Chris Warren Non-tarrif barriers: why do they exist and how does PFSCM navigate this environment

Non-tariff barriers are non-tax measures encountered during the importation of commodities. These are frequently encountered by the Partnership for Supply Chain Management (PFSCM) during importation processes.

Some of these contribute little to delays as their overall management is commonplace, routine and relatively straightforward. Other non-tariff measures are less routine, difficult to address and, if not innovatively and precisely managed, can have a tremendous impact on the amount of time it takes to clear commodities.

Non-tariff barriers always serve some purpose. For example, they support rules and regulations that ensure imported items correspond to national standards to protect the well-being of citizens.  Sometimes their purpose may not be as readily apparent as this, and the layers of complexity impeding the import process can seem not only perplexing, but also counterproductive.

The presence of non-tariff barriers can also be frustrating to donors and implementing partners who are contributing to addressing the health needs of countries and would prefer to see the importation process sped up accordingly.  However, as complex and time consuming as it might be, non-tariff barriers are considered to be part of the procurement process and subsequently factored into lead times when they are known. The reasons for its existence can be divided into three categories.

Protecting domestic markets

National government authorities can set restrictions on importation for specific products in order to support established local producers or protect infant industries. When there is an established domestic health commodity industry supplying to the public sector, those industries may raise concerns that imported goods destabilize their markets. Non-tariff barriers may exist to support this perspective.

Protecting consumers

National health standards for determining the safety and effectiveness of health commodities are often established based on evaluations specific to an individual country’s need. Though these may be different than those determined by donors or the manufacturer, they may still be completely valid. The basis for these differences may be various health needs that result from factors such as climate, geography, life expectancy, and disease patterns. Whatever the difference may be, these standards generally result in legislated rules and regulations to protect citizenry from the risks associated with poor quality imports, such as could be experienced with expired, fake, substandard or unregistered products.

Exercising sovereignty

Non-tariff barriers can also be a punitive response directed towards exporting countries that have implemented their own non-tariff barriers to imports from the recipient country. They may also be put in place as a response to disagreements in foreign policy objectives. Sometimes this kind of non-tariff barrier has nothing to do with the product being imported but rather with how it is imported, such as with airlines or trucking companies that are not nationally registered

Examples of non-tariff barriers
  • Pre-inspection
  • Import licenses and/or permits
  • Automatic demurrage
  • Assorted handling fees
  • Packing, language and marking requirements
  • Trade documents
  • Translation services
  • Import deposits
  • Administrative feeds
  • Airline non-objections fees

The added value of PFSCM

PFSCM’s broad awareness of multiple iterations of importation processes, and cognizance of the fact that these can, and do frequently change, enables us to work with vendors and recipients to prepare documents before commodities are shipped, anticipate where new challenges may arise, and compress delivery delays or avoid them altogether.

System strengthening is also something that PFSCM does in this area. Through collecting and documenting the evidence of the impact of non-tariff barriers on behalf of public health programs, we enable the programs to advocate for national-level policy changes that will subsequently improve their supply chains. This could be something relatively straightforward as advocating for a distinction to be made between humanitarian shipments of health commodities and commercial shipments, or raising the awareness of public officials to the human cost and health impact of inefficient port and customs management.

PFSCM also supports recipients to increase their understanding of their role in the importation process to ensure they have the capacity to handle the shipments. PFSCM works with recipient’s staff to determine the specific customs procedures and documentation necessary to bring the shipment into their country.

On occasion we also work with the recipient to draft documents in the country’s official language in order to speed up the customs clearance process.

PFSCM’s experience with a wide supplier base further enables us to consult with suppliers to learn of their experiences as they are often familiar with the importing procedures for a number of countries.

Complementing this is PFSCM’s retention of experienced freight forwarders and logistics services providers who are familiar with the requirements for the importation of health care commodities on a country by country basis

Intervening in the importation of health care commodities, particularly in situations with multiple non-tariff barriers, is not a simple process, especially if relationships between staff from different ministries do not exist.

