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The Responsible Supply Chain Show is a must-hear podcast for insights and strategies on building ethics and sustainability into global supply chains. Each episode delves into the challenges and opportunities businesses face as they strive to create more responsible, transparent, and environmentally friendly supply chains. From innovative sourcing and trade disruptions to reducing carbon footprints and combating modern slavery, we explore the critical issues that define the future of global commerce.
Hey, everyone. This is a breaking edition of the responsible supply chain show. I'm your host, Justin Dillon. Over the weekend, the Trump administration met with leaders in Asia to break a new deal, a new trade deal around that's going to have an impact around supply chains. So we decided to bring in an expert on trade and supply chains.
Justin:Jen Johnke is here from the Tendai Initiative. She has worked at places like Customs and Border Patrol. She is here to help you understand the details of this agreement. These are breaking details, things that you are going to want to understand if you work in responsible sourcing. Again, this is a breaking edition, so some of the things you're going to learn today are just details that we have learned so far.
Justin:More will come. Here is my conversation with Jen Jonkey. Jennifer, thank you so much for coming on, last minute, to the Responsible Supply Chain show. I was just hoping you can kind of give us a real quick synopsis of what happened this weekend.
Jennifer:Well, there was a lot that happened this weekend.
Justin:Not everything. Like, what happened in Asia with the Trump administration? Maybe that part.
Jennifer:Maybe that part, Sue. Even then, a lot happened this weekend. Okay. So the US government announced, two agreements. They're called agreements on reciprocal trade, and they announced two new agreements, one with Malaysia, one with Cambodia.
Jennifer:They announced frameworks for continued negotiations and some in the case of Thailand that included agreements. With Vietnam it was a little bit more sparse in terms of the labor piece of this. I'm going to, unless otherwise noted, really focus on the labor portion of these agreements. There's a lot to note. There were some significant developments in that, Malaysia and Cambodia both agreed to enact and enforce a their own forced labor import ban, which is that that's a new development.
Jennifer:Now, we have seen this in the framework with Indonesia as well, but is we're seeing the trend or seeing what we thought might be a one off flip turn into a trend.
Justin:Isn't Indonesia working on their own forced labor law currently? Don't they have Yeah.
Jennifer:Believe so. Yes. As part of this agreement, it is required. They have committed to
Justin:it. So
Jennifer:then you have the frameworks with Thailand and Vietnam. With Thailand, they also are finalizing agreements, I believe it was the term they used, or finalizing their agreements or the language that'll be used in that agreement. But I anticipate that eventually they will also agree to implement their own forced labor import ban. So this is notable for several reasons, but there are also limitations associated with this. So, the move forward, if you will, is that these are being included now in several of these reciprocal reciprocal
Justin:How forward?
Jennifer:Sorry? How forward?
Justin:Time of the day.
Jennifer:Agreement on reciprocal trade. This is starting to become a trend that you're seeing these import bans included.
Justin:Yes.
Jennifer:What was notable this time around is you're starting to see a foundation for mutual, agreement, mutual recognition. So what I mean by that is that if The US issues a WRO, then there is
Justin:language Just make sure everyone understands what a WRO is.
Jennifer:Thank you for pulling me out of my acronym world.
Justin:A
Jennifer:WRO is a withhold release order and that is basically an instruction from the US government to the ports to detain imports from a certain entity or a region. And when a WRO is announced they typically announce the scope of the WRO. So if it's an individual company or it's a region or a country, then it's noted in the WRO.
Justin:Got it.
Jennifer:So let's say that the US government issues a WRO, then based on the language that was in the two agreements with Cambodia and Malaysia, and this it's just that they may recognize it. I don't want to overstate this because anybody who's ever been involved in negotiations knows that you're gonna sit there and agonize over every little world word. And one of there were several keywords here. So the difference between may and shall is huge, and they kind of split the difference. So it means that they may Malaysia and Cambodia may recognize these these enforcement actions, and if so, then they shall take action to detain those imports.
Jennifer:So what the the practicality of that, it means that it's going to be much more difficult for each of these countries to allow imports from companies or regions or countries that are subject to a WRO. It's going to be much harder for companies to shift their goods made with forced labor to other markets other than The United States market?
Justin:Okay. So we've been living for companies that have been dealing with the UFLPA ban here in The United States for a good two plus years now and have been importing from Taiwan, Indonesia, Malaysia, elsewhere. What does this mean for those companies?
Jennifer:So companies in The US that are importing into The US market are subject to several trade enforcement authorities. One is the Tariff Act of 1930, section three zero seven. That is when CBP issues a WRO. But there are other trade enforcement authorities, and one of them being UFLPA. The trade agreements that were, that came into well, they didn't come into force, but the the agreements that came out of this weekend do not cover the UFLPA, and that's one of its significant limitations.
Jennifer:So people who are looking to see how this affects companies subject to the that you know, are subject to a UFLPA entity list designation, that they're not going to then be listed, say, in Cambodia or Malaysia. I think that's a step too far probably for those two countries. These countries are on China's back doorstep. So I mean, that would be a really difficult thing for them to undertake.
