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U.S. Moves to Block Conventional Arms Sales to Iran

conventional arms

U.S. Moves to Block Conventional Arms Sales to Iran

President Trump issued an Executive Order on September 21, 2020, which is effective immediately, imposes secondary sanctions on the transfer and sale of certain conventional arms shipments and the supply of related services to Iran by non-U.S. persons. This Executive Order follows the current administration’s failed effort to reinstate sanctions and a conventional arms embargo by the U.N. Security Council. The Executive Order, titled “Blocking Property of Certain Persons with Respect to the Conventional Arms Activities of Iran”, attempts to enforce such sanctions unilaterally by authorizing the U.S. Secretary of State to impose blocking sanctions on any non-U.S. person who transfers conventional arms to Iran or otherwise performs activities to support such transfers.

If the U.S. Secretary of State, in consultation with the U.S. Secretary of the Treasury, determines that a non-U.S. person has engaged in any of the following activities, then all of that non-U.S. person’s U.S. property (including property in the U.S., which transits through the U.S. financial system or which is otherwise in the possession of a U.S. person) will become blocked. U.S. persons and the U.S. financial system will be prohibited from transacting with those:

-Engaging in any activity that materially contributes to the supply, sale, or transfer, directly or indirectly, to or from Iran, or for the use in or benefit of Iran, of arms or related materiel, including spare parts;

-Providing Iran any technical training, financial resources or services, advice, other services, or assistance related to the supply, sale, transfer, manufacture, maintenance, or use of arms and related materiel;

-Engaging, or attempting to engage, in any activity that materially contributes to, or poses a risk of materially contributing to, the proliferation of arms or related materiel or items intended for military end-uses or military end-users, including any efforts to manufacture, acquire, possess, develop, transport, transfer, or use such items, by the Government of Iran or paramilitary organizations supported by Iran;

-Materially assisting, sponsoring, or providing financial, material, or technological support for, or goods or services to or in support of, any person whose property and interests in property are blocked pursuant to the Executive Order;

-Being owned or controlled by, or to having acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to this Executive Order.

The Executive Order clarifies that it does not apply to persons “facilitating a transaction for the provision (including any sale) of agricultural commodities, food, medicine, or medical devices to Iran.”

Following the issuance of the Executive Order, the U.S. Department of Treasury’s Office of Foreign Asset Controls (OFAC) added several individuals and two (2) entities to the Specially Designated Nationals (SDN) list, thereby subjecting the designated entities to the above-described blocking sanctions. The Iranian entities are Mammut Diesel and Mammut Industrial Group P.J.S. (aka Mammut Industrial Group, Mammut Tehran Industrial Group, or Mammut Industries).

The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) added five (5) individuals to the Entity List who BIS says “played a critical role in Iran’s nuclear weapons development program and continue to work for the Iranian regime.” By adding these individuals to the Entity List, they are now prohibited from receiving any items or technology that are “subject to the EAR”, which will essentially prohibit any exports or re-exports of U.S. origin items or technology to these individuals.

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Cortney O’Toole Morgan is a Washington D.C.-based partner with the law firm Husch Blackwell LLP. She leads the firm’s International Trade & Supply Chain group.

Grant Leach is an Omaha-based partner with the law firm Husch Blackwell LLP focusing on international trade, export controls, trade sanctions and anti-corruption compliance.

Camron Greer is an Assistant Trade Analyst in Husch Blackwell LLP’s Washington D.C. office.

short order

TK Maxx – The Poster Child for Short Order Purchasing?

In the midst of the global pandemic, with a second wave threatening and further lockdowns looking ever more likely, retail experts have been championing the importance of e-commerce in order for businesses to survive the crisis – says Mina Melikova, CEO of TradeGala and owner of online fashion retailer – Goddiva.

Surely these extreme safety measures must have taken a toll on the company’s fortunes? Unsurprisingly, the company made a loss in the first quarter of the year with sales falling by 31%, but while other retail chains are studying administration procedures, TK Maxx has risen to become the UK’s sixth-largest retailer, taking over from the giant that is Arcadia Group’s Topshop. Company directors are reportedly looking forward to the second half of the year with confidence and are even looking to expand their high street presence with more store openings in the near future. So how did this discount chain store buck industry trends and come out of the crisis stronger than before?

The secret to its success, it seems, is in the company’s agile buying approach. Unlike other major retailers which purchase their stock months in advance, TK Maxx follows the short order purchase model, buying “little and often” according to current industry trends.

So while other major retailers were stuck with warehouse loads of bikinis and holiday fashion which was no longer of interest to a consumer base whose Summer holidays had been canceled, TK Maxx was able to reduce its purchasing during the enforced closure of high street stores and quickly react to customer needs, concentrating on more popular product ranges such as homeware and childrenswear upon reopening. Every item purchased goes directly to the shop floor, so there’s no guesswork or forecasting required – the purchasing team can react directly to immediate sales and plan the next investment accordingly. As other stores are looking for ways to offload unwanted stock, TK Maxx is now in the enviable position to be able to snap up deals from retailers around the world and pass these reductions onto their customer base which, in the current climate, is looking for bargains more than ever.

The Coronavirus crisis has clearly shaken up the fashion and retail industries. Major fashion houses are looking to move to more “seasonless” designs, and away from the relentless five-season a year fashion calendar which until now has been at the heart of traditional sourcing methods. The bi-annual fashion weeks predicting trends months in advance, the never-ending trade show seasons around the world, the forward ordering of stock based on what the industry assures us will be popular – these methods are no longer relevant, or even possible in some cases. TK Maxx’s short order purchasing model has allowed it to continue to grow even in these unprecedented times, and the benefits of this agile technique are clear as we move forward into an uncertain future.

