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​What Documentation Do Retailers Require of Suppliers When Disputing Chargebacks?

Posted By RCVF Admin, Saturday, August 4, 2018
Updated: Saturday, August 4, 2018


What Documentation Do Retailers Require of Suppliers When Disputing Chargebacks?
By RVCF

In 2016, RVCF developed the white paper Expediting the Investigation and Reconciliation of Deduction Claims. We surveyed merchandise suppliers to find out what information they need from retailers to research chargebacks, determine validity, and shorten time to resolution. In what was essentially Part 2 of this survey, we recently asked retailers what documentation they require from suppliers to have a chargeback overturned and deducted money paid back.

In the interest of full transparency, we didn’t get responses from as many retailers as we would have liked. However, we combined the responses we received with the guidelines offered by several retailers on their compliance sites to create a matrix of recommended supporting documentation for disputing common deductions. This matrix can be viewed here. While providing the recommended documents by no means guarantees the reversal of chargebacks, this document can serve as a valuable guideline to help suppliers better manage disputes.

Researching and disputing chargebacks is a major headache, and a potentially long and expensive process, for merchandise suppliers. They receive a chargeback. They research the chargeback to the best of their ability based on the information they have. They believe the chargeback is invalid. They take it up with the retailer within the proper time period but don’t provide all documentation required by the retailer.

This typically leads to one of two scenarios. In the first scenario, the supplier’s request to have the chargeback reversed is flat-out denied. Some retailers only give suppliers one opportunity to dispute a chargeback. If the supplier doesn’t provide all required information the first time, that’s the end of it. There is no appeal.

In the second scenario, the supplier gets into a back-and-forth situation with the retailer. The retailer received some but not all documentation required to conduct their own research. They go back to the supplier and say they need X, Y and Z. Of course, the retailer never said upfront that the supplier needs to provide X, Y and Z to dispute a chargeback.

So the supplier sends a second set of documents to the retailer, who then must piece together this information with the first set of documents. This creates a delay in resolving chargebacks on the supplier’s books. As long as the chargeback is out there with no resolution, it affects their days outstanding. Meanwhile, the retailer considers it a closed matter, claiming the supplier’s window for disputing the claim has expired.

At the conclusion of this back-and-forth between trading partners, suppliers often end up with invalid chargebacks that are never reversed because of all the hoops they have to jump through in order to get the retailer’s attention before time runs out.

More importantly, the issue that caused the chargeback is often left unaddressed, possibly resulting in repeat occurrences of the same issue.

A Simple Solution

Retailers should provide suppliers with a checklist of the specific documentation required to dispute each type of chargeback. This allows suppliers to get their ducks in a row and send all necessary documentation right away. Retailers can then review this information one time and make a timely decision. They can either say the chargeback is valid and clearly explain why, or concede that the chargeback should have never been issued and compensate the supplier.

Regardless of the outcome, the supplier is happy to get the deduction off the books as quickly as possible so it doesn’t affect days outstanding. The supplier can also address issues in their supply chain to prevent future errors. A checklist from the retailer helps to steer them in the right direction.

The retailer is also happy because they can deal with the dispute once and have it resolved quickly. Employees can focus on higher value tasks rather than researching and reconciling the same claims over and over. Retailers that provide a list of requirements that suppliers must follow to ship orders correctly should just go the extra mile to tell suppliers exactly what must be done to dispute a chargeback.

It’s a checklist. It’s not that hard. And it can go a long way to reducing the tension and animosity that can build during a prolonged dispute about a chargeback.

We invite more retailers to participate in the RVCF survey, which will allow us to provide deeper insights to suppliers and ensure more retailers receive the right documentation when suppliers dispute chargebacks. To request a link to access the survey, contact Susan Haupt at shaupt@rvcf.com.

 

 

 

Tags:  Chargeback  Chargebacks  Deductions  Dispute  Documentation  Reconciliation  Survey 

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Chargebacks and Penalties for Poor Inventory Productivity?

Posted By RCVF Admin, Saturday, August 4, 2018
Updated: Saturday, August 4, 2018


Chargebacks and Penalties for Poor Inventory Productivity?

by Victor Engesser & Stephany Goodnight of RVCF

Inventory productivity is increasingly becoming a key area of focus for retailers.  As we highlighted in the June issue of the RVCF Link newsletter, inventory is typically the largest asset on the balance sheet for retailers and contributes significantly to the liquidity of the organization.  Many retailers are seeing their inventory turns slowing, which has a direct impact on cash flow.  At the same time, both retailers and suppliers are under pressure to operate with leaner inventory.  We recently read a trade article that got us wondering, "Will inventory productivity become the next element of supplier compliance management?"

In the olden days, inventory management was fairly simple. A retailer met with a supplier, negotiated a price, wrote a purchase order, and paid in full 30 days after the product arrived into the retailer’s distribution center (DC). At that point, the inventory was all theirs to sell (or not sell).

However, over time, compliance management came to be.  Retailers expect orders to be on time, in full and in accordance with a myriad of other requirements.  As retailers keep "fine tuning" this process, is it possible we have reached a point where suppliers will not only be responsible for delivering inventory, but also for ensuring inventory is sold within a reasonable amount of time?  How much responsibility do suppliers have with respect to inventory productivity?

According to a recent article by Daphne Howland in Retail Dive, Amazon is instituting a series of initiatives aimed at improving inventory management on its Marketplace.  In July, Amazon began assigning an “inventory performance index” to each seller.  We are not sure how this index is calculated, but sellers who fail to achieve a minimum index score will be prohibited from sending new shipments to Amazon until their inventory levels drop below specified limits. Sellers will also be charged a “store overage fee” on the excess inventory. 

In the past, Marketplace sellers had been able to pay for unlimited storage.  Not surprisingly, Amazon is also taking a harder look at unsold inventory, especially aged (365 days or older) inventory, by adding additional monthly charges to motivate space productivity improvements.  Amazon’s fulfillment costs have escalated over the past year as new DCs have been added and Prime members’ expectations for customer service continue to rise.

