Compliance for Auto Imports Faces 'Brave New World,' Experts Say
Importers of automobiles and auto parts are facing a massive increase in compliance standards as the Trump administration's tariffs on automobiles force importers to reevaluate supply chains to find competitive advantage, compliance experts said during an Aug. 6 webinar.
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Alexandre Lira, co-founder of Trade Compliance Executive, said that "the sensation the whole [automotive] industry has" is that the level of supply chain scrutiny required under the Uyghur Forced Labor Prevention Act will become necessary for car importers to avoid violating the Trump administration's new interpretation of transshipment.
Gianluca Romano, CEO of Trade Compliance Executive, said that under this interpretation, importers are "guilty until you can prove innocence," which forces importers to evaluate the very beginnings of their supply chains.
Romano said that this level of compliance means a "complicated new world" for the automotive industry, because of the sheer number of parts in modern vehicles. He described the experience of a trade compliance director from Ikea of mapping the sourcing for a bookshelf "all the way back to the beginning, as you have to under UFLPA," which resulted in almost "200 suppliers and sub-suppliers for a bookshelf." Applying that standard to automobiles is infinitely more complex, he said: "Imagine ... if we have the BMW engines coming out of Graz, Austria. How many part numbers in that bill of material?"
For car manufacturers, going beyond the bill of material, "all the way back to the steel and the copper and the rubber and the plastic," is deeply complex, Romano said. "How do you do it?"
Romano said that some companies are beginning to develop software that can help importers map supply chains, but even "the best tools" he has seen, even using artificial intelligence, "can't truly prove where your suppliers purchase their materials."
Leonie Zappel, a researcher at German compliance company AWA, said that car importers will have to choose between paying higher tariff rates or changing "whole processes, your whole supply chain and documentation and everything in order to fulfill these rules."