Fortunately, it’s not only industry giants that can take advantage of this innovation – with wholesale fashion marketplaces like TradeGala, retailers of all sizes can purchase short order fashion from international brands in just a few clicks. From purchase to store within less than a week in most cases, independent retailers can adapt to their customers’ needs and update their stock without the financial risk. With the best fashion, shoes, and accessories brands from around the world, TradeGala offers buyers womenswear, menswear, and childrenswear at the touch of a button. Make short order purchasing the reason for your retail business success – register for a buyer account today at TradeGala.

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Mina Melikova is the CEO of TradeGala and owner of online fashion retailer – Goddiva.

manufacturing

How to Gain an Advantage in Manufacturing Facilities During Post-Crisis Times

In the United States today, as many manufacturers have entered post-crisis phases in their facilities, some have a much different business model than they did entering 2020. Others, such as those who manufacture medical supplies, craft supplies, and pet supplies, don’t look much different than they did at the beginning of the year, outside of a backlog of orders that they are doing their best to fill in a timely fashion. 

Some manufacturers were surprised at how well their products did during crisis times earlier in the year. For example, LumenAID, a manufacturer of portable, solar-powered lanterns that double as a phone charger, has seen a huge uptick in sales. It seems with people preparing for times unknown, emergency supply manufacturers of this type can’t fill the shelves quickly enough. Other manufacturers were well aware of the need for their products, like office chairs, school supplies, and pet training products. The comforts of home for those stuck at home became the quick front-runners in sales, and suppliers with stored inventories were pleasantly surprised with their sales numbers. 

Yet, for some manufacturing facilities, especially in the hardest-hit areas of the country, it wasn’t a lack of demand that shut down the product lines. It was the lack of production associates able to make it to the facility. Quarantine, public transportation being shut down, mandatory stay at home orders, and a lack of child care left some facilities looking much like a part of a ghost town. The most prepared of those production facilities put that time in the hands of their plant engineers and maintenance managers, and for good reason. 

In an industry where it is often common for machines to run in 72-hour cycles or longer to meet production needs, the downtime came as a blessing in disguise to many engineers and mechanics. They strapped on their tool belts and began performing preventative maintenance that had been put off, in some cases, until the machinery refused to operate any longer. While many production associates were home by no choice of their own, skeleton crews of mechanics and engineers quietly worked behind the scenes to ensure that the production lines that these associates returned to were repaired, lubed, and ready to run for another 100,000 rotations. 

While You Were Out…

Although we’re not positive what the “new” normal will look like, manufacturers are doing their best to get back to business as usual.  One key element is ensuring that their facility can handle the workload, and well-maintained production lines are a fundamental part of that process. Even those production facilities that did not have to implement the Emergency Contingency Plan and were still able to run socially distanced production shifts were finding difficulty in getting the parts necessary to perform preventative maintenance on their production machinery. 

Facilities with CMMS systems that handled their maintenance parts rooms were seeing just how much those systems did for them, possibly for the first time ever. These manufacturing facilities were able to perform preventative maintenance as normal, because of the reorder point set in the CMMS, ensuring that the parts to perform the maintenance were, indeed, stocked in the parts room. Due to the human element being removed by CMMS, the moment the last technician performed the PM and took the part off of the shelf, the system already issued a purchase order and had a replacement on the way. 

Full Speed Ahead

As manufacturers are getting back into the swing of things, especially those fortunate enough to have orders that they need to fill, the appreciation for well-maintained machines is at an all-time high. With most of the country able to return to work, and production lines full of associates thankful to be back on the line, returning to a facility with newly maintained machinery is just another day in manufacturing. However, from the mechanics and engineers who worked solo overnight shifts to prepare for firing the production lines back up, there is a nearly audible sigh of relief when the conveyor belts start running. 

Preventative maintenance was, in some facilities, the only items that could be completed during the height of the crisis, and production managers are reaping the benefits of those overhauls at the moment. In notoriously under-maintained facilities, the quietly operating, well-oiled machinery that is producing post-pandemic inventory is a sign of moving into stronger financial times. 

As A Post-Crisis Model

If your production facility is running at a pre-pandemic rate, you’ve more than likely gotten back into the normal preventative maintenance schedule, less a few adjustments. For those facilities that don’t have the need to run full production shifts at this point, investing labor dollars into machine maintenance is a smart move. Although the need may not be there at the moment, when the orders do come in, the ability to perform full production runs without stopping because of unperformed routine maintenance will be one more way to stay competitive. 

Well maintained machinery produces to specification, which reduces scrap and reworks exponentially. By producing a consistent and reliable product, your facility develops a reputation for quality, and that is priceless in post-crisis America. By ensuring that your production facility is adhering to a preventative maintenance schedule, you’re committing to running products that are manufactured to strict standards at a time when they’re more valued than ever. A CMMS is another tool in a manufacturer’s facility to ensure that they’re producing items that meet or exceed the expectations of their customers. 

In addition, maintenance costs are decreased by 5-10 percent by having a preventative maintenance program in place in a manufacturing facility. It also decreases the time spent repairing machinery by 20-50 percent. In terms of looking out for the bottom line as manufacturing facilities try to push forward in uncertain economic times, a strong preventative maintenance program makes sense. In saving both time and money long term for manufacturing facilities, preventative maintenance can help manufacturers get a leg up in the post-crisis American economy. 

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Co-Founder and CEO of REDLIST. Raised in a construction environment, Talmage has been involved in heavy equipment since he was a toddler. He has degrees and extensive experience in civil, mechanical and industrial engineering. Talmage worked for several years as a field engineer with ExxonMobil servicing many of the largest industrial production facilities in the Country.

nuclear

NUCLEAR OPTIONS: THE TRUMP ADMINISTRATION’S TRADE RESPONSE TO URANIUM PROTECTION

Rocks for Jocks

High school has started online in our household. At our dinner table the other night, we were discussing different science courses and their workloads. My husband recalled that Earth Science (before political correctness) was affectionately known as “Rocks for Jocks,” playing into a stereotype that introductory geology was an easy way to get science credits. If you’re paying attention to trade policy, it’s time to dust off the Earth Science textbooks.