In light of this, we can envision other retailers questioning whether they should be looking at store space productivity or DC space productivity in a similar way. Until now, most traditional merchandise retailers have made store shelf assortment decisions and planagram location and space decisions while looking at sales and margin metrics.  We have heard very little to suggest poor inventory productivity performance has escalated to a compliance program violation or candidate for automated chargebacks.  But we also recognize that fulfillment costs are escalating and DCs do not have unlimited space.

Clearly, inventory productivity can be measured and key performance indicators (KPIs) such as inventory turns, DIOH (days inventory on hand), and GMROI (gross margin return on inventory investment) are valuable performance metrics to add to a supplier scorecard.  But setting a required performance standard and holding suppliers to this performance as part of a compliance program is not the norm today, and with so much variability throughout the supply chain, a single standard seems unrealistic.   However, having supplier performance expectations around inventory performance does seem likely.

We at RVCF would like to hear your thoughts and opinions on this topic. We are especially interested to know if you feel inventory productivity should remain a retailer (internally-managed) responsibility and, as such, a business area best handled as part of the merchant/supplier relationship management process.  Or do you feel that inventory productivity should be thought of as an element of the end-to-end supply chain and would benefit if incorporated into the supplier scorecard so performance could be more broadly managed?

Give this some consideration and, if you agree, we can make this topic a part of the Retailer Open Forum discussion at the 2018 RVCF Annual Fall Conference this October in San Diego.  We are already planning to delve more deeply into the area of Inventory Management and Productivity during the Fall Conference, with three breakout sessions included in the agenda:  Business Processes Driving “Buy Online Pickup in Store,” Selling More with Less – Smart/Lean Inventory, and Best Practices in Inventory Management.

See you in San Diego!

 

 

 

Tags:  Amazon  Chargeback  Chargebacks  Inventory Integrity  Inventory Management 

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From the Desk of Kim Zablocky: Time for Both Sides of the Aisle to Revisit and Prioritize the Perfect Order Index

Posted By RCVF Admin, Saturday, August 4, 2018
Updated: Saturday, August 4, 2018

RVCF_Link


Time for Both Sides of the Aisle to Revisit and Prioritize the Perfect Order Index
From the Desk of Kim Zablocky

On-time, in-full, damage-free, full and accurate documentation. That’s what the Perfect Order looks like. That’s how an order should be shipped.

Although we’ve been discussing the Perfect Order for more than 15 years, inaccuracy in order fulfillment has held steady at 3-4 percent. It’s time for retailers and merchandise suppliers to refocus on the elusive Perfect Order. Perfect Order Index metrics should be used to identify and address errors, update technology, reduce costs, and ensure merchandise gets to store shelves and into the hands of customers as quickly as possible.

The lack of visibility and analytics processes keeps suppliers from being nimble enough to wrap their heads around the constant onslaught of change management. The fact is, most companies lack the flexibility to accommodate change. Many build their supply chains to support one or two major accounts, leaving others to be more challenging than they should be.

Unfortunately, too many suppliers make the determination that it’s better to take the chargeback rather than make the necessary investments to fix the cause of the chargeback. In other words, the decision is driven by cost rather than the Perfect Order Index.

This could prove to be a costly miscalculation. At some point, suppliers that take this approach might drive the retailer to increase the cost of the deduction, or in some cases stop getting orders all together. Retailers don’t have the time or resources to repeatedly deal with shipping errors, and they certainly aren’t willing to sacrifice sales and profits because of disruptions in their supply chain.

Best-in-class suppliers apply best practices to consistently achieve higher performance, lower operating costs and higher margins. They also draw from the knowledge of cross-functional teams. By unifying the competencies of the various departments that touch an order, these departments can learn from each other so they can better construct each order.

Let’s review each of the four Perfect Order attributes against what our research has shown to be supplier best practices, which will support suppliers in maximizing the Perfect Order Index. 

1) Orders should arrive to retailers on-time. 

Suppliers should maintain open lines of communication with retailer customers to keep them updated on order status and collaborate to establish metrics and requirements.

Utilize carriers that track shipments, offer electronic proof of delivery, and have the ability to integrate tracking information into their system. Track delivery performance at the order level.

Manage the flow of orders in the warehouse using an integrated warehouse management system. 

Optimize warehouse layouts to minimize travel time and non-value steps.

Work with retailer customers to establish what constitutes on-time performance so retailers can measure and report it.

2) Orders should be complete. 

Implement receiving and storage processes that guarantee product is correct and placed where it belongs so that it can be used for orders.

Use cross docking to expedite received product to open orders.

Use system-stored customer data to manage partial and short-ship rules, as well as back-order processing.

Ensure that the ASN triangulates to the purchase order and matches shipment contents.

3) Orders should be delivered damage free.

Document and fully understand retailer packing and shipping requirements, which must be followed during order processing.

Implement processes for verifying that all products are free of damage, and that internal transport of product does not cause damage.

Utilize carriers that have solid records for undamaged shipments and have processes in place to measure and report carrier performance.

4) Orders should have accurate documentation. 

Store retailer data is in a single database.

Use system-generated, customer-specific labels and documents to ensure orders are shipped with correct documents.

Send accurate, system-generated ASNs to customers.

Retailers Need to Step Up, Too

Suppliers aren’t the only ones guilty of choosing to accept chargebacks rather than solving problems. Retailers must do what’s necessary on their end to achieve the Perfect Order rather than simply issuing chargebacks to recover costs. Here are six basic steps retailers should take to improve the Perfect Order Index.

•            Improve order management receiving and acknowledgement processes

•            Improve speed to market

•            Improve inventory visibility for E-Com sales

•            Improve inventory flow

•            Reduce the number of defects per million

•            Improve cycle times

In addition, retailers that expect On-Time In Full OTIF requirements from their suppliers, must also in turn be willing to create and share a viable forecast.

