As global trade evolves, understanding regulations is crucial. In this post, we explore the key changes impacting international trade this year and offer tips to navigate them effectively. Our insights will help you stay compliant and competitive in the market.
Overview of the Global Trade Environment in 2023 ๐
1. Changes in the Scale of Global Trade
According to data from the United Nations Conference on Trade and Development (UNCTAD), global trade in goods and commercial services will total approximately US$30.5 trillion in 2023, an overall decrease of approximately 2%. Goods trade will decline by approximately 5%, while services trade will grow by approximately 9%.
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The World Bank indicates that trade volume will increase by only 0.2% in 2023, the slowest growth rate in a non-recessionary year in nearly 50 years.
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2. Intensifying Trade Protectionism
Approximately 3,000 new trade restrictions will be implemented worldwide in 2023, including tariffs, export controls, subsidy reviews, etc.
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Major economies such as the United States, the European Union, and Canada have imposed tariffs or countervailing duty investigations on key Chinese industries (such as electric vehicles and batteries).
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II. Major Regulations and New Institutions in 2023
1. EU Carbon Border Adjustment Mechanism (CBAM)
The EU Carbon Border Adjustment Mechanism officially came into effect on May 17, 2023. It requires importers of products from the following six carbon-intensive industries (such as steel, cement, aluminum, fertilizers, electricity, and hydrogen) to report their embodied carbon emissions during a transition period from the end of 2023 to the end of 2025:
Register and declare according to coal emissions;
A carbon tax will be imposed on goods within the reporting scope starting in 2026.
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2. EU Foreign Subsidies Regulation (FSR)
This regulation, which takes effect on July 12, 2023, regulates subsidies provided by non-EU countries for mergers and acquisitions and public procurement. Companies that receive foreign subsidies and plan to participate in large EU mergers and acquisitions or public contracts must disclose these to the EU. Violators will be banned from participating in transactions.
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3. EU Anti-Coercion Instrument
Adopted in November 2023 and effective in December, this regulation allows the EU to uniformly respond to economic coercion (such as trade restrictions or unilateral sanctions) imposed by third countries and implement countermeasures (such as market access restrictions and intellectual property rights controls) through collective authorization (without unanimity).
Wikipedia
4. Germany's Supply Chain Due Diligence Act (GSCA) and Global Due Diligence Regulations
Germany's Supply Chain Due Diligence Act officially came into effect on January 1, 2023, for German companies with more than 3,000 employees, and will be expanded to companies with more than 1,000 employees in 2024. It requires multinational companies to:
Establish a preventative supply chain management mechanism;
Publish due diligence reports annually;
Establish a supplier risk prevention and control mechanism;
Violators face fines of up to โฌ800,000 and a ban from public contracts.
In addition, countries such as the European Union, Norway, Switzerland, and the Netherlands have introduced similar human rights/sustainability laws to strengthen corporate supply chain ESG controls.
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5. EU Deforestation Regulation (EUDR)
The EU Deforestation Products Regulation was adopted in May 2023 and is scheduled to take effect from December 30, 2024 (for medium and large businesses) and June 2025 (for small businesses).
Covered commodities include palm oil, coffee, soy, timber, rubber, and beef. Operators are required to provide geographical coordinates of their origin and proof of land legality. Violators will be fined up to 4% of their EU turnover.
Wikipedia
6. UK Developing Countries Trade Scheme (DCTS)
The UK implemented the DCTS on June 19, 2023, replacing the previous common system. It provides preferential tariff treatment to 65 developing countries and will last until the end of 2025, with the possibility of further extensions.
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III. Challenges Facing Enterprises in a Complex Regulatory Environment
1. Multiple Non-Tariff Barriers (NTMs)
In addition to traditional tariffs, NTMs such as product safety certification, technical standards, labeling requirements, and biosafety approvals are becoming key barriers to market entry for enterprises.
World Bank Blogs
2. ESG Reporting and Supply Chain Transparency Pressure
With the implementation of non-financial reporting regulations such as the UFLPA (the US ban on products made with forced labor) and the EU's mandatory human rights due diligence, enterprises face sharply rising ESG compliance costs and potential penalties.
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3. Geopolitical and Trade Policy Uncertainty
Frequent political friction between China, the US, and Europe, coupled with frequent trade policy changes, such as tariff increases, subsidy reviews, and reverse engineering investigations, requires enterprises to continuously adjust their compliance strategies in real time.