Over the last few years, the national security dimensions of trade policy have come into sharper focus. It has become a lens through which a broad spectrum of trade policies is viewed, including those affecting extraction and trade in the minerals and metals mined from the earth. These materials have vast commercial and vital military applications and are the bedrock of today’s modern and emerging technologies.

Explosive Potential

The United States has had a tepid love affair with nuclear energy, yet nuclear holds an important place in the U.S. energy mix. Nearly 20 percent of U.S. electricity is generated by 96 nuclear reactors in 29 U.S. states. Nuclear accounts for more than 55 percent of U.S. carbon-free electricity.

Beyond consumer electricity, nuclear powers U.S. Naval submarines and aircraft carriers as well as spacecraft and the amazing NASA probes now roving Mars. Nuclear plants produce isotopes used in medical imaging, cancer treatments and radiation that kills bacteria in our food. Globally, advanced reactors are being used to bring fresh water to the Middle East and African countries by powering desalination facilities. It is the only carbon-free energy source that can deliver world energy supplies on a large scale.

What fuels nuclear energy is uranium, a naturally occurring radioactive material containing fissionable isotopes that once concentrated, or enriched, can produce the chemical chain reaction required to generate electricity.

Policy-Enriched Uranium

After World War II, the U.S. government sought to promote the development of the civil nuclear power industry. Nuclear generated electricity would stimulate demand for U.S.-mined uranium, which would in turn assure the supply for military needs.

In 1964, Congress amended the Atomic Energy Act of 1954 to enable private ownership of nuclear fuel. Prior to that, the U.S. Atomic Energy Commission ran the only enriching operations in the free world – a large and dedicated client for U.S. uranium. To shield the U.S. uranium industry from competition as commercial nuclear operations came online, Congress prohibited the importation of foreign-sourced uranium destined for domestic end use. Enriched uranium could not be imported, but the U.S. industry could import natural uranium and enrich it for domestic use and for export. Congress estimated such restrictions would only be required for ten years until civilian demand would grow to such volumes as to sustain uranium production in the United States.

Whether those restrictions constituted a violation of U.S. obligations under the General Agreement on Tariffs and Trade went uncontested by U.S. trading partners, the largest of which were – and still are – Canada and Australia, which boast cheaper, higher-grade sources of uranium.

The import prohibition remained in place from 1969 to 1977. It was phased out from 1977 through 1984 as demand for uranium increased and domestic mining reached capacity. The 1980s would turn out to be a heyday for U.S. uranium, its fate bound with the ups and downs of the U.S. nuclear industry. Nuclear utilities were negatively impacted by conservation efforts during the oil embargos of the late 1970s and suffered major regulatory and policy setbacks in commercial expansion following high profile accidents at Three Mile Island and Chernobyl. Slowed production and plentiful stockpiles for both commercial electricity and defense uses dramatically reduced demand for newly extracted uranium.

U.S. Uranium’s Implosion

The timing of the uranium mining industry downturn coincided with a seminal free trade agreement with Canada, which is a major exporter of uranium for nuclear fuel. The 1989 U.S.-Canada Free Trade Agreement (a precursor to NAFTA and USCMA), exempted Canada from any restrictions the United States imposes on imported uranium.

Although the FTA incorporated GATT national security exemptions under which the United States could derogate from this obligation, Canada and the United States explicitly agreed to limit use of such exemptions in North American trade in energy goods.

The agreement effectively threw open the door to cheaper, high-grade uranium that would displace U.S. uranium. As Canada could fill the majority of U.S. demand, remaining restrictions on imports from other foreign sources would have little benefit to the U.S. uranium industry.

The U.S. industry resorted to filing its first petition to the U.S. Department of Energy under the 1962 Trade Expansion Act Section 232, which required the U.S. Energy Secretary to determine whether uranium was being imported “in such quantities and under such circumstances as to threaten to impair the national security of the United States.” If so, options would include raising tariffs to block foreign imports of uranium.

The Secretary issued a negative finding and President Reagan rejected tariffs on imported uranium. Rather than preserving national security, tariffs were believed to have the potential to disrupt critical supplies, therefore impairing it. The Reagan administration instead established a Uranium Revitalization fund – a government purchase program – to buy up unneeded resources, helping to create space in the market and restore prices for the U.S. uranium industry.

US Uranium Production Falls

The Half-Life of Industry Protection

The term “half-life” derives from nuclear physics. It describes the length of time that stable atoms survive before exponential radioactive decay occurs. Uranium-238 has a half-life of 4.5 billion years. Uranium-235 has a half-life of just over 700 million years. Trade protections for U.S. industries typically have a half-life of around 2 to 3 years.

Artificial and temporary protections (for example: tariffs on imports from foreign competitors) may provide immediate relief for the domestic industry, but that advantage quickly drops off unless the industry makes investments to improve efficiencies or other market conditions change in the domestic industry’s favor.

Since the late 1980s, U.S. nuclear energy producers have steadily increased their purchases of cheaper foreign uranium, primarily from Canada, Australia and Russia. As more uranium circulated in global markets, the U.S. government privatized its uranium enrichment operations during the 1990s, releasing more uranium into the U.S. market. Kazakhstan and producers in Africa also came online, ramping up the use of cheaper and environmentally harmful extraction techniques, exacerbating a growing glut of inventory in global markets, depressing prices and creating more strain on a struggling U.S. uranium industry.

Uranium Resources

Uranium’s Future is Bound with Nuclear

Of the 442 nuclear units in the world, the United States operates 96 nuclear reactors – one-quarter of the global total – compared with 57 in units in France, 48 units in China, and 38 units in Russia. The U.S. fleet produces more electricity from nuclear energy than any other country – two times more than France, three times more than China, and four times more than Russia.