The Perfect Order Must Be a Shared Goal

Some retailers and suppliers may question whether the Perfect Order is achievable in an age of highly complex, frequently changing retailer requirements. Even if you believe perfection in every order, every time isn’t realistic, the Perfect Order should always be the goal – a shared goal among trading partners.

We need to take a fresh look at the Perfect Order Index form both sides of the aisle. Suppliers need to tighten their ships to improve the four key components of the Perfect Order. Retailers must use those components to hold suppliers accountable, but also collaborate with suppliers to improve order accuracy instead of viewing cost recovery through chargebacks as a solution to the problem.

Talk about the Perfect Order with your trading partners. Discuss what the Perfect Order looks like and what needs to be done to achieve it. Make it a priority because of what the Perfect Order means for your organization – higher profits and margins, lower costs, faster time to market, and happier customers.

Kim
kzablocky@rvcf.com
(646) 442-3473 

 

Tags:  Perfect Order 

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U.S. Issues Advisory on Sanctions Risks Involving North Korea (July 23, 2018)

Posted By RCVF Admin, Saturday, August 4, 2018
Updated: Saturday, August 4, 2018



U.S. Issues Advisory on Sanctions Risks Involving North Korea (July 23, 2018)

 By Melissa Proctor (Miller Proctor Law PLLC)

 

On July 23, 2018, the U.S. Departments of State, Treasury and Homeland Security issued an advisory that warns companies of the tactics used by North Korea to evade U.S. and United Nations economic sanctions. The advisory does not impose any new sanctions on North Korea. Rather, the sanctions on North Korea remains fully in effect. The advisory merely provides examples of how North Korea is attempting to evade existing sanctions, and draws attention to the risks of inadvertent sourcing and purchasing of goods, service and technology from North Korea.[1] In many cases, U.S. companies are wholly unaware of North Korea’s involvement in their overseas transactions.

 

For example, third-country suppliers are known to have moved their manufacturing operations (or have subcontracted portions of their production processes) to factories in North Korea without notifying their customers. In addition, North Korean companies often place false country of origin labels on goods that were produced in North Korea. The advisory also notes that North Korean companies have entered into joint ventures with entities located in other countries—the involvement of North Korea in those entities are not readily apparent to many multinational companies in industry sectors that include seafood, consumer electronics, minerals and precious metals, textiles and apparel, and construction, among others. (A list of the known joint ventures are identified in Annex 2 of the advisory.) Further, companies in North Korea are known to sell their products far below market prices, making them very attractive to middlemen and trading companies.

 

The advisory also points to the use of North Korean labor in international supply chains—where North Korean nationals have been loaned out by the North Korean government to manufacturers located throughout Asia, Eastern Europe, the Middle East and even South America. Based on a report issued by Military.com earlier this year, it is estimated that approximately 200,000 North Koreans are being used as slave labor in over 45 countries around the world, and that the North Korean government earns an estimated $3 billion annually for supplying slave labor to these countries. All of the wages earned by the workers are paid directly to the North Korean government or to companies controlled by the North Korean government. The average wage for a North Korean worker, payable to the North Korean government, is reportedly around $400 per month; however, the workers receive only 10% to 20% of that total amount. The export of slave labor is in addition to the forced labor taking place in the numerous prison labor camps inside North Korea.[2] Affected industries include seafood processing, shipbuilding, medical and pharmaceutical, textile apparel and footwear, IT, and the restaurant and hospitality industries.


1. Current Sanctions on North Korea

 

By way of background, the Foreign Assets Control Regulations,[3] which are enforced by the Treasury Department’s Office of Foreign Assets Control (“OFAC”) prohibit virtually all dealings by U.S. persons with North Korea. The U.S. Customs Regulations also prohibit the importation of North Korean-originating goods into the United States—specifically, imported merchandise that contains any amount of North Korean content is prohibited from entering the United States. CBP has also long had the authority to deny entry into the United States of merchandise produced, in whole or in part, by prison, forced, child or indentured labor under the Tariff Act of 1930 (19 U.S.C. Section 1307). The Trade Facilitation and Trade Enforcement Act (“TFTEA”),[4] which was enacted in 2016, further solidified CBP’s enforcement authority in this area. CBP is authorized to deny the entry of imported goods into the United States where there is evidence that they were produced by forced labor—but the burden was placed on CBP to prove that forced labor was in fact involved in the manufacture of imported goods.

 

The Countering America’s Adversaries Through Sanctions Act (“CAATSA”),[5] however, changed the rules of the game. CBP continues to refuse the entry of imported merchandise into the United States where it is believed to have been produced with forced labor, but the burden of proof now falls on the U.S. importers to show by clear and convincing evidence that North Korean forced labor was not used. If there is evidence of North Korean labor, CBP may detain and seize the imported goods, subject the goods to forfeiture, assess civil penalties, and may even refer the issue to Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”) for criminal investigation. U.S. importers caught up in a violation of CAATSA should expect to have their future import shipments scrutinized by CBP to a much greater degree, such as through increased examinations and detentions. And of course, violators will likely suffer negative publicity as a result of the violations.

 

2. Previous Guidance Issued on North Korea’s Deceptive Practices & U.S. Enforcement

 

Earlier this year, OFAC issued guidance on the various deceptive shipping practices employed by North Korea. For example, North Korea is known to physically alter the names and International Maritime Organization (“IMO”) number of vessels passing themselves off as different vessels. North Korea has also transferred cargo from one ship to another while at sea rather than while located a port, thereby concealing the origin or destination of the cargo. North Korea has also falsified vessel and cargo documents to obscure the origin or destination of cargo, as well as disabled the Automatic Identification System (“AIS”), a vessel’s collision avoidance system, to mask their movements.

