Abstract
International supply chains require the movement of goods across borders. While moving goods internationally is already operationally complex, the regulatory requirements that need to be met complicate this further. In this chapter, we explain how and why international regulatory issues enter the supply chain. At the basic level, we discuss in some detail concepts such as arm’s length trading, origin, customs declaration and the role of trade agreements. We then introduce, as part of the advanced level, the basic principles of customs supervision in supply chains. Most customs regulations contain principles that are designed to facilitate international business and allow for the postponement of duty and tax payment to the right time and place. In the supply chain literature, these concepts are virtually unknown, but they play an important role in the design of international supply chains in practice. We also introduce a new vision on customs enforcement that was developed as a spin off of several European research projects. In this vision, so-called trusted tradelanes are introduced as the next step in supply chain compliance. We end with the state of the art discussion on the design of trusted tradelanes and the necessary and sufficient conditions that need to be met to achieve this trusted tradelane status. Throughout the chapter, we have included case studies from practice to illustrate specific insights, or offer a basis for further discussion.
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Notes
- 1.
There is an important exception to this: the pro-active movement of spare parts, as a result of warranty agreements. In this case, there is no contract of sale with a buyer and seller that drives the international movement of goods. Many elements of these transactions remain similar to a sale and purchase arrangement, however. Another example is stock movements by e-commerce companies.
- 2.
CMR stands for Convention Relative au Contrat de Transport International de Marchandises par Route.
- 3.
Incoterms is an abbreviation of International Commercial Terms, referring to a set of terms of sale that are accepted worldwide.
- 4.
The supranational basis for the arm’s length trading principle is complicated, but its formal codification might be traced back to the General Agreement of Trade and Tariffs (GATT) of 1994, article VII, which is now included in the WTO Valuation Agreement. It is also adopted in the OECD Model Tax Convention. Shifting profits is still a contentious topic, however, as a result of many bilateral tax agreements that allow corporations to distribute profits to low tax jurisdictions through other means, such as royalties and brand management fees.
- 5.
UTZ comes from the Guatamalan Mayan word utz kapeh, which means good coffee.
- 6.
The Dutch foundation Max Havelaar aims to get better prices for commodities, such as coffee and cocoa, for small holder farmers. These commodities are labeled with the Fairtrade logo.
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Acknowledgements
We would like to thank Frank Heijmann from Dutch Customs, Ruud Tusveld from PWC, our fellow teachers in the Master Customs and Supply Chain Compliance and our students for constructive discussions on parts of this chapter.
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Veenstra, A.W. (2019). International Trade, Global Supply Chains and Compliance. In: Zijm, H., Klumpp, M., Regattieri, A., Heragu, S. (eds) Operations, Logistics and Supply Chain Management. Lecture Notes in Logistics. Springer, Cham. https://doi.org/10.1007/978-3-319-92447-2_7
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