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4. Supply Chain Disruptions and Logistics Risks
Events such as the Panama Canal water shortage, the Suez Canal blockage, port strikes, and geopolitical conflicts have severely impacted the smooth flow of global trade. Even after the baptism of COVID-19, continued disruptions remain the norm.
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5. Reporting and Data Acquisition Challenges
For example, the EU CBAM requires "real production data," but many suppliers do not collect specific carbon emissions data. Companies struggle to compel compliance and lack authoritative support. This incomplete image data presents a significant obstacle to compliance.
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IV. Response Strategies and Best Practices
1. Build a Digital Compliance Management System
Promote supply chain digitization and deploy global trade compliance software (such as export management systems, supplier risk assessment systems, and restricted party screening) to improve transparency and enforcement efficiency.
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2. In-depth Supply Chain Due Diligence and Origin Traceability
Establish a supply chain map to thoroughly assess each supplier's legal, environmental, human rights, and carbon emissions risks, and require downstream suppliers to provide clear origin coordinates and compliance certification.
3. Multilateral Policy Insights and Real-Time Adjustments
Closely monitor the latest reports and policy trends released by organizations such as the WTO, UNCTAD, and the World Bank, and promptly adjust company contract terms, logistics routes, and tariff classification strategies.
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4. Leverage Free Trade Agreements and Tariff Engineering
Reduce tariff costs through free trade agreements. Employ "tariff engineering" strategies (such as splitting production processes across different countries) to reduce the overall tax burden. Apply for tax refunds or establish warehouses in free trade zones to mitigate policy fluctuations.
Logistics Viewpoints
5. Build Collaborative Bridges with Policy Institutions
Actively participate in policy consultations with government and industry organizations to understand the context of regulatory development; collaborate with professional consulting firms (such as customs experts and trade lawyers), and proactively design contract terms to address policy changes.
6. Institutionalize ESG Compliance and Reporting
Establish an ESG department at the strategic level and strengthen internal systems for labor, environmental protection, human rights, and carbon emissions. Regularly disclose compliance reports to demonstrate the company's commitment to sustainability to investors, regulators, and consumers.
V. Typical Case Analysis
๐ฉ๐ช German GSCA Leads to Executive Fines and Misconduct
A multinational textile company was fined โฌ400,000 by German regulators for failing to conduct human rights and environmental risk reviews of its tier-10 suppliers and was banned from participating in public project tenders. Failure to rectify the situation could result in further fines.
๐ช๐บ EU CBAM Causes Sharp Cost Increases for Metal Exporters
A Chinese aluminum profile exporter was unable to provide accurate carbon emissions data and had to pay high CBAM certification fees based on standard valuations, resulting in a 15% drop in profits and the loss of multiple EU contracts.
๐บ๐ธ The Removal of US De Minimis Rules Impacts the Fast Fashion Industry
The US suspension of the de minimis tax exemption for small packages from China has resulted in a large number of packages from platforms like Shein and Temu being taxed, increasing costs, complicating logistics tracking, and forcing a restructuring of the supply chain.
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VI. Outlook: Trend Analysis for 2024 and Beyond
Trade Policy Continues to Fluctuate: Given the ongoing Sino-US rivalry, tariff/export control/subsidy regulations are expected to become more stringent and refined.
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WTO Reform and Deepening Regional Cooperation: The global trade organization may promote reforms to guide member countries in fair competition and harmonize digital trade rules.
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Green Trade Regulations Continue to Evolve: Carbon emissions, forest protection, and mineral safety regulations may be implemented in more countries, impacting mining, agricultural, and energy exporters.
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Digital Trade and Data Security Regulation Strengthens: Cybersecurity and cross-border data flow restrictions become regulatory priorities, particularly increasing pressure on e-commerce and SaaS-based trading companies.
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VII. Conclusion
The global trade regulatory environment will evolve rapidly in 2023, with regulations expanding from traditional tariffs to ESG compliance, carbon tax systems, supply chain due diligence, countervailing duty investigations, and other multifaceted areas. In the face of these challenges, companies should actively respond by adopting comprehensive approaches such as digital tools, supply chain due diligence, trade policy strategy adjustments, and ESG strategy institutionalization.
In the future, legality and compliance will become the basis for companies to enter the market and win the trust of customers and partners, and resilient and agile supply chain management capabilities will be the core of companies to maintain their competitiveness in a turbulent global environment.