 

We also previously reported that CBP had begun scrutinizing import shipments suspected of being made with North Korean forced labor, as directed by CAATSA. For example, CBP has detained and seized shipments from China, and has requested information and documentation from U.S. Importers through the issuance of CF-28s. The documents and records that may be requested by CBP as part of a CF-28 inquiry may include certificates of origin, supplier certifications stating that no forced labor was used, foreign supplier daily production records (including subcontractor production records), finishing and packing records, employee timecards and wage records, employee lists, purchase orders and delivery documents for raw materials, inputs and components used, inventory records, bills of material, commercial invoices, packing lists, proof of payment, factory visit reports and photographs, inline and final inspection reports, factory utility bills and payment, etc.  At the same time, CBP encourages parties, who have information about the use of North Korean or forced labor with respect to imported merchandise, to submit information via its online eAllegation portal—parties who provide tips that lead to the recovery of a penalty, fine, or the forfeiture of violative merchandise may be eligible to receive compensation of up to $250,000.

 

3. Advisory Urges Due Diligence and Awareness of North Korean Tactics


The advisory reinforces the need for companies with multinational operations to make themselves aware of the deceptive practices described above, and to implement due diligence policies and procedures to prevent inadvertent dealings with North Korea that violate U.S. sanctions laws and regulations. Companies should first and foremost ensure that they are screening all supply chain parties and those involved in international activities against the U.S. restricted parties lists, the restrictive measures imposed by the European Union, and other applicable country sanctions lists. Companies should also review the list of joint ventures involving North Korean entities provided in Annex 2 to the advisory.

 

In addition, to assist U.S. companies in their increased supply chain due diligence efforts, CBP previously published guidance on its website recommending the adoption of additional internal controls for compliance and updated its Reasonable Care Checklist. CBP recommends that U.S. importers—

 

  • Fully understand the sourcing, manufacturing and finishing processes for their imported goods, all of the companies involved, where exactly such operations are performed, and the labor conditions that exist in each of the production facilities:
  •  Review the information contained on CBP’s website relating to Forced Labor, such as fact sheets and recent investigations conducted by CBP;
  •  Review the U.S. Labor Department’s “List of Goods Produced by Child Labor or Forced Labor” and “Reducing Child Labor and Forced Labor Toolkit,” as well as the International Labor Organization’s (“ILO’s”) publication “Indicators of Forced Labour,” with respect to high-risk countries, high-risk commodities, and red flags;
  •  Perform regular risk assessments and internal audits of their supply chains to confirm that their imported goods are both “forced labor free” and “North Korea free”;
  •  Implement a formal, robust process for vetting foreign suppliers and vendors in high-risk areas, and incorporate prohibitions against the use of forced labor in purchase order terms and conditions, supplier agreements and codes of conduct; and,
  • Implementation of a formal social corporate responsibility compliance program.


Melissa Proctor is the founder of Miller Proctor Law PLLC, an international trade law firm located in Scottsdale, Arizona. For more than twenty years, she has advised companies on the full of array of international trade issues, imports, exports, embargoes and economic sanctions, anti-corruption compliance, and other agency requirements that impact the cross-border movement of goods, information and services. She may be reached at 480-447-8986 or melissa@millerproctorlaw.com.



[1] See https://www.state.gov/r/pa/prs/ps/2018/07/284312.htm.

[2] See http://www.military.com/daily-news/2017/07/10/how-north-korea-uses-slave-labor-exports-to-circumvent-sanctions.html

[3] See 31 C.F.R. Part 500 et seq.

[4] See Pub. L. 114-125.

[5] See Pub. L. 115-44.

 

Tags:  exports  imports  North Korea  Regulations  sanctions  Tariff 

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Retaliating Against the Retaliator – U.S. Proposes Additional Tariffs on Chinese-Origin Goods Valued at $200 Billion

Posted By Administration, Thursday, July 12, 2018
Updated: Thursday, July 12, 2018


by Melissa Proctor, Miller Proctor Law PLLC


It appears that the U.S. is moving deeper into its trade dispute with China. Late in the day on July 11th, the U.S. Trade Representative (USTR) announced that the United States may impose additional 10% ad valorem duties on a new list of Chinese-origin products valued at $200 billion. The new list covers certain agricultural goods, chemicals, materials used in building construction, and electronics. The USTR's proposal is in response to China's retaliation against the first round of Section 301 tariffs that took effect on July 6th.

By way of background, the United States' decision to impose increased tariffs under Section 301 of the Trade Act of 1974 (9 U.S.C. § 2411) was the result of an investigation into China's practice of requiring U.S. companies to transfer their intellectual property rights and technologies to Chinese companies in order to obtain business licenses and approvals to invest in China. The USTR determined that these practices were unreasonable, discriminatory and restrict U.S. commerce.

The following provides a timeline of the key events and developments in the Section 301 saga –

June 20, 2018: The USTR published a notice in the Federal Register announcing the imposition of the 25% ad valorem duties on certain Chinese-origin products. Affected goods included items classified in over 800 HTSUS subheadings valued at $34 billion – these items are identified in Annex A of the June 20th Federal Register notice. In addition, the USTR also requested public comments on the proposed imposition of additional tariffs on more Chinese-origin goods, which are valued at $16 billion – they are identified in Annex C of the June 20th Federal Register notice. The public comment process for the proposed on the Annex C items is ongoing. See 83 Federal Register 28710, June 20, 2018.
July 6, 2018: Additional 25% tariffs on the initial group of Chinese-origin (Annex A) products imported into the United States took effect. On the very same day, China retaliated by imposing increased tariffs on U.S.-origin products imported into China. China is now assessing 25% tariffs on U.S.-origin goods classified under 545 Harmonized System subheadings, which include agricultural products, SUVs, electric vehicles, whiskey, dog food and tobacco. China is also threatening to impose tariffs on 114 additional U.S.-origin goods if the U.S. takes further action under Section 301.
July 10, 2018: The USTR issued a notice of proposed tariffs (10% ad valorem duty rates) on even more Chinese-origin products valued at $200 billion in response to China's retaliatory action on July 6th.
July 11, 2018: The USTR published a notice in the Federal Register outlining the procedures and criteria for submitting requests for product exclusions from the Section 301 tariffs that took effect on July 6, 2018. See 83 Federal Register 32181 (July 11, 2018).

