Attention Transportation, Supply Chain & Logistics Leaders: A Hidden Compliance Minefield Threatens Your Business

Mar 27, 2024Supply Chain Chronicles

Imagine having millions of dollars of product seized by US customs, to be held indefinitely, with no answers and no compensation coming your way.

It may seem unfair. You did everything required to prepare this shipment, after overcoming all those COVID-era supply chain issues, to get these goods manufactured. But in solving one problem, did you create another?

Sometimes evading an attack can lead you into a minefield.

In the face of material shortages, if you’re like most companies, you adapted by expanding your supply network. Two is one, one is none, right? But new sources mean new possible headaches, e.g. some of those sources may be restricted or banned.

Auto giant Volkswagen recently found themselves in just such a predicament; one that they’re still in as of this writing.

Numerous models of their cars; which include Porsche, Bentley, and Audi, were refused entry into the US and impounded by Customs authorities. Why?

These hyper-sophisticated machines contain a tiny electronic part from China, possibly the western province of Xinjiang, a region pinpointed by the US government as suspected of forced labor practices, among other complications.

This whole gigantic export transaction now hinges on the possible origin of a minor ingredient. The letter of the law seems to be, “block first, ask questions later,” placing the burden on the company to prove the compliance of that part’s entire chain of production or replace it.

And this leads to further complications: VW’s transparency may now be under scrutiny.

They claim they didn’t know the device’s origin, as it came from a supplier, and they’re “looking into it”. But it has since come out that VW is no stranger to doing business in western China, where it co-owns a factory with a local organization.

If the authorities come to suspect that VW was aware of the situation, they may have been obliged to disclose that, perhaps on the Maroney sticker, a US government-mandated window label for new cars that prominently displays pertinent information.

(Most industries have one or more equivalents of the Moroney sticker. What are yours?)

The release of VW’s inventory is pending investigation, projected to extend to at least two months from the time of seizure, supposedly April, but you know how that goes.

You may not be Volkswagen, but this goes to show how problem-solving with a focus on the nuts and bolts of your business could cause you to miss something that could expose your brand to untold damage.

In our increasingly globalized marketplace, it’s more incumbent than ever to meticulously catalog, track, evaluate, and assess these fine details that are as easily overlooked as they are potentially catastrophic.

Who do you have looking into these details?

Not sure where to start in dealing with these matters? Unsure of some of the legal/ logistical details?

Contact Commerce Law Partners today and Prepare to Win.

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