Under it, the US Customs may stop any imports for reasons such as health and safety, protection of intellectual property rights, currency manipulation, goods produced using forced or child labour, money laundering, bribery and various other practices which are held to put US industry at a disadvantage.
The Act is already in force and India is seen as one of the countries under watch. US President Barack Obama had said while signing the new law that US industry needed protection and actually mentioned India in connection with dumping of steel products. Hala Bou Alwan, head of risk market development at media and information services entity Thomson Reuters, said: "The US Customs are under obligation to screen and grade whatever is imported, and ensure the exporter has not violated any prescribed norms." India should, she advises, be pro-active and ensure compliance.
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Says D S Rawat, director-general of business chamber Assocham, "The intention of the Act is good, which is to discourage bad business practices. However, such provisions may be used to protect local manufacturers, in the garb of (checking) forced labour, money laundering, bribery, etc."
It is a fact that compliance costs in countries like India are much lower compared to Western nations. Partly also due to flouting of rules by small and medium enterprises in the supply chain. Mukul Shrivastava, partner, fraud investigation & dispute services, EY, said, "Indian organisations are taking steps to be compliant in the real spirit from a supply chain and integrity standpoint. Companies will have to focus on pro-active measures to minimise, if not zero-ise, risks around non-compliance. That said, for fair play, the decision makers will need to adapt a non-judgemental approach to ensure the Act does not become a barrier for cross-border trade."
As an example, there is gold smuggling into India. It is not easy for ultimate jewellery exporters to always verify the source of gold. Technically, this violates the US law. Textiles or apparel are another such product, where the value chain is a long one, with the unorganised sector also coming in.Hala adds: "The process on how to approach such issues is to be finalised and we believe there should be a compliance manual and processes' guidance, internally within organisations and externally from regulators. However, the exporting companies have to give undertakings that norms are being followed to the best of their knowledge, and have to secure similar undertakings from their suppliers down the line of the manufacturing process. The companies should not be waiting to do that until regulatory detailed processes are in place."
The undertakings and declarations should contain a pledge not to deal with child labour and the like. And, policies to ensure compliance with various other provisions. India's mercantile export to the US is around $40 billion annually. Gems and jewellery, pharmaceuticals and textiles are among the top exports. Hala said they were getting requests from Indian companies on the Act. "We ask them to know their suppliers and ensure they deal with legitimate sources. We ask them to educate their staff on dealing with this and, further, educate their suppliers in this regard - suppliers have to know very well their own suppliers. It's a chain which should be always a clear and clean one.