Impact of conflict mineral regulations on the supply chain
As TAKE Supply Chain’s Inside Sales Consultant, I talk with supply chain, procurement, planning, manufacturing and IT executives all over the country. Many times these executives know exactly where their supply chains are struggling. But sometimes a new kink is thrown into a process that was running like clockwork. That was the case with an executive at a large high tech equipment manufacturer I spoke to recently. The company runs multiple plants and over 100 retail outlets across the US. Their supply chain was thrown a curve ball with the new focus on the use of conflict minerals in the manufacture of consumer electronics such as mobile phones, laptops, and MP3 players.
Conflict minerals can bring confusion and complexity to your supply chain
Conflict minerals are minerals mined in areas facing armed conflict and dealing with conditions of human rights abuses. Currently this is an issue with the cassiterite, wolframite, coltan, and gold essential for production of many electronic devices and mined in the eastern Congo. These minerals pass through multiple countries and multiple middle-men before they make their way to the final processing plants and manufacturers in East Asia. In 2010, the United States passed language regulating the reporting around these minerals as part of the Dodd–Frank Wall Street Reform and Consumer Protection Act.
The law requires:
· Independent, 3rd party supply chain traceability audits. The audit scope and process are not determined by the law or proposed regulations. That offers companies the flexibility to do what works with their unique supply chains, but also means that what will be considered acceptable may change at any point.
· Reporting of audit information to the public and the SEC annually. Companies will be required to provide reports stating whether the minerals used in their products originated in the Democratic Republic of Congo or adjoining countries if they already report to the SEC and the minerals are necessary to the product they manufacture or contract to manufacture.
This will affect companies regulated by the SEC as well as companies that supply materials to those companies. It could also affect some retailers that are not manufacturers but that contract a 3rd party to manufacture a product they then brand. Estimates run from 10,000 to 200,000 US companies impacted by these regulations.
Supply Chain Traceability and Compliance
The SEC has stated that the first reports must be filed by May 2014 – less than 8 months from now. Are you ready for that level of reporting – either to the SEC or to the companies who use your products in their products? The manufacturer I spoke to was not, but was anxious to get moving.
· Conduct your own “supply chain compliance and readiness” audit. Rather than simply reacting to this current regulatory challenge, take a step back to see how you can make adjustments to prepare for any surprises or unexpected changes that may come – either in the US or in different regions around a world. Our eBook 9 Quick Safety Checks for Supply Chain Compliance provides a roadmap for evaluating your current processes.
· Consider bringing increased collaboration, automation and visibility to your supply chain management. TAKE Supply Chain’s OneSCM software can deliver the comprehensive traceability system to provide the reporting required now and the flexibility to quickly extend reporting and automated processes as needed when regulations or global conditions change.
· Schedule a supply chain business process review to discuss your current process and what you will need to change to prepare for these reporting requirements.
Global Turbulence means “Supply Chain Pain”
As supply chains become more global, global turbulence whether political or environmental, will continue to generate surprises. We understand that even the best prepared supply chains may experience a sudden sting when this happens, and we have solutions that can help. Over the next few months I will be sharing stories about “supply chain pain” I’ve heard from executives around the country, and passing on some recommendations and suggestions for starting to fix that pain. You may be surprised how many companies are experiencing the same issues you are and find some solutions you can implement in your own supply chain.
EU and US agree end to Airbus-Boeing supply chain tariffs
The EU and US have agreed to resolve a 17-year dispute over aircraft subsidies, suspending tariffs on billions of dollars' worth of goods that have plagued procurement leaders on both sides of the Atlantic.
Under an agreement reached by European Commission Executive Vice-President Valdis Dombrovskis and US Trade Representative Katherine Tai on Tuesday, the tariffs will be halted for a period of at least five years.
It will bring an end to punitive and disruptive levies on supply chains that have little to do with the argument, which became embroiled in the trade battle. Businesses on both sides of the dispute have been hit with more than $3.3bn in duties since they were first imposed by the US in October 2019, according the EC.
The US imposed charges on goods upto $7.5bn in response to a World Trade Organisation ruling that judged the EU’s support of Airbus, its biggest aircraft manufacturer, unlawful. A year later in November 2020, the EU hit back. The WTO found the US had violated trade rules in its favourable treatment of Boeing, and was hit with EU duties worth $4bn.
In all the tariffs affected $11.5bn worth of goods, including French cheese, Scotch whisky, aircraft and machinery in Europe, and sugarcane products, handbags and tobacco in America. Procurement leaders on both sides of the fence were forced to wrestle with tariffs of 15% on aircraft and components, and 25% on non-aircraft related products.
Boeing-Airbus dispute by the numbers
- The dispute began in 2004
- Tariffs suspended for 5 years
- $11.5bn worth of goods affected by tariffs
- $3.3bn in duties paid by businesses to date
- 15% levy on aircraft and 25% on non-aircraft goods suspended
Both sides welcome end to tariffs
European Commission President Ursula von der Leyen branded the truce a “major step” in ending what is the longest running dispute in WTO history. It began in 2004.
“I am happy to see that after intensive work between the European Commission and the US administration, our transatlantic partnership is on its way to reaching cruising speed. This shows the new spirit of cooperation between the EU and the US and that we can solve the other issues to our mutual benefit,” she added.
Both aircraft manufacturers have welcomed the news. Airbus said in a statement that it will hopefully bring to an end the “lose-lose tariffs” that are affecting industries already facing “many challenges”. Boeing added that it will “fully support the U.S. Government’s efforts to ensure that the principles in this understanding are respected”.
The US aerospace firm added: "The understanding reached today commits the EU to addressing launch aid, and leaves in place the necessary rules to ensure that the EU and United States live up to that commitment, without requiring further WTO action."
This week’s decision expands upon a short-term tariff truce announced in March this year. The EC says it will work closely with the US to try and further resolve the dispute, establishing a Working Group on Large Civil Aircraft led by each side’s trade minister.
Airbus last month signalled to suppliers that post-pandemic recovery was on the horizon, telling them to scale up to meet a return to pre-COVID manufacturing levels. “The aviation sector is beginning to recover from the COVID-19 crisis,” said Airbus chief executive Guillaume Faury, adding that suppliers should prepare for a period of intensive production “when market conditions call for it.”