Upcoming Deadlines and Key Takeaways
The USTR is current seeking public comments on the June 20th proposed tariff increases on items identified in Annex C in the Federal Register notice. Key dates for this proposed action are as follows –

  • July 23rd: Deadline for submission of comments.
  • July 24th: Public Hearing at the International Trade Commission in Washington, D.C.
  • July 31st: Deadline for submission of post-hearing rebuttal comments.

The USTR is also currently seeking public comment on the July 10th proposed retaliatory tariff increases, and will hold a public hearing on the proposal. Key dates for the public comments and the hearing are as follows –

  • July 27th: Deadline for filing requests to appear at the public hearing.
  • August 17th: Deadline for submission of written comments.
  • August 20th-23rd: Public hearing at the International Trade Commission in Washington, D.C.
  • August 30th: Deadline for submission of post-hearing rebuttal comments.

The USTR prefers that public comments and rebuttal comments be submitted via the Federal eRulemaking Portal at http://www.regulations.gov.

The following provides the key takeaways for understanding the scope and requirements associated with the Section 301 actions:

  • The current and proposed Section 301 tariffs apply only to Chinese-origin goods – they do not apply to goods that are products of Hong Kong or Taiwan, even if they are exported from China to the United States.
  • Chinese-origin goods that are shipped to the United States from countries other than China are subject to the Section 301 tariffs.
  • Upon the entry of covered goods into the United States, U.S. importers must declare the HTSUS classifications that normally apply to the products, as well as the special Section 301 HTSUS subheading (HTSUS 9903.88.01).
  • The Section 301 tariffs do not apply to goods that are entered under HTSUS Chapter 98, such as HTSUS 9801 or 9802 – in these cases, the U.S. importer must declare HTSUS subheading 9903.88.01, the applicable HTSUS Chapter 98 subheading, and the Chapter 1 – 97 HTSUS classification that normally applies to the merchandise in question.
  • Section 301 duties are eligible for duty drawback.
  • Section 301 duties will apply to affected Chinese-origin products that are entered under free trade agreements or special trade programs.
  • With respect to Foreign Trade Zones (FTZs), affected products that enter into an FTZ on or after July 6th (except for those eligible for admission under Domestic Status) must be entered as Privileged Foreign Status (PFS) – they will be subject to the Section 301 duties or any applicable quantitative restrictions upon their withdrawal for consumption. (Note that withdrawals for export from the United States will not be impacted by the Section 301 tariffs.)

Key Strategy Considerations for U.S. Companies
In order to assess the impact of these developments on international supply chains, U.S. companies are urged to carefully review the lists of covered goods. Companies dealing in these products should consider submitting exclusion requests to the USTR. They should also consider reviewing the accuracy of the tariff classifications currently used for these items as valid arguments for their reclassification may be available thereby removing them from the scope of the Section 301 tariff increases. However, companies should exercise extreme caution here, as any sudden classification changes will likely draw scrutiny from U.S. Customs and Border Protection (CBP). Any classification changes should be made only after conducting a thorough legal analysis under the U.S. customs laws and regulations in order withstand such scrutiny.

U.S. importers of Chinese-origin goods that do not fall within the scope of the Section 301 tariffs should still anticipate close scrutiny by CBP. CBP will likely want to investigate whether the Section 301 tariffs are being unlawfully circumvented. The same holds true for U.S. importers of goods that are classified in Section 301 tariff classifications but that are sourced from other countries, as CBP will likely scrutinize those shipments to whether illegal transshipment may be occurring.

Of course, it goes without saying that U.S. companies should, if at all feasible, explore sourcing alternatives for products that are captured by the Section 301 actions.

U.S. companies should also consider submitting public comments and post-rebuttal comments to the USTR. Concerns about the likely impact of the Section 301 actions on U.S. companies and the economy should be voiced loudly – for example, the key decisionmakers should be made aware of any current and anticipated disruptions in supply chains, the impact of Section 301 actions on U.S. manufacturing operations and U.S. jobs, examples of price-gouging by some non-Chinese suppliers of covered products, and so on.

Finally, as this is an incredibly fluid situation with developments occurring at lightning speed, U.S. companies should continue to monitor closely the Section 301 actions that have been taken and those that are threatened. It appears that this game of chicken will continue at least for the near term.


Melissa Proctor is the founder of Miller Proctor Law PLLC, an international trade law firm located in Scottsdale, Arizona. For more than twenty years, she has advised companies on the full of array of international trade issues, including export controls, embargoes and economic sanctions, customs laws, anti-corruption compliance, and other agency requirements that impact the cross-border movement of goods, information and services. She may be reached at 480-447-8986 or melissa@millerproctorlaw.com.

Tags:  Tariff 

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From the Desk of Kim Zablocky: Why RVCF Is Launching an Inventory Management Initiative

Posted By Administration, Thursday, June 14, 2018
Updated: Thursday, June 14, 2018


About a year ago, Target and Walmart announced that they were demanding improvement in on time, in full (OTIF) performance from merchandise suppliers to reduce shipment variability. This announcement is indicative of efforts being made across the industry by both retailers and suppliers to more tightly manage inventories.

Retailers want lean inventories with constant replenishment to avoid out-of-stocks, and they need to minimize shipment errors that slow down the flow of goods. Suppliers also want to maintain lean and productive inventories that are in the right place according to demand. If you can't manage inventory, you can't manage any of these requirements. You need visibility into inventory as it flows through the supply chain.

This is what happened to Walmart a couple years ago. Suddenly, they were running out of certain items in their stores and didn't know why. They didn't know if the affected items were in the back of the store, in transit, or stuck at a distribution center. They had lost sight of inventory and stores were running out of product, so there was a huge push to tighten up inventory flow.

