Navigating the Complexities of Nearshoring
How Supply Chain Mapping Tools Can Support Compliance and Optimize Origin Determination
In recent years, the global manufacturing landscape has been shifting, with many companies opting to nearshore operations from China to Mexico. This trend, driven by factors like U.S.-China trade tensions, tariffs, and the benefits of the USMCA, has opened new opportunities while introducing challenges for importers. One of the most complex aspects of this shift is determining raw materials, intermediate goods and product origin with accuracy and consistency in an evolving regulatory environment.
The Nearshoring Dilemma
While moving assembly operations to Mexico offers advantages, it doesn’t necessarily simplify origin determination. Instead, it often introduces additional layers of complexity:
· Products assembled in Mexico may still include significant components sourced from China.
· Different origin rules apply depending on regulatory purposes (e.g., USMCA preferential treatment, Section 301 tariffs, or country of origin marking).
· A single product might carry multiple countries of origin depending on the regulatory lens being applied.
These nuances can increase compliance risks, reduce opportunities for duty savings, and expose companies to enforcement measures under laws like the Uyghur Forced Labor Prevention Act (UFLPA).
The Emerging Role of Supply Chain Mapping Tools
To address these challenges, many companies are exploring advanced supply chain mapping tools that promise better visibility, risk identification and control. Some solutions from Deleon’s trade matrix, for instance, integrate granular data mapping, risk analysis, and origin determination capabilities. These tools aim to help importers respond to evolving supply chain requirements (UFLPA for one) by identifying risky suppliers and providing compliance and operational efficiency.
Below are examples of providers within Deleon’s network, each offering solutions for different aspects of supply chain management:
| Provider | Description |
|---|---|
| Sayari Analytics | Supports supplier screening for large datasets by providing visibility into global business relationships. |
| TrusTrace | Focuses on material traceability and supply chain transparency, especially for the apparel sector. |
| Kharon | Integrates forced labor data into supply chain mapping and denied party screening systems. |
| Sourcemap Inc. | Enables end-to-end supply chain visibility with multi-tier mapping and supplier network diagramming. |
| Exiger | Provides compliance risk management tools, including real-time risk monitoring. |
Tools like these, enhanced with technology such as KYG Trade, allow for detailed SKU-level visibility, offering potential benefits like:
· Mapping tier-n suppliers and tracking goods through various production stages.
· Conducting origin determinations with multiple tests (e.g., tariff shift, substantial transformation).
· Identifying and mitigating risks related to forced labor or regulatory violations.
· Fast response to regulatory enforcement such as detentions of goods for import.
While these capabilities represent a promising step forward, their success depends heavily on how well companies integrate and apply these tools in practice. Importers will likely need to work closely with technology providers to adapt these systems to their unique supply chain challenges and stay aligned with evolving regulatory expectations.
Real-World Applications
Consider a scenario where an importer has moved final assembly for electronic devices from China to Mexico. By using supply chain mapping tools integrated with origin software, the importer may be able to:
· Visualize the entire supply chain, from raw materials to finished goods.
· Determine whether products meet USMCA eligibility or require additional compliance efforts.
· Analyze whether components sourced from China create exposure to Section 301 tariffs or UFLPA enforcement.
· Assess supplier risks and explore opportunities to diversify sourcing for improved compliance and reduced tariff exposure.
While these insights can significantly improve decision-making, implementing such tools is not a one-size-fits-all solution. The complexity of modern supply chains requires a collaborative approach, where companies and their technology partners continuously refine their systems to meet shifting enforcement priorities and trade policies.
A Collaborative Path Forward
The adoption of advanced supply chain mapping technologies represents an important step toward achieving greater transparency and efficiency in nearshoring efforts. However, the journey is far from straightforward. Importers must navigate not only the inherent complexities of global trade but also an evolving regulatory landscape where expectations around supply chain visibility are likely to increase.
By partnering with technology providers and leveraging cutting-edge tools, companies can improve their ability to adapt to these demands. Enhanced visibility at the SKU level may help reduce response times to enforcement actions and lower costs associated with compliance, but these outcomes will depend on how effectively the technology is implemented and maintained.
As the global trade landscape evolves, these tools offer a promising opportunity to strengthen compliance frameworks, reduce risks, and create more resilient supply chains. However, their ultimate impact will depend on a shared commitment by companies and their technology partners to keep pace with new requirements and refine processes accordingly.