Nuclear energy dominance, however, may be shifting hemispheres. China has 44 reactors under construction and 168 planned. India has 14 reactors under construction and Russia has 24 under construction with as many planned. In contrast, the United States has just three reactors under construction and 18 planned.

Energy expert Jane Nakano points out that, while exporting nuclear materials to supply power plants is largely a private sector endeavor in the United States (though heavily regulated to mitigate proliferation risks), both Russia and China have state-owned or directed industries and are deploying aggressive export and overseas investment strategies with both commercial and foreign policy objectives. As these countries forge ahead with global partnerships, U.S. exports of natural and enriched uranium continue to decline as a share of global exports, dropping from 29 percent in 1994 to 3.4 percent in 2019.

Global Uranium Exports

From Fission to Fizzle

Nuclear generation capacity in the United States may decrease over the next decade depending on the life of existing reactors. Recent financial losses in the U.S. nuclear sector have led to shutdowns and scaling back of investments, further reducing opportunities for U.S. uranium.

Although global demand for nuclear power is projected to grow, especially in East Asia and the Middle East, that’s not necessarily good news for uranium mining and trade.

The OECD Nuclear Energy Agency and International Atomic Energy Agency produce a biannual Red Book, assessing the state of world supply in uranium. The 2018 Red Book indicated that identified recoverable uranium resources are sufficient to power the global nuclear reactor fleet at 2016 levels of installed nuclear capacity for the next 130 years.

Uranium exploration and mine development expenditures have been declining almost everywhere in the world in response to oversupply. At the same time, nuclear plants are being run more productively on fewer uranium resources.

The impact on the U.S. uranium industry is evident in its steep decline in production output. The U.S. Energy Information Agency (EIA) reported uranium mining in the United States produced 78.9 tons in 2019, representing an 88 percent drop from 2018 production of 656.8 tons. It is the lowest output recorded since 1948. For context, 2019 production contributed 0.3 percent of the uranium fuel requirements for U.S. nuclear reactors. The remainder was supplied by foreign producers.

US uranium contribution to fuel US reactors

Good Chemistry

The near-total collapse of the industry prompted the few remaining U.S. uranium mining, milling, and producing companies to file a new Section 232 petition to the Trump administration in January 2018, asserting that reliance on imported uranium constitutes a threat to U.S. national security. U.S. nuclear energy and utility companies opposed new import tariffs, saying the strain of increased costs would threaten the viability of their own operations.

Although fuel for defense purposes is adequately supplied by government stockpiles of highly enriched uranium, the Secretary of Commerce rendered a finding in favor of the uranium industry. President Trump, however, made a choice that diverged from this recommendation and from his use of Section 232 tariffs to protect the U.S. steel and aluminum industries.

Instead, the President issued a memorandum in July 2019 establishing a Nuclear Fuel Working Group to develop recommendations about how to “reinvigorate the entire nuclear fuel supply chain.” In April this year, the working group issued a Strategy to Restore American Nuclear Energy Leadership.

The first step in the plan is a throwback to the Reagan era, creating a uranium reserve through which the Department of Energy will buy uranium directly from domestic mines and contract for uranium conversion services. As for trade restrictions, the Strategy supports the Department of Commerce measures to counter uranium imports from Russia that are “dumped” in the U.S. market at below fair market prices (representing no change from current trade policy). It also explicitly enables the U.S. Nuclear Regulatory Commission to deny imports of nuclear fuel fabricated in Russia or China on national security grounds.

US Strategy

Nuclear Options

The nuclear industry may represent the same or higher strategic importance to national security as the uranium industry. They are interconnected in the same way semiconductors provide brains to your smartwatch and to military weaponry, or the way rare earths drive hybrid cars as well as armored vehicles. They are emblematic of how U.S. industries are affected by global markets regardless of whether their sales are primarily domestic.

What the administration’s approach to the uranium Section 232 petition recognizes is that import tariffs to deliver temporary protections to one domestic industry inherently harm the American buyers of those inputs and the workers in downstream industries.

And, it recognizes that national defense relies on commercial companies to sustain its technology needs. However, the government as a sole buyer cannot support innovation or sales growth for private companies. U.S. companies benefit from tapping into fast-growing foreign markets to be profitable and to reinvest in innovation. It’s a balancing act. “Nuclear options” in trade policy ultimately damage both commercial and national security interests.

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Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught international trade policy and negotiations for the last fifteen years as an Adjunct Professor at Georgetown University’s Master of Science in Foreign Service program.

challenges

KÖRBER: ONLY 1 IN 10 BUSINESSES CAN STAY AHEAD OF THEIR SUPPLY CHAIN CHALLENGES

Körber, the Hamburg, Germany, global supply chain technology leader from software to materials handling automation, on Sept. 1 announced the results of its “2020 State of Supply Chain Complexity” survey.

Among the top findings: Manufacturing and fulfillment complexities only continue to grow–and 91 percent of supply-chain professionals cannot stay ahead of these challenges.

More products, distribution channels, and customer expectations make supply chains more complex, according to Körber, which polled 1,200 global supply chain professionals to learn how they cope with supply chain complexity, how they feel their solutions stack up against the competition and how they’re managing the transition from manual to automated processes.

Technology integration and customer demand ranked among the top challenges today’s supply chain faces.

The issues respondents said most often contribute to their company’s supply chain complexity include:

-48% ‒ integrating and ensuring software, materials handling equipment (MHE), and technologies work together throughout the entire logistics ecosystem

-46% ‒ integrating functions across the supply chain – from manufacturing to end-customer deliveries

-46% ‒ meeting consumer expectations for speed, cost and adaptability

Nearly three-quarters of survey respondents said senior executives view the supply chain as mission-critical–an important step in gaining support for upgrading warehouses and last-mile technology.

