Next week, in a five-part podcast series sponsored by Assent Compliance Inc. (Assent), I explore market access for supply chain. During the course of this series, I visit with several members of the Assent team to introduce the topic, consider what market access is, provide an overview of trade compliance, Federal Acquisition Register (FAR) flow downs, the value of continuous monitoring and the origins of laws impacting market access.
What is market access? It turned out the answer was a bit more complicated, as Travis Miller , General Counsel of Assent Compliance explained. He related that market access really means the ability to sell a product into a given market. However, it is up to whomever might be in charge of allowing certain products to enter into the market, dictate what controls are put in place and what the requirements may be for entry. It can be defined by law or industry standards.
Miller stated, “when we think about market access, we take a very pragmatic approach. There are the legal requirements, there are physical steps you have to take to bring a product to market and all of this occurs before we even get to the question if anybody ever wants to buy it.” In the current business environment, the access to global markets is something that companies continually struggle with. They struggle with it from a legal regulation, commercial consumer, customer and, even now, from a political or geopolitical standpoint.
There is a growing realization that one product may not qualify to be sold into multiple markets. There may be different component, manufacturing, financial or environmental requirements. Now overlay all these different legal or trade requirements on the current social media platforms and you have a situation where a company can get into legal/trade/reputational hot water very quickly. Social media amplifies these issues. Further, different brands can mean very different things in different markets. Miller gave the example of the brand “Made in Germany” which may connote quality and craftsmanship, yet after the Volkswagen (VW) emissions-testing scandal it might mean something very different outside Germany. He said, “if the concept is that German cars are made by cheaters, other folks that are within that same region can encounter enhanced scrutiny and punishment and a negative effect.” A key response is compliance because if “you can’t show that at least you’re not acting in a negative bad way and that you are meeting those industry standards and norms, you may well be assumed to be a cheat as well.”
Interestingly, one business response to the limitations placed on market access have been to “go local”. Miller said, “you see a lot of conglomerates or large brands have really spent an incredible amount of time, wealth and energy is to create the appearance of being local even though they might be an international brand. What they’ve done is they’ve found brands that appeal to or that are domestic in nature and that have that value.” It has now moved to manufacturing and “Supply chains and domestication of producing items are becoming more centralized and localized and specific regions or hubs.”
It is not clear if the era of robust free trade is at an end or if there is a blip brought on by the policies of the Trump Administration. Whichever it might be, it is on the forefront of every company in the international arena and every Board of Directors of those companies. Miller suggested it could be seen as a “rebalancing” of trade in that the United States was clearly the biggest player in international trade. However, with the current US administration, many countries and indeed companies outside the US are looking for more reliable, stable trading partners. He said, “China and the European Union trading block are the two kinds of dominant peers to the United States at this point. As these rebalances and shiftings occur, there is a certain backlash against the perception that these free trade agreement activities have somehow harmed domestic populations. This could well continue for a substantial period of time.”
This insight led me to inquire “do you have any suggestions on best practices to ensure market access for US companies?” Miller believes the restrictions to market access will likely come through additional regulations, as “each market that you want to access has fundamental differences that are reflected in the law they have passed. It also includes how a country may have developed industry standards to comply with those laws. Equally important is the way that they treat law breakers.” Miller provided a generic example of shipping a product to Europe, as “it’s a single most, influential trading block in the world. They have domestic priorities towards safety, recyclability, the ability to decrease consumption and then domesticate and recyclability and production from waste materials that’s kind of end of life. The have closed loop recycling initiatives.” If your product does not align to those initiatives, it may receive a difficult regulatory reception.
He contrasted the European market with China and the Far East. Here, Miller said the priorities are “sustained domestic economic growth and ability to uplift their population, to invest internally. That is, to use that kind of industrial revolution that they are going through as a way to springboard to greater economic development. This means they will desire intellectual property and they will want your company to be involved in domestic investment. This means you will need to have a local presence; one that is at least partially controlled or if not entirely controlled in many instances by individuals that are loyal to that regime or that country.”
Interestingly, Miller observed that even with political gridlock, international trade can remain robust because if Washington or other national political centers are gridlocked, it can suck all the wind out of the air. This means no new laws are passed and the side effect is that less regulation is passed. One need only consider the US or UK governments about now to confirm this point.
Yet for businesses involved in international trade, the key is how they react. Are company’s nimble and agile enough to take advantage of market opportunities which appear or respond to new regulations? Miller said that as new trade barriers arise, “what’s going to happen is the business is going to have new metrics. An effective business, the kind of business that’s going to continue to exist and is going to thrive in this economy is going to find what that regulation is actually driving it. This means there is an opportunity for efficiency. This will allow companies to be more profitable.”
Miller concluded, “As cost to change and shift focus increases, you may well see companies start to domesticate business. This could lead to increased job markets and lower unemployment. We are seeing companies investing in these new workers.” Another way to consider it is that companies are “recreating themselves in more jurisdictions.” But the key is to have both the information and the metrics to do so. This is where the need for robust Supply Chain information and data comes into play.
For more information on Assent Compliance, check out their website www.assentcompliance.com.
Join Michael Volkov and myself on Friday, May 17 for a nuts and bolts session on how to structure this important component of any best practices compliance department. The webinar is hosted by Hanzo. In this webinar you will learn:
1) Why the intake of a hotline report is a critical start of your investigation protocol.
2) How to effectively set up a triage program for all internal and external reporting.
3) The different levels of investigations you should set up.
4) What type of report you should issue.
5) How and why you should protect the privilege.
The time of the webinar is 2 PM EDT. Registration and additional information is here. Best of all it’s FREE.
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© Thomas R. Fox, 2019