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About the Author |
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Scott Byrnes
Vice President, Marketing
Amber Road
Scott Byrnes is Vice President of Marketing for Amber Road. He has spent the past 20 years in various sales and marketing roles with software companies and professional services firms.
Prior to Amber Road, Scott held the position of Executive Vice President at The Walker Group, a strategic marketing consultancy based in Washington, DC. Prior to that, Scott was Vice President of Marketing for HandySoft, a provider of BPM software. Scott spent four years at Vastera, a global trade management software and managed services provider. During his tenure with the company, Vastera completed a successful IPO. Prior to Vastera, Scott spent nearly five years at Manugistics, where he held a variety of leadership positions in both services and sales. He began his career with Andersen Consulting, now Accenture.
Scott holds a bachelor's degree in Business Administration from the University of Richmond, where he graduated cum laude.
For more information, please visit www.amberroad.com.
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Supply Chain Comment
By Scott Byrnes Vice President, Marketing, Amber Road
April 23, 2015
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Managing China's Changing Regulatory Landscape
Survey Results That Provide Input Regarding Growth, Risks and Regulatory Issues
Companies must develop a strategic approach to trade management to manage the complex and unpredictable regulations trade regulations in China.
Respondents to an SCM World survey ranked China as the number one growth opportunity for their companies by a large margin, a sentiment echoed by the market. China today is the world’s largest merchandise exporter, and the second-largest importer, behind only the United States, and is on course to become the world’s largest importer. Its GDP is expected to grow by around seven percent over the next 12 months. Not surprisingly, respondents expect an increasing number of their goods produced in China to be consumed in the Chinese market rather than exported.
Byrnes Says: |
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| Companies that develop a strategic approach to doing business in China have markedly better outcomes than those that manage it tactically. |
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What Do You Say?
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Our Guest Experts |
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At the same time, the country is also ranked as the fifth riskiest country in the world in which to operate. According to SCM World’s China trade management study, the biggest issues for companies are complex trade regulations, immature logistics infrastructure, the threat of rapid cost increases and an opaque sub-distribution network.
An Amber Road survey of its customers found that 100 percent were concerned with “persistent issues” involving the management of their supply chains in China, including excessive costs and efficiency issues.
SCM World respondents’ biggest issue was China’s enforcement crackdown of its complex and uncertain trade regulations. Many of these regulations were already there, but only recently have begun to be enforced. Similarly, 30 percent of those surveyed by Amber Road were concerned about fines and penalties imposed by Chinese customs and 60 percent were concerned that failure to comply might result in a “reduced agency rating” by Chinese compliance agencies, making it more difficult and time consuming to manage trade flows in and out of China.
How can companies manage these issues?
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Recognize that China does not have a country-wide approach to regulatory policies and procedures. Local and regional governments are in charge of managing regulations, which can differ according to locale. Because each province is responsible for enforcement there is no scalable, uniform way to comply with these rules and regulations. Companies must then have compliance procedures for each region. |
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Understand that many agencies issue their own trade rules and regulations. Aside from Customs, other agencies (which each have their own set of rules) involved in trade regulations include The Ministry of Commerce (MOFCOM), the China Inspection and Quarantine Bureau for Entry-Exit Inspection and Quarantine (CIQ), the State Food and Drug Administration (SFDA), and the State Administration of Foreign Exchange (SAFE). |
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Develop local contacts. Local contacts are extremely important to avoiding risks as they can monitor changes and quickly incorporate them. China can change its regulations overnight. It doesn’t need “an act of Congress” before making changes or publishing new guidelines. Of course, these connections and relationships must be legal. Many companies try to build relationships with local regulatory officials and customs agents, which is beneficial to both sides. Provincial regulatory trade authorities may also be trying to figure out how to interpret and enforce regulations that are just as new to them as to the companies.
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Realize that non-compliance can cause costly delays and potentially lead to criminal charges. Delays are the most common result of compliance issues, with audits being costly and time consuming. A company might be required to post a large guarantee deposit that could potentially cause working capital problems or even lead to suspension of import/export operations. |
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Understand that duty rates can dramatically affect margins. However, due to their complexity many aren’t well understood or used. According to SCM World’s survey, almost 60 percent of respondents either do not know about the adoption of such programs and agreements, or do not see how they would benefit them. |
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Adopt China Trade Management (CTM) technology and content. Sixty percent of SCM World’s respondents said supply chain automation will play a key role in their China trade management strategies. The top two anticipated supply chain automation investments in China in the next 24 months were visibility tools (62 percent of respondents), followed by global trade management solutions (50 percent). CTM software helps a company more efficiently manage its trade compliance by automating import and export processes for all China operations. It helps enforce company-wide policies, meet local compliance requirements and help facilities get higher customs ratings. CTM also improves the bottom line with financial benefits such as tax savings from taking advantage of Processing Trade; importing materials; and/or reducing discrepancies. Further, automation enables operations to become more efficient and scalable, as well as more automated and more rule-based, allowing for lean operations. |
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Final Thoughts
Companies that develop a strategic approach to doing business in China have markedly better outcomes than those that manage it tactically. Seventy-seven percent of SCM World’s respondents with a strategic trade management capability report “good” or “excellent” results, versus only 39 percent of those that manage their China trade tactically.
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