Compliance is not new to the trading community. In their daily business, traders are used to complying with import and export rules and regulations. As a way to guarantee product quality, importers may also ask suppliers to have their products certified by quality assurance bodies in compliance with internationally recognised standards. Over the past few years, two major developments in respect of compliance have further emerged -- cargo security and corporate social responsibility (CSR).

Cargo Security

Since the 9/11 incident, the US government has implemented a series of measures to protect the country from further attacks. In respect of international trade, the US authorities endeavour to ensure that cargoes reaching the US border are free of any risks associated with terrorism.

• C-TPAT: The principal initiative as to cargo security is the Customs-Trade Partnership Against Terrorism (C-TPAT). Participants of C-TPAT are entitled to the convenience of fast-track clearance through US customs. As such, major US importers have signed up to the programme, and request overseas suppliers to adopt measures in response to the C-TPAT requirements.
  
  
• CSI and AMR: Container Security Initiative (CSI) has established a system to identify high-risk containers and pre-screen containers before they arrive US ports. The screening of containers is accomplished by teams of Customs and Border Protection (CBP) officials working jointly with their counterparts in the host nations. To ensure that CBP can obtain complete and timely manifest data, CBP has implemented the Advance Manifest Rule (AMR), which allows CBP to receive information necessary to screen containers at CSI-participating ports.
  
  
• BTA: To minimise the risk of contaminating food by terrorists, the Bioterrorism Act (BTA) aims to build up a system, which allows US authorities to track and trace the sources and distribution of food circulating in the US.

Corporate Social Responsibility (CSR)

Driven primarily by human right movement, consumers nowadays generally agree that products should be made in a humane way. A product or a brand's image is often associated with the working conditions of the people who make the product.

• Emergence of Codes of Conduct: In the light of consumers' rising expectations of corporate social responsibility, US importers and retailers make great effort to monitor the factory operation of their local as well as overseas suppliers. Many of them have established codes of conduct, which are strictly enforced against all of their suppliers. New suppliers looking for orders from these importers and retailers have to pass evaluation exercises so as to ensure compliance with the codes of conduct. Existing suppliers also have to meet on-going audits.
  
  
• Major Areas of CSR: In respect of manufacturing of goods, CSR is mainly related to the working conditions of labour. US importers and retailers request suppliers to comply with a number of conditions such as prohibition of forced and child labour; prohibition of harassment or abuse; compensation and benefits; hours of work; prohibition of discrimination; healthy and safe work environment; protection of environment; and compliance with local laws and regulations.

Implications and Recommendations

Compliance with extra rules and standards inevitably incur more costs to exporters. But a refusal to comply will unfortunately drive their existing or prospective clients away, while other suppliers render their best efforts to meet these requirements. Since the pendulum of bargaining power is often on the side of US buyers, compliance with their requests is almost the only viable option open to exporters. More positively, a supplier can strengthen its competitiveness vis-à-vis other suppliers if it can win the trust of US importers in respect of various compliance issues. All in all, exporters' best strategy is to turn all these difficulties and challenges into their advantage.

Sources of information as to compliance are obtainable from US importers, trade associations, international bodies and the US government.

• US Importers: Many of them have established their own sets of code of conduct in respect of CSR and/or cargo security. They are willing to provide the necessary information and assistance to suppliers in their quest of compliance.
  
  
• Trade Associations and International Organisations: Trade associations like the International Council of Toy Industries (ICTI) (http://www.icti-care.org/) are committed enthusiastically to promote uniform compliance standards. Some standards, which are recognised by US buyers, are however set by bodies other than trade associations, for instance, SA8000 by Social Accountability International (http://www.sa-intl.org/) and WRAP certification by Worldwide Responsible Apparel Production (http://www.wrapapparel.org/).
  
  
• US Government: Hong Kong exporters are also advised to monitor the changes of US laws and regulations so as to respond swiftly and aptly. The website of CBP contains a wealth of information as to the latest development of US customs laws and regulations. Other US departments or agents that warrant close attention include Department of Commerce (http://www.commerce.gov/) and US International Trade Commission (http://www.usitc.gov/). Food & Drug Administration (FDA) is the regulating authority of food, dietary supplement and medicine. It often posts its new rules and regulations on its website (http://www.fda.gov/). Hong Kong Trade Development Council (HKTDC) also publishes the latest US trade regulations and rules through "US Business Alert" on its trade portal (http://info.hktdc.com/alert/usabout.htm).

This new report is available at TDC's Retail Outlets. It can also be purchased through the TDC Bookshop section in the TDC's trade portal: info.hktdc.com.