“Now isn’t the time for supply chains to break under pressure–yet, 48 percent of companies have experienced growth in complexity this past year,” said Rene Hermes, chief marketing officer for Körber Supply Chain. “It’s good to hear so many executives see this business area as mission-critical. Now we must transform that understanding into action.”

Access the 2020 State of Supply Chain Complexity Survey here: https://www.koerber-supplychain.com/complexitysurvey.

steel

Steel Import Licenses Must Include Country of “Melt and Pour”

The U.S. Department of Commerce’s (Commerce) Steel Import Monitoring and Analysis System (SIMA) will be modified effective October 13, 2020, to require that the country where the steel was “melted and poured” to be identified in the license application. Other changes in the final rule published on September 11, 2020, include adding coverage for eight additional HTS numbers in order to synchronize the system with the coverage of Section 232 for basic steel mill products; increasing the low-value license to $5,000, and allowing multiple uses; and extending the SIMA program indefinitely.

The new rule defines “melted and poured” as “the original location where the raw steel is: (A) First produced in a steel-making furnace in a liquid state; and then (B) Poured into its first solid shape…The first solid state can take the form of either a semi-finished product (slab, billets or ingots) or a finished steel mill product.”

The reporting requirement does not apply to raw materials used in steel manufacturing. The new required information on the country of “melt and pour” may also be useful in investigating circumvention of duties.

The SIMA website will shut down from October 9 until October 13, 2020 when the new website is updated and goes live. Commerce has created a page with the latest updates regarding SIMA. In the interim, Commerce stressed that there will be limited availability for manual license processing.

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Nithya Nagarajan is a Washington-based partner with the law firm Husch Blackwell LLP. She practices in the International Trade & Supply Chain group of the firm’s Technology, Manufacturing & Transportation industry team.

Camron Greer is an Assistant Trade Analyst in Husch Blackwell LLP’s Washington D.C. office.

cross-docking

What Warehouses Should Keep in Mind When First Implementing Cross-Docking

Warehouses that want to improve labor and space utilization without expanding to a new location or breaking ground may consider cross-docking because of its potential efficiencies. Unfortunately, it can also come with many pitfalls for those trying it for the first time.

Cross-docking requires a detailed understanding of your team, space, partners, and technology. For new warehouses, that means implementing cross-docking should come with significant testing and preparation, especially in terms of your inventory management, scheduling, spatial allocation, and the training you give your team and partners.

Test inventory management tools

Cross-docking prepares companies for just-in-time (JIT) shipping and distribution, making immediate use of inventory as it arrives. Companies that want to start utilizing cross-docking will need a robust inventory management system that can understand and differentiate these inbound shipments.

Your tools must be able to understand inventory utilization. If half of the goods on an inbound shipment are for JIT purposes, then the inventory platform must be able to split received goods and correctly update both inventory levels and the number of products you list for sale. If this action would require ongoing intervention from you or additional inventory counts, it could introduce higher labor costs that negate cross-dock benefits.

Ultimately, cross-docking can help with inventory management and often keep companies from needing to expand physical infrastructure for the products they hold. It might also help you expand operations to support backorders. This takes time, however, and requires tools that help you understand and manage inventory levels without adding burden.

Robust scheduling includes flexibility

Cross-docking is intense choreography. You’re going to need smart people and reliable technology to manage the planning of how people and trucks are moving in and around your site. Cross-docking and JIT operations demand having the people available to handle inbound shipments and process them while helping your team know what inventory is ready to use and what needs to be put away.

Dock availability and the time of truck arrivals and departures must be flexible so that your operations can run normally. Every cross-docking team plans on a smooth day where everything runs on schedule. However, that’s rarely a reality. Paperwork, traffic delays, accidents, or even someone needing to use the bathroom can cause a small delay. Something as simple as an employee driving through the parking lot can force a truck to wait.

If you schedule everything down to the minute and don’t give your team and partners flexibility, it’ll cause greater delays. In most cases, as you’re expanding and learning, arriving trucks will end up waiting because it’s hard to predict the time people need, but you also don’t want docks sitting empty for extended periods. So, ensure that you have people ready when trucks are there and test the time you give teams for inbound and outbound.

Dock door assignments should consider space and traffic

One other caveat that many warehouses don’t consider when they first start cross-docking is the physical space that people, trucks, and inventory required. Cross-docking effectively requires that dock door assignments be efficient and allow incoming and departing trucks enough space to maneuver safely and quickly. Adding extra points to a turn will slow the entire process down, for example.

If your warehouse wasn’t built with cross-docking in mind, test this thoroughly. Often, warehouses need significant reconfiguration of internal elements or will install new doors and adjust the building design to facilitate cross-docking. Multiple teams, doors, trucks, and the equipment everyone is using are going to take up extra space and need to be able to move freely and safely. Start by giving everything and everyone more leeway than you think they need.

Some new inventory and dock management platforms support cross-docking and can make suggestions based on timing, assignments, and other aspects of your operations based on historical and current data. When your tools offer this, try out their analysis and recommendations to see if you can maximize your efforts.

The entire supply chain requires competencies

Cross-docking is an advanced management and utilization technique for any warehouse or distribution center. You’re managing dock door assignments, transshipment, vehicle routing, product allocation, barcode scanning and putaway, new warehouse layouts, and the network and systems required to manage it all.

Your team needs competency in each of those areas and activities. Partners should have their own understanding plus the ability to support you. Inbound expertise is required, across the board, for JIT requirements and scheduling to be effective.

You’ll eventually want to build out appropriate penalties for time windows to keep things running smoothly, but that requires your team not to cause delays. In many instances, cross-docking is complicated mathematics disguised as people and trucks.

Take your time to test and implement it. Work with partners proactively to help understand what they need from you and explain what you need from them. Train your team specifically on the new processes and requirements. Simulate, test, and optimize procedures and layout continually.