Further, Ministry of Health programs are often not enabled with the staff or the administrative authority to intervene with other government ministries such as ministries of finance, customs, transportation or pharmacy regulatory authorities.

PFSCM takes pride in aiding in bridging the experience gap between importation authorities and health program implementers to the point where the ability of the host government to manage importation is strengthened, while the needs of public health programs are simultaneously supported.

 

Non-tariff barriers always serve some purpose such as protecting consumers, protecting domestic markets or exercising sovereignty.


Andrew Savoy-Burke “Red Zone” happens every year and matters for humanitarian supply chains… here’s what to do about it

What is the Red Zone?

Holiday shopping, and the supply chains that meet that demand, are the main cause of the largest annual demand fluctuation in cargo prices. This affects the containerized ocean and air cargo markets at different times, due to the different lead times for each mode of shipment.

Containerized occean prices typically have two annual upswings. The first runs from mid-August through mid-October, as retailers use in-transit fulfillment to hold additional inventory in anticipation of the fourth quarter sales upswing. An additional cargo price increase typically occurs in January and February due to both demand and port closures that result from the Chinese New Year.

Air cargo prices typically peak in a Red Zone that extends from mid-November through early January. An increase in passenger air travel at the same time can affect cargo prices. Prices are impacted by the demand for fuel, which is stimulated by small parcels competing for space with excess baggage on certain flights.

In recent years, the increase in e-commerce has magnified these effects on air cargo prices in the Red Zone – making air shipments more expensive and less predictable during these weeks.

Meanwhile, winter weather in the global north can also cause delays.

What does this mean for public health organizations?

Public health supply chains compete with the retail sector for booking cargo.

The International Air Cargo Association (TIACA) predicts that the industry is better prepared for this year’s demand surge [1]. Likewise, TIACA notes that global air cargo capacity is slightly outpacing demand [2].

However, we cannot rest easy during the Red Zone. A booming global economy means demand for air cargo should be robust. E-commerce is a large and still-evolving sector that makes aggregate demand and cargo patterns difficult to predict; there is also evidence that it may be extending the peak season [3]. A global shortage of air cargo pilots could also affect flight availability [4] [5].

In addition, protectionism and trade disputes have the potential to cause disruption and increase costs.

Disruption or cost increases in commercial freight forwarding impact the humanitarian and public health organizations that depend on these markets for resupply and distribution.

What can supply chains do to manage the Red Zone?

In short, having a solid freight strategy, and exercising proactive logistics planning can make all the difference.

Below are some winning actions that the Partnership of Supply Chain Management executes when it comes to dealing with the Red Zone.

Freight Strategy

  • Negotiate fixed rate cards with third-party logistics (3PL) service providers. 3PLs typically agree to fixed rates cards for all but the lowest-frequency lanes. These rate cards are valid for six months, smoothing cost variance.
  • Standardize rate cards across all onboarded 3PLs. This facilitates quick cost comparisons and gives the supply chain management company the agility of having at least two 3PL options for most lanes, including all high-volume lanes.

Proactive Logistics Planning

  • Proactively engage both upstream suppliers and downstream clients to identify office holidays, warehouse closures, and other events which might disrupt operations. Use and share this information to more easily plan shipments around known end-of-year disruptions.
  • Identify orders with expected delivery dates in the Red Zone. Workshop these with the clients and assigned 3PLs. Where possible, expedite shipments ahead of the Red Zone or delay them until after. When that is not possible, book the shipments as early as possible to reserve the capacity and lock-in prices

Read more about PFSCM’s Freight and Logistics services.

 

[1] https://www.joc.com/air-cargo/international-air-freight/air-cargo-groups-say-peak-season-capacity-match-demand_20180731.html
[2] https://www.iata.org/publications/economics/Reports/afm/Airlines-Financial-Monitor-Aug-18.pdf
[3] https://www.shiplilly.com/blog/e-commerce-extending-peak-season-cargo-companies/
[4] https://blog.kencogroup.com/how-the-cargo-pilot-shortage-will-affect-your-supply-chain
[5] https://blog.kencogroup.com/how-the-cargo-pilot-shortage-will-affect-your-supply-chain