Increasing Regulations Could Lead to Increased Supply-Chain Delays

ACR Brief 26 January

Increasing Regulations Could Lead to Increased Supply-Chain Delays

One element of the global economy the COVID 19 pandemic has surprisingly thrown into the spotlight is the web of supply chains that move products from raw materials to our homes. While once a fairly obscure element of the marketplace, almost everyone is now familiar with the headaches and delays a single kink in a supply chain, such as a ship stuck in a canal or a lack of workers at a dock, can cause. And now, an increasing number of laws and regulations aimed at making supply chains more transparent and humane, while important and necessary to prevent human rights violations, may add further delays and complications.

Last week we published a Q&A with Michael Littenberg, a partner at Ropes & Gray, whose practice focuses on ESG, CSR and other elements of supply chain compliance, about the Uyghur Forced Labor Prevention Act (UFLPA). It was signed into law at the end of December as part of the “all tools” approach to China policy. Under the Act, goods mined or manufactured, in whole or in part, in the Xinjiang Uyghur Autonomous Region (XUAR) in China are presumed to have been produced by forced labor and are barred from entering the U.S. unless the importer can demonstrate clear and convincing evidence to the U.S. Customs and Border Patrol (CBP) that forced labor was not involved. For its part, Chinese Foreign Ministry spokesperson Zhao Lijian called the law “political manipulation and economic bullying in the name of ‘human rights’” on December 15, 2021, and China has consistently denied reports of mistreatment of religious and ethnic minorities in the region.

The most likely consequence of failing to comply with the UFLPA “is that a shipment will be detained by CBP and denied entry into the U.S,” which can result in significant commercial costs for the importer and possibly fines, Littenberg told the Anti-Corruption Report. So, more headaches and delays are to be expected.

And the UFLPA is just one of a series of supply-chain-related legislation passed by numerous countries around the world that companies need to be aware of. In this article, Sarah Carpenter of Assent Compliance deftly explains the global modern slavery landscape, for example. Jonathan Cross of Herbert Smith Freehills recently wrote about how to manage sanctions risk, another important element of supply-chain risk, both up and down the supply chain. And Fernanda Beraldi, international ethics and compliance director and corporate counsel of Cummins Inc., and Edwin Broecker, a partner at Quarles & Brady, explained in a two-part series how supply-chain transparency can have unintended consequences for companies.

How are you and your clients handling the increasingly complicated requirements for supply chain resilience and transparency? You can drop us a line here.