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Supply Chain

How global companies mitigate supply chain disruptions

In the US, the Biden administration is unveiling its global trade strategy. In Europe, Brexit’s impact on corporate supply chains continues to unfold. In Asia and around the world, authorities are negotiating new free trade agreements. For trade and customs specialists at multinational companies, today’s disruptions follow unprecedented challenges spawned by the US-China trade war and pandemic-driven supply chain breakdowns. Nimble, agile operations and sophisticated global trade management software are essential for companies to avoid the pitfalls and identify opportunities in this fast-changing environment.

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Tax & Tech Talks: How tech tools help mitigate supply chain disruption

Tax & Tech Talks: How tech tools help mitigate supply chain disruption

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Global trade experts from Ernst & Young and Thomson Reuters addressed corporate strategies for managing disruption in a new episode of the Tax & Tech Talks podcast titled How Tech Tools help Mitigate Supply Chain Disruption. The discussion features Suzanne Offerman, senior proposition manager for ONESOURCE Global Trade at Thomson Reuters, and Lynlee Brown, a partner in Ernst & Young LLP’s global trade practice. Brown co-authored a chapter on US trade policy in the 2020 book Global Trade and Customs: A Practical Comparison of Major Jurisdictions.

Here are a few takeaways from the podcast:

  • Section 301 Tariff Actions: The US Section 301-Tariff Actions and Exclusions process is the most recognizable source of supply chain disruption in recent years, Brown said. These include punitive tariffs on Chinese products, tariffs placed on EU and US products under a dispute over large civil aircraft production, and retaliatory actions related to digital services taxation.
  • Companies are assessing the Biden administration’s trade priorities: “With a new administration and a new US trade representative, companies are very eager to understand this new field of play,” Brown said. “We’re evaluating, assessing and, to a certain extent, determining what is tenable, what is palatable, from a trade policy perspective.” The Biden administration’s agenda is likely to be more global and focused on multilateral trade deals than the previous administration, but it’s too soon to say precisely what policies and agreements it will pursue, the timing of changes, or how specific industries will be impacted.
  • Biden is disrupting the semiconductor industry: A recent White House executive order addresses tax credits and research and development policies for semiconductors and lithium batteries—and suggests that Biden wants to reduce the US semiconductor industry’s dependence on foreign suppliers, Brown said. This move, coupled with a tightening of exports to China, could have the unintended consequence of making it difficult to sell and export semiconductors to the Chinese market. “This is a long way off, but it helps to illustrate the interconnectivity of global supply chains, global markets, trade policy, and business realities,” she said.
  • The global trade ecosystem continues to evolve: Multinational enterprises (MNEs) in Europe continue to face post-Brexit supply chain disruption, Offerman and Brown noted, while free trade agreements proliferate—creating opportunities and operational challenges for companies. One example: the Regional Comprehensive Economic Partnership, ratified in November, will have a significant impact on business operations and supply chains in the Asia-Pacific nations of Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, South Korea, Thailand, and Vietnam.
  • Companies rely on global trade management software to navigate change

During the podcast, Offerman and Brown discussed global trade strategies companies deploy to stay ahead of change and respond to disruption—and how they depend on the underlying technology that provides reliable data analysis and business intelligence.

“When we chat with companies,” Brown noted, “solutions, recommendations, and analysis are almost always couched in terms of ‘people-process-technology.’ Technology is critical to any compliance or optimization/mitigation plan. Without technology to provide accurate, trusted data, how do companies rely on their free trade agreement benefits?  How do they accurately forecast the impact of the tariffs on leadership?”

Corporate trade compliance teams that were most successful in managing the supply chain challenges of the pandemic and punitive tariffs enacted during the Trump administration shared the ability to accurately quantify risk, Brown said. This enabled them to tell senior executives, for example, how much a proposed tariff would cost the company, how the company should respond, and how much funding was required to execute the plan. “That story laid the foundation for their next actions,” she said.

Those actions could involve customs classifications, customs valuation, shifting to a preferential country of origin, or implementing a duty-saving program, Brown and Offerman explained.

“When the punitive tariffs began (during the Trump administration), there was a clear line in the sand between those companies who could scenario-plan and those who could not,” Brown said. “Those who could all had one thing in common—reliable data produced by enhanced technology. It was, and continues to be, absolutely mission-critical.”

 

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