Justin:Okay. Are we seeing a trend here where the US government is saying, we've been having to block shipments, and we've been having to be the world's police. Now everyone else is gonna have to do this. Mexico, we've got a trade agreement with you. Canada, we've got this USMCA, formerly NAFTA.
Justin:Now we're in Asia. We've been having to do this. You all need to do your part. Is this, I mean, I know I just made it sound simple, but is that, did I just say the quiet part out loud? Is that what's happening?
Jennifer:Essentially, yes. We for a long time, The US has been the primary country that has enforced these forced labor import bans. We really haven't seen other countries undertake that, but I think there's a significant shift now. You've seen the EU, take on a forced labor market ban, which is different than an import ban. Basically, you can't import, you can't export, and they take the goods off the shelf.
Jennifer:That's in
Justin:play, yeah, soon. Well,
Jennifer:that's gonna be come into play very soon.
Justin:That's right. That's right.
Jennifer:The, and so you're starting to see other countries consider it. I I think you're gonna start to see, The UK and Australia, possibly New Zealand, start to look in this direction. If they I'm I they may be well on their way, actually. So to say and then you have these other now reciprocal the reciprocal agreements, and you have these labor provisions in them. I think you're going to start to see that it's very difficult for companies that are splitting their supply chains and sending goods that are made with forced labor to other markets.
Jennifer:That's going to be increasingly difficult, and so companies need to be aware of this, both suppliers and importers, and they need to start assessing whether this is still a viable strategy moving forward.
Justin:So what's the news? What happened this weekend that everyone around the world needs to understand that happened in Asia, they woke up to this week that didn't that wasn't the case in the world last week?
Jennifer:Well, forced labor import bans have expanded and are likely to continue to expand. You're gonna start seeing as these agreements start rolling out, you're going to start to see more of these forced labor import bans become part of the agreements. We're seeing in terms of mutual recognition, that's just the start because we're gonna start working now and negotiating with countries that are not on China's back doorstep. And so it's going to be difficult. I I don't mean to understate this and say, we're just gonna see forced labor import bans everywhere.
Jennifer:USTR negotiators are working very hard on this, and it's not to say it's going to happen everywhere, but I do expect to start seeing this expand even further. So I would start to see maybe perhaps under the USMCA joint review coming up, I would start to expect to see some more mutual recognition language in those agreements that goes even above and beyond this. Because Canada and Mexico have already agreed to take on a forced labor import. That's what I
Justin:was gonna ask. That was Yeah. Do you see enforcement coming out of Canada and Mexico?
Jennifer:Well, I mean, that's really TBD. And and and that's what I wanna say about all these agreements. Yeah. They are only as strong as, the will to enforce them. So I would say, in Canada, I do expect them to take on more enforcement.
Jennifer:I think there are some ways that maybe it's structured up in Canada that make it made it more logistically difficult to issue enforcement actions. But I expect them to kind of try to overcome that. I know that there certainly seems to be interest. There certainly seems to be resources allocated to this, so I expect Canada is going to expand their enforcement. It's notable that their forced labor import ban is actually a forced labor and child labor import ban.
Justin:That's right. So
Jennifer:in Mexico, there are also logistical difficulties. Sure. And there I expect at the very least, I think there's going to be pressure, on the government to take enforcement actions that mirror The US. That's really what I'm expecting to see in the near term. I don't necessarily think that Cambodia and Malaysia and Mexico are going to start issuing WROs that, you know, proactively on their own, but this is definitely the first step where I see that this is going to expand.
Justin:Okay. Last question. Any response from China on all this?
Jennifer:Well, I'm sure there's a response from China. I'm sure and I'm sure we're not going to be privy to it. Okay. I I am watching watching the negotiations, closely with China, but I do think that's completely different. I have a different set of expectations there.
Jennifer:So Well said
Justin:said like someone who used to work at Customs and Border Protection.
Jennifer:Yeah. It's different. Yes. I still have to maintain my diplomacy, but, yes, it's going to be a different I I much different, I think. But what what we're seeing with these forced labor import bans elsewhere, this is not something that's going to go away.
Jennifer:That's the headline.
Justin:This If is the new people want to stay tuned, where do they go? Where can they glean from your wisdom?
Jennifer:Well, I'm the founder of the Tendai Initiative, and we will be, issuing updates. We're going to have blogs, newsletters, things of that nature, coming up very soon.
Justin:Okay.
Jennifer:And so but so go to our website, sign up for our updates, and we're happy to talk to people too. Just reach out and we'll be happy to hop on a call and have a chat.
Justin:Just like reciprocal, how do you spell Tendai?
Jennifer:T E N D A I.
Justin:Perfect. Thank you so much for coming on at Last Minute. I appreciate it, Jen.
Jennifer:You bet. Thanks for having me.
Justin:You got it.