We can talk OTIF until our eyes bleed, but we at RVCF determined that we need to expand our offerings in the area of inventory management. This is a natural progression for RVCF, which has long focused on supply chain efficiency, shipment accuracy, trading partner alignment, and increased profitability for retailers and suppliers through collaboration. As an industry, we need to spend more time understanding methodologies and best practices for managing inventory. When customers buy online and pick up in store and suppliers drop ship to fulfill orders on behalf of retailers, clear communication between trading partners and full inventory visibility are required to make it work.

When you master inventory management, you can accelerate speed to shelf. Products get to your stores before your competition's stores. You're able to get out front with the products customers want early in the lifecycle of those products.

You also reduce excess inventory so you don't have money tied up in inventory where you don't need it. When you can operate with lean inventory without going out of stock, you reduce markdowns required at the end of the product lifecycle to get them off the shelf and make room for the next generation of products. When you have visibility into inventory, you can see what's selling well and what's not. This allows you to be more dynamic and adapt on the fly to avoid those markdowns that eat into profits.

Back in the old days, retailers would simply order a million widgets and the supplier would ship a million widgets. Today, retailers are asking the supplier to reserve a million widgets but only ship 100,000 a time while reserving the option to cancel the other 900,000 if they're not selling. This creates a lot of risk for the supplier. If the retailer cancels, they're left holding inventory that isn't as valuable. Effective inventory management is critical to minimizing risk.

OTIF forces retailers and suppliers to become better trading partners by sharing more data. Suppliers can get out in front of retailer demand and make adjustments in their own manufacturing supply chain much earlier. Suppliers can intelligently calculate demand before taking on an acceptable level of risk. Data becomes more available and accessible through better inventory management.

RVCF is excited to welcome Stephany Goodnight, former Vice President of Replenishment with AutoZone, Inc., as a Retail Executive Advisor who will spearhead the development of a new learning track focused on inventory management and productivity. Under Stephany's leadership, we'll get to the root cause of inventory management challenges, identify and share best practices, and develop multiple sessions for the 2018 RVCF Fall Conference.

Of course, the foundation of this initiative must be ongoing collaboration between retailers and merchandise suppliers. We invite professionals in inventory control, supply chain, planning and forecasting, and other areas to get involved in our new inventory management efforts. What's working? What's not? What obstacles are you struggling to overcome? What tools do you use? What are your strategies for keeping inventory lean without out-of-stocks or markdowns?

Give me a call at 646-442-3473 if you want to get involved. We look forward to tackling inventory management together.

Kim
kzablocky@rvcf.com
(646) 442-3473

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Tags:  Inventory Management 

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Retail Value Chain 101: RVCF Spring Conference Insights: What's Negotiable and What's Not in a Compliance Program

Posted By Administration, Thursday, June 14, 2018
Updated: Thursday, June 14, 2018


by RVCF


At the recent RVCF Spring Conference in Clearwater Beach, we held two separate sessions – one with retailers and one with merchandise suppliers – in which we had very candid, honest discussions about compliance programs. More specifically, we talked about what's negotiable and what's not and how to approach negotiations. By hearing the viewpoints of both sides of the trading partner relationship, we gained valuable insights into the compliance landscape and a fair amount of consensus in several areas. Here are the highlights.

The Retailer's Perspective
When a supplier attempts to have a compliance chargeback reduced, we found that many retailers will be open to negotiation if the supplier acts quickly to resolve the issue to prevent future orders from shipping incorrectly. On the other hand, chargebacks resulting from the same errors that aren't addressed by the supplier in a timely manner are almost always viewed as non-negotiable.

Suppliers who think they can show up at the end of the quarter or fiscal year with a pile of chargebacks and expect to have them reversed have another thing coming. It's not happening. Not only will this approach fail, but it's also likely to strain the trading partner relationship. Also, ignorance is never a valid excuse. If you signed the retailer's contract and agreed to the compliance requirements, you can't say you weren't aware of those requirements and expect a reversal.

Circumstances beyond the supplier's control, such as a hurricane, a port shutdown due to a strike, or some other event could very well be a valid reason to ask for a pause in the enforcement of a compliance program. However, most retailers will view this as a short-term exception. The supplier will be expected to come up with an alternative or workaround solution and get back into compliance as quickly as possible.

The Supplier's Perspective
RVCF merchandise supplier members work with a large number of retailers and, as a result, must navigate a wide range of compliance programs. Many retailers are very fair and reasonable in their requirements, chargeback fees, and how chargebacks are communicated. Unfortunately, some retailers take an extreme and sometimes abusive approach.

For example, when chargebacks are issued, suppliers have every right to expect that the retailer will provide all data required to investigate and, more importantly, correct compliance errors. Suppliers need to know what happened, right down to the purchase order level and possibly the SKU level, so the problem can be resolved as quickly as possible.

Also, compliance fees should never be so high that they're considered excessive or punitive. If a shortage is discovered and a single $50 item is missing, a purchase order-level compliance charge should never be 10-20 times that amount. Chargebacks should cover the costs incurred by the retailer to deal with the issue at hand. Noncompliance should not be viewed as a profit center.

If compliance requirements are no longer needed due to enhancements to the retailer's systems and capabilities, those requirements should be eliminated. Compliance programs should adapt to and align with these changes. For example, if a retailer with a rigid carton labeling requirement installs tunnel scanners in the distribution center, the labeling requirement could be either relaxed or removed.

Retailers should keep in mind that they don't always get the candor they need from suppliers. In other words, a supplier's salesperson might not bring up a compliance issue with the merchant because they don't want to rock the boat or jeopardize the relationship in any way. The reality of the situation is that retailers need to hear from suppliers when compliance programs and behaviors are considered unfair or unreasonable. Honest, open communication is essential to a healthy, profitable trading partner relationship.

The Big Takeaway
Compliance programs are typically designed to support the retailer's goal of quickly and efficiently moving the products through the supply chain and into the hands of the consumer. To achieve this goal, both trading partners must have flexibility in their requirements. Both sides must be willing to sit down, listen to each other's concerns, make adjustments, and solve problems through collaboration.

