As we kick off the new year, we sat down with Jayachand Pachakkil, senior trade consultant at CATTS, to discuss the challenges that companies will face in 2023 from a Trade Compliance and Supply Chain Management perspective and how CATTS intends to address these.
Jayachand highlighted four main areas of concern: the ongoing Russia-Ukraine war, new trade equations that will emerge in 2023, the increasing importance of ESG Compliance, and emerging technology.
Regarding the Russia-Ukraine conflict, Jayachand noted that it's difficult to predict how it will ultimately end. However, he identified two potential scenarios. CATTS is prepared to assist companies in either scenario, whether it be through the rollback of sanctions or the optimization of costs through new sources of supply.
"The war has meandered on, and an end does not appear to be in sight. As there is not enough clarity on how the war will end, we believe that we must be prepared for the scenarios below:
Scenario 1: A negotiated cessation of hostilities
This will involve NATO and the U.S. and will most likely see a step-by-step rollback of sanctions. These will have a mitigating impact on measures and controls that have been currently implemented on Russia, and supply chains and trade compliance elements may slowly come back to the environment that existed prior to the war. Under this scenario, CATTS will stay focussed on the rollback of Sanctions and will be able to assist in the revival of exports that have been negatively affected by Sanctions
Scenario 2: Continuation of the war
This would mean a continuation of high costs of energy and food not just in Europe but across the world, and several households will find it difficult to allocate money towards expenditures other than those for essential requirements. Demand for non-essential goods will diminish and companies will be looking for ways to reduce costs of their inputs to retain market share. CATTS is ideally placed to assist companies in importing goods from new sources of supply, and in leveraging trade programs that can optimize costs."
Jayachand also pointed to a number of new trade equations that are likely to develop in 2023, including a decrease in global trade, increased trade hostility between China and the US, and the implementation of several new trade agreements.
"In my view, there are several new trade equations that will evolve during 2023 due to the following:
- Forecasted decrease in global trade - only a 1% growth over 2022 levels is projected
- Increase in trade hostility between China and the US; relative increase trade between the EU and China; between China and other countries; and China replacing the US as a major trade partner
- Trans-Atlantic trade tension due to green energy and industrial policies
- Implementation of several new Trade Agreements including Australia-India, Australia-EU, UK-India, EU-India, and EU-Chile
CATTS are in a prime position to analyse these emerging trade equations and agreements assist companies in redesigning their supply chains, especially in changing the origin of goods in a manner that is compliant with the trade regulations of source and destination countries, so that companies can use emerging trade scenarios to their benefit.
We expect that several measures will be implemented by countries from commitments made to combat climate change. We believe that there will be an increase in: Trade of products related to alternative, clean and sustainable energy Products requiring HS and export classification"
In addition to these factors, Jayachand emphasized the growing importance of Environmental and Social Governance (ESG) Compliance in the coming years.
"From our expertise and experience in this sector, we will be well placed to assist companies operating in these sectors. Most business observers expect that there will an increasing focus on ESG Compliance in the coming years. With our unique approach of mapping and analysing global trade lanes, we believe that we can assist companies in creating a competitive advantage and reducing risk by identifying applicable regulatory jurisdictions, compliance requirements, and the implementation of a Social Compliance Standard."
Finally, we touched on the role of technology in Trade and Supply Chain Management, increasing digitization, and the use of Artificial Intelligence.
"CATTS, fresh from our pathbreaking win at the WCO Technology Hackathon, will continue to invest in increasing Digitization and the use of Artificial Intelligence in Trade and Supply Chain Management so that our clients and their partners in the global supply chain can improve Customs processes and risk analysis. We bring a unique dimension to the equation because of our thorough understanding of risks from the perspective of Customs authorities."
Overall, 2023 promises to be a year full of challenges and opportunities for companies in the Trade Compliance and Supply Chain Management space. With the help of experts like Jayachand and organizations like CATTS, businesses can stay ahead of the curve and make informed decisions about their operations.