Cross-docking can save warehouses significantly on a variety of costs and size requirements. You might reduce material handling and make labor more efficient. Customer satisfaction can be improved, too, as you’re relying less on backorders or older products. Achieving all of those wins is a lengthy process, and it’s important to walk into the situation with patience.

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Jake Rheude is the Director of Marketing for Red Stag Fulfillment, an ecommerce fulfillment warehouse that was born out of ecommerce. He has years of experience in ecommerce and business development. In his free time, Jake enjoys reading about business and sharing his own experience with others.

disruptions

Preparing for Future Supply Chain Disruptions: Insights from the Field

Organizations across all industries—from automotive, consumer goods, and pharmaceuticals to transportation, electronics, and oil and gas—have felt the disruptive effect of the coronavirus pandemic. Turning the global supply chain on its head, COVID-19’s impact has cut across multiple facets of international trade, including manufacturing, import/export, logistics, compliance, and supply chain management. This disruption has been a wake-up call for organizations worldwide, prompting them to assess their readiness to respond reliably, expediently, and effectively to rapidly evolving risk factors going forward.

Disruption Is Inevitable

Whether driven by an unprecedented pandemic or events that are more familiar, like trade wars or frequent duty and tariff changes, future disruptions to the flow of goods are unavoidable and companies must be as prepared as possible. Case in point: on June 29, the amendments to the Export Administration Regulations (EAR) published by the U.S. Department of Commerce, Bureau of Industry and Security (BIS) came into force, impacting U.S. companies that export goods, software, and technology to China, Russia, and Venezuela.

A few days later on July 1, a new free trade agreement entered into force as the United States-Mexico-Canada Agreement (USMCA) replaced the North American Free Trade Agreement (NAFTA). While the USMCA is designed to provide “significant improvements and modernized approaches to rules of origin, agricultural market access, intellectual property, digital trade, financial services, labor, and numerous other sectors,” companies must respond efficiently to changes in import duties, tariffs, and rules of origin verification procedures in order to avoid compliance issues.

The current government’s uncertain trade relations with China, BREXIT’s unfolding impact on U.K. trade, and evolving pandemic predictions are just a handful of factors that may unsettle global supply chains going forward. With disruption an unavoidable consequence of doing business in 2020, successful companies are securing their supply chains by prioritizing operational responsiveness, agility, and adaptability in order to keep goods flowing while avoiding compliance violations and penalties.


Are You Prepared?

Today’s businesses are keenly aware of the importance of keeping a close eye on their sources of raw materials, parts, and finished products to ensure logistics costs do not erode overall profit margins. But COVID-19 caught many companies off guard, throwing their sourcing strategies and revenue flow into crisis.

Descartes’ 2020 Global HTS Classification Benchmark Survey of importers, shippers, logistics and supply chain operators, and customs brokers around the globe analyzed the impact of the supply chain disruption on companies’ operations and ascertained how they are addressing issues for the long-term.

The survey found that 35% of respondents were forced to research alternative suppliers or locations as a result of the pandemic. An additional one-third felt increased pressure to identify ways to reduce duty and tariff costs in order to shore up the shrinking bottom line.

Lessons Learned: Count On Technology

For those survey respondents forced to look for alternative suppliers due to COVID-19, many also looked to advanced technology solutions to address the more demanding workload and support the shift to a distributed workforce and the ‘remote working’ model.

In their leaning towards more advanced technology, approximately three-quarters of respondents were aiming to establish a workflow process for mass classification and to create an audit trail for proof of due diligence; sixty-eight percent were seeking a collaborative online classification process, while 55% sought configurable classification rule sets for different industries and product categories.

The Descartes survey also found that the majority of companies—not just those impacted by COVID-19—are adopting more advanced technology to enhance responsiveness to change and to increase resiliency. Regardless of the number of SKUs classified annually, businesses are recognizing the value of additional layers of protection against the unknown to help ensure their import operations remain viable during turbulent times.

Keep Agility and Responsiveness Top of Mind

Prior to switching to av more automated and integrated research and classification solution, most respondents surveyed were using labor-intensive and error-prone manual methods; a massive 81% were accessing multiple government websites to access classification data and 46% were looking up information in hardcopy books—an unacceptable drain on valuable time and resources and a serious impediment to pivoting swiftly in the face of disruption.

Respondents using advanced global trade intelligence solutions, with up-to-date tariff data accessed from a single system, reportedly accelerated the classification process by 30% to 100%. This increase in speed is a critical piece of the preparedness strategy, as companies aim to focus on agility to keep goods moving during market volatility.

Future-proof Your Organization

New disruptions to the global supply chain may be just around the corner. A proactive global trade intelligence strategy will help organizations continue to drive commerce while ensuring trade compliance in the face of inevitable change:

1. Take advantage of more advanced technologies to maintain compliance efficiency and accuracy as workload demands increase, as well as to better manage a more distributed workforce.

2. Look to technology solutions to increase the resilience and responsiveness of trade compliance programs.

3. Ensure a single point of access to research complex international trade information, including up-to-date HTS codes, duties and tariff treatments, rulings, and explanatory notes.

4. Use a robust solution to effectively exercise and establish a “standard of reasonable care” for product classification.

With the impact of COVID-19 on sanctions and export controls still not fully known, compliance professionals should re-evaluate their global trade compliance strategy, honing it to boost adaptability, agility, and responsiveness to change. By leveraging advanced global trade intelligence technologies, companies can better insulate themselves from the fallout of future supply chain disruptions while minimizing duty spend and achieving higher trade compliance rates in the process. For compliance professionals everywhere, the age-old Boy Scout adage rings true: Be prepared.

agility

4 Strategies Manufacturers Can Adopt to Increase Agility

In turbulent, transformative times like these, the term “business agility” seemingly appears everywhere. And though it’s easy to imagine even the world’s largest tech companies or consulting firms making a sudden pivot, it’s harder to picture a manufacturer with a factory full of heavy equipment doing the same thing.

