Two years ago, the U.S. and China began a tariff war that changed the face of international trade. Tech companies in particular deal with a series of rules and regulations that lack consistency across the globe.
Electronics distributors handle many of the components, services and IT equipment that pass through the international supply chain. The newly-formed Global Electronics Distributors Association (GEDA) will tackle – among other issues -- standards for processing and reporting tariffs that will reduce inefficiencies caused by new regulations.
The organization was formed late last year by Arrow Electronics Inc., Avnet Inc. and Electrocomponents plc; Future Electronics Inc. and TTI Inc. are also members. Arrow, Avnet and Electrocomponents alone account for more than $50 billion in global commerce.
“GEDA’s main focus will be on global practices,” said Cathy Morris, president of GEDA. “There are practices and processes that are unique to the global electronics industry. They have not evolved to address the global context we operate in. Some practices are specific to a region or even a country. No organization has been able to approach these issues from purely global perspective. Effective global commerce is our first focus.”
GEDA also has anti-counterfeit measures, global supply chain best practices and voluntary operating standards on its agenda. All practices and standards will be available to industry participants free of charge.
The electronics industry has struggled to keep pace with frequently-changing tariff regulations. Toward the end of 2019, some U.S. manufacturers were unable to secure contracts for 2020 because customers had varying requirements for tariffs. Some wanted tariff costs to “pass through” the supply chain; others wanted those costs represented as a percentage of their bills-of-material. For many global electronics manufacturers, distributors manage component and materials logistics and are integral to tariff compliance.
“It has taken the industry some time to decode the first tariff initiative and many of the new provisions have not been addressed,” Morris said. “Distributors, suppliers and customers all want to do things the right way. But it is difficult to execute given the vast number of products and processes for the importer of record.”
GEDA will be reaching out to suppliers in all its development efforts. “Distributors and suppliers have to go to market together,” Morris notes. “They are an integral part in process development and it’s impossible to improve efficiencies without supplier partners.”
Arrow, Avnet and Electrocomponents left the Electronic Components Industry Association (ECIA) in October to focus on global distribution issues. ECIA is comprised of suppliers, distributors and manufacturers' reps; GEDA is currently distribution-centric. ECIA addresses global supply chain practices but its membership is largely concentrated in the Americas. GEDA members conduct significant portions of their business -- in some cases, one-third -- in the Americas, EMEA and Asia-Pacific.
The move was disruptive to ECIA as Arrow, Avnet and Electrocomponents were three of its largest members. When the trio of global distributors departed ECIA, they also pulled their inventory from ECIA’s authorized inventory website, TrustedParts.com (formerly ECIAauthorized.) Collectively, the three distributors represent thousands of electronics component suppliers.
TrustedParts.com has since expanded beyond ECIA members only, and Avnet is listing its inventory on TrustedParts.com.
Neither ECIA nor GEDA have ruled out cooperation between the organizations on issues impacting the supply chain. GEDA does not plan to launch an inventory aggregation site.
“GEDA does not want to duplicate initiatives in areas that are already being addressed in the market,” said Morris. “So, at this time, it would not be a priority for GEDA to develop an application such as TrustedParts. In the event that TrustedParts would like to partner with GEDA, we would certainly be open to the conversation.”
In fact, GEDA sees limitless opportunities for collaboration across the global supply chain. “Based on the issues we have chosen to tackle we believe there are multiple organizations we can partner with that advance the interests of global commerce,” said Morris.
Some aspects of GEDA’s infrastructure, such as membership fees, are still in development, and the group does not envision lobbying international governments. “We believe the member companies have their own positions on things and its doubtful GEDA, as a group, will express opinions. We think that’s best left to the leadership of our member companies.”
Research associated with standards development will be made available to the industry.
“To execute our charter, there will be research required that will be incorporated into the operating guidelines,” Morris said. “Part of the way we can make these initiatives relevant is through voluntary participation by all interested parties and making the research and standards free to the entire industry.”
Covid-19 has, of course, disrupted the electronics supply chain, trade associations and global commerce since January.
“We’ve made good progress in the last four months,” Morris added. “Given the challenging times since the beginning of the year, we have a dedicated, focused board and we look forward to making it easier for distributors, suppliers and customers to conduct business.”