The million-dollar question for retailers and merchandise suppliers is simple. Are you a collaborative, problem-solving trading partner, or are you practicing behaviors that get in the way of progress?

Success isn't just the product of the size of your organization and the level of sophistication in your supply chain. Success is achieved when the right people with the right skills and attitude work together.

The insights provided in this article represent a valuable but small portion of two extremely productive sessions at the RVCF Spring Conference. To get the full benefit, you have to be there. We strongly encourage industry professionals to attend the RVCF Fall Conference, October 14-17 at the Manchester Grand Hyatt San Diego in San Diego, CA. Speak with your trading partners and peers face-to-face and be a part of these conversations. More importantly, be a part of the solution.


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Tags:  Compliance Program  Negotiation  Vendor Compliance 

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Retail Value Chain 101: RVCF Spring Conference Insights - Tips for Reducing Shortages

Posted By Administration, Thursday, June 14, 2018
Updated: Thursday, June 14, 2018


by RVCF


We've often referred to shortages as the untamed animal of the retail industry. Whether they're caused by poor packing practices, a lack of discrepancy and damage reporting by a transportation provider, or a lack of communication between trading partners, shortages tend to cause chaos and confusion when not properly addressed and controlled. This chaos and confusion slows the flow of merchandise through the supply chain and eats into profits.

At the recent RVCF Spring Conference in Clearwater Beach, we had four separate sessions in which the topic of shortages was discussed in depth, including:

  1. Supplier Only Open Forum
  2. Shortages from Theft & Prevention
  3. Managing Transportation Claims & Audits from a Legal Perspective
  4. Panel Session: Controlling Shortages

These sessions produced a number of valuable insights that merchandise suppliers can implement within their own organizations, whether that means exploring a new way of doing things or improving an existing practice. Here are several of the best suggestions we heard at the RVCF Spring Conference for reducing shortages.

Scan and Pack
The number one recommendation was to use the "scan and pack" method. Scan one unit and place it in the carton – one unit at a time, one carton at a time. It sounds so simple, but deviating from this method only increases the risk of error.

For example, suppose 12 identical units are being shipped. When you scan the same unit 12 times and pack all 12 items at the same time, errors are more likely. Also, if you work with multiple cartons at the same time, there's a greater risk of the wrong unit going in the wrong carton. You could end up with an overage of one unit in one carton and a shortage of one unit in the other. That would seem like a wash, but the likely scenario is that you'll be hit with chargebacks and the retailer will get one free unit.

"Count at First Break" Agreements
The retailer often pays for freight and requires the supplier to work with a certain transportation provider, but that doesn't mean the supplier can't communicate with the carrier. In fact, the supplier can and should speak with a carrier representative about what should be done to proactively address shipment issues before the shipment goes any farther.

A "count at first break" agreement with the local carrier facility says that the carrier should report any discrepancies in carton count or damage within 24-48 hours and stop that shipment. If a carton is missing or damaged, the issue can be rectified before you run into receiving problems on the backend. These problems lead to shortages and losses that can't be recovered.

Driver Counts
Retailers are telling suppliers to put shipper load-and-counts and notations on bills of lading. Any shortages can then be blamed on the shipper load-and-counts. But the supplier can still give the driver the opportunity to count cartons. If the driver decides not to count cartons, don't let them sign shipper load-and-counts on bills of lading. If a shortage occurs, you need to be able to investigate the issue and file a claim if necessary. Carriers must understand that this is a requirement, and shipments won't be allowed to go out if proper procedures aren't followed.

Carton Tally Sheets on Dock
Procedures for verifying package count at loading should be established and enforced. When shippers stack cartons on the dock, they're stating the number of cartons against the corresponding purchase order. Loaders and supervisors should sign manifests and loading tallies and place them with the shipment when it leaves their facility. This makes it easy for both the driver and the retailer to count and agree, ensuring the shipment has been verified as complete three times.

Facility Visits
Merchandise suppliers should invite retailers to their facility and vice versa. If a 3PL or consolidation center is involved, visit their facility as well to see how shipments are moving through the supply chain. This allows you to identify areas for improvement and make sure nothing is being done by any party that could increase the risk of shortages on the backend. If issues are identified, you can sit down and talk about ways to implement improvements and follow up to see if the situation has improved.

Regular Audits
Suppliers should be doing random audits on shipments from overseas factories to make sure the number of cartons and units per carton match what the factory says is in the order. If everything matches up, cartons can continue to flow. If not, you can open more cartons to check for shortages, overages, substitutions, damage, etc. If you see a lot of errors, you can note the types of errors and frequency and address these issues with the factory. The increase in labor costs is likely to be dwarfed by the chargebacks you would receive for shortages resulting from the factory's mistakes.

Suppliers need to have a procedure in place for reporting problems to factories and charging them back when issues aren't addressed. If you need an extra level of auditing that goes beyond your own employees, bring in a third party that specializes in these types of audits.

The Big Takeaway
These sessions and the conference as a whole were major learning opportunities for everyone involved. During the panel discussion, we noticed that even the panelists, who were selected because their organizations are so effective at minimizing shortages, were taking notes on comments from each other.

There was so much productive back-and-forth discussion that continued after each session. Peers were able to discuss how they're addressing shortages and what their success rates are, and then determine how many people in the room are doing the same thing. We're happy to provide a recap after the fact in this newsletter, but there is so much value to be gained by being at a conference and speaking directly with peers and trading partners.

To get the full benefit, you have to be there. We strongly encourage industry professionals to attend the RVCF Fall Conference, October 14-17 at the Manchester Grand Hyatt San Diego in San Diego, CA.


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Tags:  Shortages 

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RVCF New Member Spotlight

Posted By Administration, Thursday, June 14, 2018
Updated: Thursday, June 14, 2018



RVCF is a member-based organization focused on promoting best practices, trading partner alignment and collaboration, and technology solutions to streamline operations, lower costs and speed goods to market throughout the retail value chain. RVCF welcomes new member Masterbuilt.




