Here are some initial steps companies can take to ensure they are ready for compliance in 2014:

  • Ensure that your source of global trade content lists sanctions against the conflict mineral countries and the minerals themselves.
  • Consider using questionnaires or surveys to determine whether your product suppliers are obtaining minerals from conflicted areas. Much the same way that suppliers certify eligibility for preferential duty treatment, they can also certify that their products do not contain conflict minerals.
  • Perform admissibility reviews on transactions that contain the minerals or products made with the minerals.
  • Update your standard operating procedures to include processes for requesting and capturing declarations from suppliers and for performing transaction reviews.

 

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The Importance of Global Trade Content for Managing Free Trade Agreements

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Users also need to Understand the Trade Content that Powers their Solutions

On May 14, 2012, President Obama signed the presidential proclamation that put the US-Colombia free trade agreement into force. Designed to promote the flow of certain goods and services between the countries, the free trade agreement was years in the making.

According to the Office of the US Trade Representative (USTR), the tariff reductions in the Agreement will expand exports of US goods alone by more than $1.1 billion, supporting thousands of additional American jobs. The ITC also projected that the Agreement will increase US GDP by $2.5 billion. The Agreement will remove significant barriers to US goods from entering Colombia’s market, as over 80 percent of US exports of consumer and industrial products to Colombia will become duty free immediately, with remaining tariffs phased out over 10 years.

Because the agreement specifies changes in rules of origin and HS codes, it is critical that any organization using global trade management software ensure that its vendor made the appropriate updates to the underlying trade content and put them in place immediately. In fact, the US-Colombia FTA is affecting over 20,000 HS codes and over 800 rules of origin. This is a significant amount of content that required collection, analysis and interpretation so that it could be implemented in conjunction with the president’s signature.

Especially for organizations already doing business with Colombia, the FTA could mean substantial reductions in landed costs due to preferential treatment as of the effective date. Supply chain managers should be able to run scenarios that reflect preferential rates as they make sourcing decisions that may now include items from Colombia.

Don’t be afraid to speak with a representative from your GTM software vendor. Find out whether it anticipated the formalization of the agreement with the necessary updates to its trade content. You may also want to ask about how many trade specialists are on staff to monitor government information feeds from around the world as trade regulations change. Those specialists should have extensive backgrounds in compliance and global trade, as well as speak the languages of their countries of expertise.

Final Thoughts

GTM software users need to understand the importance of the trade content that powers their solutions and the critical role it plays in areas like free trade agreement management. As countries continue to expand the scope of these preferential programs, choosing a GTM vendor that offers both depth and breadth of trade content will become even more critical.