Navigating compliance: Adapting to changing Customs regulations in global supply chains

In today's interconnected global economy, rapidly changing legislation in response to political and socio-economic shifts presents businesses with an increasingly complex landscape of customs regulations, tariffs, and trade compliance requirements. Efficiently navigating these challenges is essential for companies aiming to minimize delays and reduce costs in their international supply chains.

In this article, Woodland Group looks to provide some insight into the recent, upcoming and potential changes to customs and international trade regulations.

Woodland Group remains committed to transparency and emphasizes the importance of accurate goods descriptions, up-to-date classifications, and correct tariff applications to support clients in navigating this challenging environment.

The Importance of Regular Compliance 'Health Checks'

Given the complex and dynamic nature of global compliance requirements, it's increasingly important that importers and exporters are putting in place strategies and technologies designed to streamline customs processes, ensure regulatory compliance, and optimize the movement of goods across borders. With an ever-evolving global trade environment, staying ahead of these changes is critical for maintaining competitive supply chains.

Changes in United States Tariffs and Customs Regulations

Recent years have witnessed significant shifts in the United States' tariff structure, driven by political and trade developments. The tariffs have impacted trade relations with key partners such as China and Japan as well as the European Union. Many nations have responded by diversifying export markets or challenging U.S. tariffs through the World Trade Organization.

More recent regulatory updates include stricter customs requirements for goods entering the U.S. with vague cargo descriptions or insufficient information, rendering customs entries subject to rejection. Since September 2024, the U.S. Customs & Border Protection (CBP) has enforced these standards for Air Cargo Advanced Screening (ACAS), requiring precise data to facilitate entry into, or transit via the US.
Read more about acceptable and unacceptable cargo descriptions - Examples of Unacceptable vs Acceptable Cargo Descriptions | U.S. Customs and Border Protection.

Implications of U.S. Political Changes on Tariffs and Controls

Following the recent U.S. presidential election, new tariffs have been proposed, impacting trade with Mexico, Canada, and China, with a 25% tariff on imports from Mexico and Canada and an additional 10% tariff on Chinese imports being suggested by the incoming administration.

Potential future actions may extend to the UK and Europe, adding further complexity and considerations to global supply chain planning from/to the USA.

Additional regulatory priorities include:

● Expanding export controls on advanced technologies, particularly semiconductor manufacturing equipment.

● Imposing stricter export license denials for goods involving China.

● Monitoring critical minerals and AI-related exports.

To mitigate the impact of tariffs, manufacturers are advised to evaluate their supply chains for dependence on imports from countries subject to tariffs. Diversification of sourcing strategies and exploration of alternative markets should be considered to minimize exposure to trade disruptions.

The Lacey Act and Trade Compliance

The Lacey Act serves as a prime example of how customs regulations are becoming increasingly intricate. Amended in 2008, it plays a pivotal role in regulating U.S. imports of wildlife, fish, and plants and has had profound impact on global trade of such products. By holding importers responsible for ensuring the legality of their sources, the Act has increased pressure on exporting countries to implement and enforce sustainable practices.

Kelly Morrison, Corporate Licensed Holder at Woodland Group, advises: "It’s vital that you know your products and what laws govern the global distribution of all of them. And that these laws can change and differ by country."

Woodland Group offers tailored support to ensure clients remain compliant while mitigating risks. Read our guide to the Lacey Act.

ICS2 and Advanced Cargo Systems

Shifting our focus to the European Union, it's crucial to acknowledge the significant changes underway in customs processes. The Import Control System 2 (ICS2), with its focus on electronic data exchange and automation, exemplifies the technological advancements revolutionizing customs operations in the EU, Switzerland, and Norway.

Designed to enhance security in international goods transportation, ICS2 mandates electronically submitted data, including sender and recipient details, consignment content, and shipment information.

To comply, companies exporting goods to the EU, Switzerland, and Norway must adapt their processes. This necessitates increased data sharing among importers, exporters, and supply chain service providers. Carriers will now require more information about EU parties, such as their EORI numbers, before goods can be exported from the origin country into or through the EU. You can find out more on ICS2 here - ICS2 - European Commission.

EU Carbon Border Adjustment Mechanism

The European Union's Carbon Border Adjustment Mechanism (CBAM) represents a significant development in global trade policy. Introduced in 2023, this mechanism establishes a carbon tariff on imports of carbon-intensive products such as steel, cement, aluminium and fertilizer into the EU.

