Quarterly Compliance Trends: Q1 2019

Quarterly Compliance Trends: Q1 2019

As expected, the regulatory landscape continued to expand in Q1 2019. While the U.S. administration gave American importers many compelling reasons to strengthen their supply chain due diligence practices, global human rights legislation and enforcement continued to grow. The 2019 State of Compliance Survey is also complete, and publication is forthcoming. Here were the top five compliance highlights over the past quarter.

U.S. Proposes $11 Billion in Tariffs

The U.S. government proposed more than $11 billion in new tariffs on European Union (EU) goods in March, in retaliation for subsidies granted to Airbus, an EU-based aerospace and defense manufacturer. The new tariffs would be in addition to existing levies on EU goods. This means the aerospace and defense industry will need to be highly proactive in managing country of origin and Harmonized Tariff Schedule (HTS) classification to accurately calculate these new expenses.

With the unpredictable nature of trade compliance, companies’ product data requirements are subject to change. Those leveraging a comprehensive supply chain data management solution will be better positioned to maintain compliance in the event that their goods are subject to tariffs. Download our eBook, Managing Data for Trade Compliance, to learn how Assent can help you efficiently meet your trade compliance obligations, while taking advantage of increasingly valuable exemptions in free trade agreements.

Cobalt Reporting Is Happening

On December 21, 2018, the Responsible Minerals Initiative published version 1.1 of the Cobalt Reporting Template (CRT). As a result, cobalt origin tracing has been a hot topic among companies in Q1, especially those that use it to manufacture lithium-ion batteries. Some of the world’s largest companies, including Apple, have committed to tracking the mineral in their supply chains.

This is a significant voluntary industry initiative for responsible minerals reporting. Cobalt could be the first mineral among many to be subject to new reporting requirements in the coming years. In fact, the Organisation for Economic Co-operation and Development (OECD) has a list of more than 30 proposed minerals that would benefit from supply chain due diligence into responsible sourcing practices.

Four New RoHS Phthalates

Restrictions on four additional substances under the EU Restriction of Hazardous Substances (RoHS) Directive will come into effect on July 22, 2019. In-scope companies — especially those with polyvinyl chloride (PVC) and soft or flexible plastics in their products — are advised to reevaluate their substance data. The four substances fall under the phthalates family of chemical compounds, which are added to PVC plastic to make it more pliant. Typical examples of their use in the electronics industry include soft buttons found on instrument panels or entertainment units. Most cables also make use of the substances.

To ensure a smooth transition, companies that produce medical devices and monitoring and control equipment have a further two years to comply (July 22, 2021).

Is your company ready for the upcoming RoHS deadline? Find out more about how Assent can help you acquire substance data from your supply chain.

Human Trafficking & Slavery Enforcement Under CAATSA

 E.l.f. Cosmetics was fined in late January after importing 156 shipments of false eyelash kits containing materials sourced from North Korea. Although the goods were sourced from China, the products were found to have contained materials sourced from North Korea in violation of the Countering America’s Adversaries Through Sanctions Act (CAATSA). According to the Office of Foreign Assets Control (OFAC), E.l.f. Cosmetics’ compliance program was either “non-existent or inadequate throughout the time period in which the apparent violations occurred, and appears not to have exercised sufficient supply chain due diligence.”

The company was initially given a $40 million penalty, but authorities reduced it to $1 million after the company agreed to disclose details surrounding the violation and implement preventative measures. This enforcement action showed that companies that do not perform effective due diligence are particularly vulnerable to enforcement, an insight that can be traced directly to OFAC’s public report.

2019 State of Compliance Survey

The 2019 State of Compliance study is prepping for publication, and compliance professionals from across the world have shared their insight. Last year, the survey acquired 184 responses from industry personnel which were used to create a public report. Authored by a Stanford MBA graduate and sponsored in partnership by Assent Compliance and Ropes & Gray LLP, with Deloitte acting as an advisor, the 2018 report found that companies are still in the process of implementing modern systems to manage supply chain data. Other insight included:

  • An increase in regulatory requirements impacted compliance teams across all companies, including small, medium and enterprise businesses.
  • While the use of third-party software increased in 2018, so did the use of manual processes. This resulted in more time spent on compliance activities across all departments.  
  • Companies spent an increased amount of time on compliance requests, and forecasted that the increases will continue.
  • The actual cost of compliance was higher than expected, with labor-intensive processes contributing to the cost disparity.

The report is expected to be published on May 14. Once released, you can download the report on the State of Compliance website.With Assent’s regulatory expertise and world-class software, you’ll always be ready to manage the expanding regulatory landscape and mitigate associated risk. To learn how the Assent Compliance Platform’s leading technology leverages automated supplier engagement and logic-driven data validation to streamline the compliance process, contact us at info@assentcompliance.com.