Masterbuilt

There's nothing quite like mastering something. Whether frying a turkey or flying a plane, filleting a fish or rebuilding an engine, the path to mastery is the path to our best self.

Experimentation, tinkering, messing it up and getting it just right. It's all good; the journey's just as fun as getting there, and a new hurdle cleared is a new story to tell.

At Masterbuilt we believe that given the right tools, anything can be mastered. That's why we build products to make you proud. Products that help you perfect slow-cooked ribs, try out different wood flavors and seasonings, and create signature dishes that become family traditions. On your path to mastery, we're with you every step of the way.

Master it. Masterbuilt.



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Tags:  Masterbuilt 

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Yusen, We Have a Problem!: The Future Will Be Digitized

Posted By Administration, Thursday, June 14, 2018
Updated: Thursday, June 14, 2018



by Kirk White, Yusen Logistics (Americas) Inc.


"The Times They Are a-Changin'" – Bob Dylan

"Unfortunately, no one can be told what the Matrix is. You have to see it for yourself." – Morpheus

"The Future's So Bright, I Gotta Wear Shades" – Timbuk 3

Get ready.

This is one of THOSE moments. Believe it. Take note because you will one day (probably sooner than any of us can imagine) look back and realize that 2018 was the year where the supply chain went all digital on us. At this point, many may be thinking, "Wait! Isn't the supply chain digitized already? I get EDI from my carriers now."

Folks, you ain't seen nothing yet!

Just wait.

And while you're waiting, think about the last time you ordered a pizza. Did you call or go online? And if you went online, did you use their tracking service?

Shelly is making your pizza now.

Stan is boxing it up.

Get ready because Diana is bringing your pizza to you right now.

Hey, did you like your pizza? Want us to save it so you can order again.?

Perhaps you've got a smart phone app right now that allows you to order and pay for your favorite big chain coffee drink and then just run in and pick it up from the counter. Perhaps you have a device at your home that allows you to ask a virtual presence named after an ancient library (ask her where she got her name – go on – we'll wait) to play a favorite song, give you a news briefing, or even reorder dishwashing detergent that magically arrives within a day or two.

Have you ever actually contemplated how positively AMAZING that is? The original iPhone debuted in 2007 and didn't even record video. And Steven Soderbergh just released a movie filmed on one. That's a decade for you.

Moore's law dictates that computers will double in power every two years. So, let's wonder… If today, you can talk to a tennis ball can on your bureau and order flowers for your daughter's birthday or toothpaste that will be delivered tomorrow, what happens when the tennis ball can gains the ability to monitor your toothpaste levels based on your brushing habits and order it automatically so it's there the day you brush the last drop? What happens when that same tennis ball can gains the ability to track your daughter's purchasing, browsing, and social media habits, and then tells you, "She doesn't really like flowers, but would love tickets to see Yanni play at Madison Square Garden – should I order for you?" Are you excited? Are you slightly terrified? Are you maybe wondering if we are literally living in the prequel to The Terminator?

Pandora's box is open for business – and business is about to be booming.

There are two concepts at play right now that are going to dramatically alter the way our supply chain works – Blockchain and A.I. (Artificial or Augmented Intelligence).

A.I. is a scary term for a relatively innocuous process: programs using the current data that it receives to modify its future output. It's computers learning, so to speak, and maybe, yes, that is a little scary, but only because it just happens to be the major plot point of at least three post-apocalyptic sci-fi movies. However, if we move beyond Isaac Asimov's "Three Laws of Robotics" and Cyberdyne Systems and think about the actual process for a second, the benefit of A.I. to our supply chain is evident. A program might learn that a certain DC always short counts its inventory because they don't want to deal with partial boxes; or perhaps a factory always submits invoices with the product in "eaches" instead of dozens, even though the order goes out in dozens; or a certain team always confuses item # BR549 with item # BR594, causing mis-ships and unhappy DC's. The program can then systematically create fail safes and alerts, or even autocorrects in the case of the dozens/eaches issues so that these problems are caught and addressed before anything physically moves.

Blockchain deserves and will receive a series of articles on its own, but in a nutshell, it refers to data updated by multiple users in real time and stored over multiple server points (or "nodes") instead of a single repository. This process makes the information rather difficult to hack, but also decimates the bottleneck of a single information delivery source. Imagine getting real time updates on the location of your order to the SKU level based on GPS pings, and not having to wait for an EDI transfer from your carrier. AND if a hurricane should rear its ugly head at 3:00 am, by combining Blockchain with A.I., all of your ETAs could be updated from port to DC to final store instantly instead of waiting for a carrier rep to get in the office. And let's just see how far down the rabbit hole we can get by saying that if that one in-demand SKU was going to be advertised on your site the next morning but is now not going to be there for Memorial Day weekend, the ad itself could be automatically updated to reflect this without a human having to worry about it, and thus, avoiding a mass of angry shoppers having to get rainchecks. Plus, while we're here, perhaps the A.I. could "remember" that another store a county over has extras of that SKU and could set up a transfer and order a driverless truck to go pick it up – okay, now we're getting a little ahead of ourselves. Or are we?

And yes, the practical technology of A.I. is not quite there yet and Blockchain is so tied up in the Ponzi scheme that is Bitcoin that many are not ready for the associated risk, but nascent function is not always final use. Remember that Facebook was created for college students to share pictures and campus gossip and it's now one of the biggest marketing platforms in the known universe. Things change.

Things are changing.

Get ready.


Kirk White has worked in every division of Yusen Logistics. After a brief stint in Transportation, he transferred to Corporate, where he coordinated Yusen's Employee Empowered Kaizen system and served as a Specialist for the Business Process Re-engineering group, after which he moved to the Warehouse division to serve as the East Coast Quality Manger before ultimately joining the International division, where he hopes to use his Quality knowledge base to prove an asset to OCM.

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Tags:  Artificial Intelligence  Blockchain  Digital  Supply Chain 

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