2010 has witnessed the emergence of several regulations that are bound to have a lasting impact on global supply chains – specifically in areas such as logistics, transportation and security. Here are ten such regulations (introduced, expanded or started being enforced in 2010) that I believe have already started leaving their marks on retailers, manufacturers, suppliers, shippers and carriers alike:
- Importer Security Filing (ISF) Enforcement: The US Customs and Border Protection Agency (CBP) went ahead with enforcing its Importer Security Filing (ISF) regulation, commonly referred to as 10+2 from January 26, 2010.Under the rule, importers or their designated agents must electronically submit 10 data elements no later than 24 hours before the cargo is laden aboard a vessel destined to the United States. Additionally, carriers are asked to submit 2 data sets no later than 48 hours after vessel departure. Each filing could be associated with more than one violation and each instance of violation could attract a $5,000 fine.
- Certified Cargo Screening Program (CCSP): The US Transportation Security Administration’s Certified Cargo Screening Program (CCSP), that mandated piece-level scanning for US-origin air cargo on passenger aircraft went into effect Aug 1,2010. This covered US-origin air freight that originates overseas on passenger aircraft.
- Expanded Air Cargo Security: The timely detection of two packages containing explosive devices disguised as printer cartridges air-shipped to the US from Yemen in late October 2010 renewed the call for legislation to mandate 100% air cargo screening for US-origin as well as international-origin,US-destined air freight on passenger as well as cargo aircraft. Following this incident, the US DHS swiftly banned certain “high risk cargo” while the International Civil Aviation Organization proposed that the industry focuses on enhanced supply-chain security initiatives that involve checking outbound shipments before they even reach airports.
- Conflict Minerals Law: A new law designed to draw global attention to the genocide in Congo, was tucked into the Dodd Frank Wall Street Reform and Consumer Protection Act and passed by US Congress in July 2010. This law has electronics industry supply chain executives scrambling to comply. The provision requires public companies to determine whether any one of the four minerals – Tantalum, Tungsten, Tin, and Gold are used in their products. If they are, then the company is required to determine and disclose in a report filed with US Securities & Exchange Commission (SEC) whether any of those minerals originated in the Democratic Republic of Congo (DRC) or from a neighboring country.
- European Union (EU) E-Invoicing Directive: In December 2010, the EU issued a communique with a set of tangible actions “to eliminate technical ambiguity, legal uncertainty, and operational constraints” in the way of widespread adoption of electronic invoicing. The EU is set to launch two new projects in the framework of the Competitiveness and Innovation Programme (CIP) to help specific sectors agree on interoperable processes for the electronic exchange of data and documents along the different steps of the supply chain (including e-invoicing). Organizations that have started to explore or have already invested in technologies and processes to support fiscal dematerialisation will likely have to rethink their strategies.
- Consumer Products Safety Improvement Act (CPSIA): Several portions of the CPSIA regulation went into effect February 10, 2010. In particular, the law requires manufacturers to produce certificates of conformity attesting to their products having been tested per safety standards set forth by the CPSIA. Additionally, all products under the purview of this legislation are required to have paper or electronic certificates of conformity, otherwise known as the GCC. This regulation, coming in the wake of several high profile instances of toys and children’s products manufactured in China tainted with lead and phthalates, has imposed stringent requirements for both retailers, manufacturers and other supply chain participants.
- Channel Checks & Insider Trading: The US Securities and Exchange Commission (SEC) has from November 2010, started to focus on insider trading cases, that according to published reports – revolve around “routinely published information about public-company supply chains.
- Sustainability Regulations: In January 2010, the US Securities and Exchanges Commission (SEC) issued a directive that public companies should warn investors of any serious risks that global warming might pose to their businesses. This has triggered public companies to look up and down their supply chains to identify climate change-related risks. In October 2010, the US Federal Trade Commission (FTC) proposed a set of environmental marketing guidelines that would require companies to be extra cautious when it comes to calling their products “green” or “eco-friendly”. This move will without doubt put the onus on companies to work closely with their suppliers, carriers, contract manufacturers, vendors and even raw material producers to clearly document, disclose and declare each entity’s contributions towards making the end product “green”
- Driver Shortage & CSA 2010: The US Department of Transportation’s (DOT) Federal Motor Carrier Safety Administration launched a new CSA program called Safety Measurement System on December 13,2010 to analyze safety-based violations. This new program while designed to enhance carrier safety, could potentially disqualify thousands of otherwise well qualified drivers. With 71% of all freight in the US moving via truck, this driver shortage and the ensuing capacity constraints will have adverse consequences on product availability as well as logistics costs, margins and revenue.
- Wal-Mart: While not government regulations per-say, Wal-Mart introduced several key directives in 2010 that have already shaken up its supply chain. In February 2010, Wal-Mart announced ambitious plans to eliminate 20 million metric tons of greenhouse gas emissions by the end of 2015. By doing so, it asked its suppliers to examine the carbon lifecycle (source, manufacturer, package transport) of their products – from the raw materials used in manufacturing all the way through to the recycling phase. Also in February 2010, Wal-Mart announced a new “Supply Chain Reliability Program”, an initiative designed to ensure that goods did not arrive too early or too late into over 100 of their US Distribution Centers (DCs), as defined by a four-day window leading up to a “Must Arrive By Date (MABD)”. Suppliers who fall below a 90% monthly threshold for compliance with this program would incur invoice deductions that equal 3% of cost of goods sold (COGS) for shipments arriving before or after this 4-day MABD window. A few months later, in June 2020, Wal-Mart initiated a process to take over responsibilities for all US transportation activities from their suppliers.
Has your business been impacted by these regulations? Are there other laws, regulations or initiatives that have taken center stage for you in 2010?