So what does business agility mean in the context of manufacturing or construction? It’s less about the speed and scope of changes being proposed and more about communicating effectively across large, dispersed organizations. When disruptions break the supply chain or cause demand to plummet, manufacturers must be able to encourage an information flow across all corners of the enterprise. Agility depends on the free flow of information and the ability to guide a team directly.

The good news is that manufacturers are used to disruptions. They regularly deal with supply chain issues, sudden regulatory changes, or shifting market dynamics. Adaptation is in their nature.

The bad news is that COVID-19 puts a unique strain on the industry that makes agility more important yet less accessible. Specifically, factories and construction sites that have had to either scale back or shut down in response to public health requirements can’t exactly pick their work up remotely. Teams are spread out more than ever and cut off from core assets — and that includes everything from machinery to data.

These are circumstances manufacturers don’t have contingency plans for. Meeting the moment will require extensive brainstorming, aligned leadership, and quick and decisive action — but none of those things will be easy with stakeholders scattered to the wind.

Today’s Realities

All of this means manufacturers need a new concept of business agility along with a fresh sense of commitment.

Since the start of the pandemic, we’ve seen heavy-duty industries forced to shut down suddenly and reopen as quickly as possible. While opening, they’ve had to integrate new social distancing requirements into all aspects of operations and vastly expand health and safety measures. In some cases, they’re even learning how to stop sharing pens and clipboards. And those are just the implications for operations.

Unstable economic forces mean that supply and demand could be in flux for the foreseeable future. Granted, some manufacturers are booming right now — but others have seen business crater, and the long-term fallout of this pandemic remains to be seen. Manufacturers must reexamine (and in many cases revise) their plans, strategies, and fundamental business assumptions. Everything is up in the air.

On top of everything, this pandemic is accelerating the shift away from in-person interactions toward digital ones. Relationships with customers, suppliers, employees, and all other stakeholders are evolving because of the need to socially distance. More than that, though, this health crisis has underscored the fact that digital environments are more efficient, convenient, and customizable than the alternatives. This could prove to be a tipping point for digital transformation throughout the manufacturing industry.

It’s hard to overstate the pace of change right now. The degree to which some manufacturers have already responded is impressive; we’ve seen liquor producers start making hand sanitizer and sports equipment manufacturers adapt assembly lines to create face masks. Agility is possible in the face of this crisis, but manufacturers must take the initiative.

“Business as usual” stopped being relevant with the first COVID-19 cases, and there are serious questions about whether we’ll ever return to normal. That means something different for every manufacturer while still placing the same obligation on all of them: Stay agile or get swept under.

Building the Basis of Business Agility

Manufacturers need to grow agile as quickly as possible. Unfortunately, moving fast while staying coordinated is never easy. Apply these strategies to help guide your transformative efforts:

1. Share information in real time. People need answers right now, whether that’s about health and safety measures, new workplace practices, changing strategies, and everything else that’s been uprooted by the pandemic.

The less accessible this information is, the more disorganized things become. Sharing information in real time so everyone has the answers they need on demand keeps communication issues from making a bad situation worse. Strive to be as transparent as possible and to make information highly accessible.

2. Identify information bottlenecks. The pandemic exacerbated the existing information bottlenecks in organizations and created a number of new ones. Analyzing how internal communication works — how information flows through an organization — identifies where these bottlenecks are and suggests how they can be resolved.

Better access to information (of all types and at all levels) helps accelerate and improve decision-making. Before COVID-19, 86% of companies surveyed said frontline workers need more insights at their disposal. That priority is even higher now.

3. Lead from the bottom up. In any fast-changing scenario, insights from the front lines are what matter most. If executives ignore the ideas and perspectives of workers who are actually in the thick of operations, they miss both the red flags that require attention and the innovative ideas necessary to meet this moment. Information needs to flow freely and broadly within an organization, from one-on-one and small group communication all the way up to corporate messaging. Instead of giving lip service to this priority, make sure there’s a direct pipeline.

4. Create new touchpoints. Information from outside the organization — from customers or suppliers — is also immensely valuable right now. It’s vital to business agility because it helps a manufacturer explore how it can pivot without alienating the partners it relies on. Take those outside insights seriously and solicit as many as possible. Convenient digital touchpoints make it easy for others to supply complaints, suggestions, and praise, all of which inform a manufacturer’s next move.

Remember that agility is all about alignment. Any company — manufacturer or otherwise — can evolve on the fly as long as it can move as one. Communication is what cements that connection and helps achieve unity across the board.

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Daniel Sztutwojner is chief customer officer and co-founder of Beekeeper, the single point of contact for your frontline workforce. Beekeeper’s mobile platform brings communications and tools into one place to improve agility, productivity, and safety. Daniel is passionate about helping businesses operate more efficiently. He has a background in applied mathematics and more than eight years of experience in sales and customer success.

structure

Create a Flexible Corporate Structure to Develop High Performance Leadership in Global Companies

This article portrays a more detailed picture of the effects of flexible structures on knowledge management. This article also indicates that executives can implement structural changes for better leading their companies. This article summarizes my experience as a senior management consultant and is about getting the information needed to be successful in the right hands of executives worldwide.

How Can Flexible Structures Improve Leadership Effectiveness?

A flexible structure is necessary to lead a global organization. This type of corporate structure is at the forefront of the knowledge base and has relative value in organizations throughout North American and the rest of the developed countries. When executives generate flexible corporate structures inspiring innovation and creativity within organizations, they will secure a foothold in an ever-changing hypercompetitive marketplace.

Corporate structure has been defined as a pattern by which organizations can divide their activities and tasks as well as control them to achieve higher degrees of coordination. Corporate structure, therefore, refers to the bureaucratic division of labor accompanied by control and coordination between different tasks in order to develop communication within organizations. 