From 2026, the CBAM will take full effect, requiring importers to purchase and surrender CBAM certificates corresponding to the embedded emissions of their imported goods. This effectively imposes a carbon price for these imports, aiming to level the playing field for European producers facing stricter emissions regulations.

Businesses must prepare for these changes to avoid disruptions and additional costs by focusing on carbon data traceability throughout their supply chain into the EU. Consulting experts, particularly those specializing in sustainable supply chain management, can be invaluable in navigating the complexities of CBAM compliance and developing effective strategies for carbon footprint reduction. Read more in our article - How will CBAM impact your supply chain?

Preparing for Increased Compliance Enforcement

The introduction of new trade structures and regulations inevitably leads to a heightened focus on compliance enforcement. As global trade becomes increasingly complex, customs authorities are implementing more stringent measures to ensure fair trade practices, protect national security, and collect appropriate revenues. Many countries are investing in increased customs staffing and audit capabilities to address non-compliance.

HM Revenue and Customs are in the process of employing 5,000 extra compliance officers in the UK, with Customs and Border Protection in the USA also targeting an increase in border enforcement staffing responsible for auditing the customs activities and compliance of importer and exporters.

Particular scrutiny will be centered around tariff classification, valuation and origin. Companies should prepare for more frequent and stringent checks in these areas. Darren Brundell, International Trade Compliance Manager at Woodland Group, commented: "It's about protecting your supply chain, avoiding costly delays, and preserving your reputation. Mistakes can lead to lost revenue and trust."

Looking Ahead: Adapting to Evolving Regulations

As regulations inevitably continue to change and evolve, global governments are expected to assess regulations in the following areas:

Green Trade and Sustainability Initiatives - As environmental concerns gain prominence, governments and businesses are focusing on "green trade" policies that incentivize sustainable practices. These initiatives include carbon border taxes, sustainable supply chain certifications, and reduced tariffs for environmentally friendly products. Businesses must adapt to these standards to remain competitive and compliant.

Data Transparency and Digitalization to Enhance Border Security - Advancements in digital technologies are driving transparency and efficiency in customs processes. Blockchain, AI, and cloud-based platforms are increasingly being leveraged to streamline border operations, reduce fraud, and enhance security. These developments demand that businesses invest in digital readiness and data-sharing capabilities to navigate customs smoothly

Ethical Sourcing Standards on Human Rights Violations - Heightened scrutiny around human rights violations, including forced and child labor, has led to stricter sourcing regulations. Governments are implementing import bans on goods linked to unethical practices, requiring companies to demonstrate robust supply chain due diligence and ethical sourcing standards.

Changes to Regional Trade Agreements - The global trade landscape is continually evolving with updates to regional agreements such as the CPTPP and USMCA. These changes can significantly alter market access, rules of origin, and tariff benefits, requiring businesses to adapt strategies to align with shifting trade dynamics.

Continued Increase in Customs Audits and Enforcements - Customs authorities are ramping up audits and enforcement actions to ensure compliance with trade regulations. Businesses face greater scrutiny on valuation, classification, and adherence to trade agreements, underscoring the need for strong internal compliance programs.

Tariff Adjustments and Retaliatory Tariffs - Geopolitical tensions continue to influence tariff policies, with countries implementing or adjusting tariffs in response to trade disputes. Businesses must stay agile, monitoring these developments and adjusting pricing, sourcing, and supply chain strategies to mitigate risks and costs.
How can Woodland help?

Woodland Group is dedicated to supporting clients through tailored solutions and expert guidance. From mitigating tariff impacts to ensuring compliance with advanced customs and trade compliance systems, our team helps businesses navigate these challenges seamlessly.

Emily Cori, U.S. Compliance Manager at Woodland Group, summarizes: "When you have trade compliance requirements, stop fighting fires and start fireproofing your business."

Woodland Group is actively involved in industry discussions through its membership of leading trade associations globally. By staying at the forefront of regulatory developments and technological enhancements, we ensure our clients receive the best possible support to prepare and navigate changing regulations across the largest trading nations in the world.

For businesses seeking clarity and control in a turbulent customs landscape, Woodland Group offer customs clearance, consultancy, and compliance health check services to help manage a sustainable and compliant supply chain. Example services include:

● Tariff classification

● Customs warehousing

● Customs brokerage

● Duty Drawback

● Regulatory consultancy

● Import and Export licenses

● Risk assessments and compliance health checks

● Denied party and sanctions screening