Corporate structure can be reshaped by executives when they develop knowledge sharing and inspire employees to create new ideas for a better environment among business-units and departments. Sirkka Jarvenpaa and Sandy Staples, prominent authors and scholars in the area of management at The University of Texas at Austin maintain that the informal structure could facilitate new idea generation to build a more innovative climate within organizations. Executives can, therefore, implement structural changes that develop better collaboration among subordinates and managers. 

Centralized versus decentralized decision making is also a topic that management executives must deal with. More emphasis on formalized and mechanistic structures can negatively impact the executive’s ability to exert such changes. On the contrary, a more decentralized and flexible structure may improve departmental and managerial interactions. The mechanical or centralization at the commanding level of leadership impairs the opportunity to develop relationships among managers, business units, and departments. 

Executives can reshape corporate structure to be more effective when the command center of organizations can disseminate information in a decentralized and organic way as opposed to the mechanical and centralized command center. Decentralized structures shift the power of decision-making to the lower levels and subsequently inspire organizational members to create new ideas and even implement them while centralized structures may negatively impact interdepartmental communications and inhibit knowledge exchange.

An empirical study by Wei Zheng, Baiyin Yang and Gary McLean in Texas A&M University affirms that there is a negative impact of centralization on various knowledge management processes such as knowledge acquiring, creating, and sharing among both managers and departmental units. On the contrary, a more decentralized and flexible structure may enable executives in improving departmental and managerial interactions that can lead to identify the best opportunities for investment that potentially leads to improve knowledge utilization processes for companies. Both scholars and executives have acknowledged some form of relationship between corporate structure and the knowledge utilization process. Ergo, executives can positively contribute to knowledge management by building more decentralized structures within organizations.

The key take-away for executives is to facilitate knowledge management by developing a more flexible structure that is considered an essential source for developing relationships. Therefore, if the corporate structure is not completely in favor of supporting knowledge management, executives cannot effectively manage organizational knowledge to improve overall performance and companies cannot be effective. Hence, the key kernel for executives is that corporate structure is a resource that enables organizations to solve problems and create value through improved performance and it is this point that will narrow the gaps of success and failure leading to more successful decision-making.

How Can Knowledge Management Improve Leadership Effectiveness?

The process of knowledge exchange enhances an executive’s capabilities to play the role of an inspirational motivator in their company as it allows them to set desired expectations by recognizing possible opportunities in the business environment. The knowledge exchange also positively contributes to executives developing a more effective vision for their employees, with access to a comprehensive array of information and insights about the external environments. By creating a vision of what is achievable, executives can then integrate knowledge internally to enhance efficiencies in their business systems and processes that align with this vision, as well as to be more responsive to any current market changes. 

To be effective, knowledge integration also requires a continuous process of monitoring and evaluating your internal knowledge management practices, coordinating experts, sharing knowledge and scanning the changes of knowledge requirements to keep the quality of work and produce in-line with market demand. By undertaking knowledge integration activities that incorporate all levels of the company, executives can assess any required changes that will keep the quality of their services at maximum efficiency. Instilling this systematic approach of coordinating company-wide experts also enables executives to propel the role of intellectual stimulation, which creates a more innovative environment within companies. 

Executives are also responsible for curtailing knowledge within companies, as and when it needs to be reconfigured to meet environmental changes and new challenges. Essentially, what worked yesterday or a few years ago has already changed rapidly, and will continue to do so as technology increases in prolific ways.

Knowledge is commonly shared at a global level amongst companies through domestic and global rewards such as the Malcolm Baldridge Award in the United States and the Deming Award in Japan. However, past industry research posits that companies might lack the required capabilities to access and develop this knowledge or decide to decline from interacting with other organizations due to distrust to share or take knowledge. Therefore, expert groups may not have sufficient diversity to comprehend the knowledge acquired from external sources.

However, despite these limitations whether natural or caused, networking with business partners is a key activity for companies to enhance knowledge exchange and should not take an award to be the impetus to initiate interaction. Ergo, networking with external business partners will enhance the effectiveness of leadership, empowering executives to better develop strategic insights for a more effective vision that incorporates the various concerns and values of external business partners.

Ultimately, knowledge transfer amongst organizations improves the effectiveness of learning, which in turn enables executives to empower human resources through creating new knowledge and solutions. Thus, I suggest that networking takes place between organizations in both domestic and international markets to enhance the effective use of management. As executives in senior positions effectively use knowledge management this is likely to improve their leadership effectiveness through increased learning opportunities.  Figure 1 illustrates how flexible structures lead to the improvement of knowledge management and leadership.  

In Conclusion

This article can portray a more detailed picture of the effects of a flexible structure on knowledge management performance. When executives ensure the effectiveness of knowledge management projects they increase control and lesson operational risk. Furthermore, knowledge management constitutes the foundation of a supportive workplace to disseminate knowledge and subsequently enhance the effectiveness of leadership. In fact, a firm’s ability to develop leadership can be highly affected when executives implement knowledge management projects as the primary form of managing people, resources, and profitability.

Executives can now see how they can implement structural changes, which can enable superior knowledge management performance to achieve business objectives and satisfy careers. In addition, this article is set in place to inspire executives to create effective structural changes in order to meet and exceed the challenges of not only today but also what we see as the onset of new advances in the future. The practices mentioned in this article can also represent a complete answer to the need for structural changes in today’s global market environment.

I suggest that scholars take these ideas and continue to conduct research using executives as the focal point so that academic scholarship can meet the needs of managerial implications at the higher echelons of companies worldwide. 

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Mostafa Sayyadi works with senior business leaders to effectively develop innovation in companies and helps companies—from start-ups to the Fortune 100—succeed by improving the effectiveness of their leaders. He is a business book author and a long-time contributor to business publications and his work has been featured in top-flight business publications.