FTZ’ine February 2022
February 1, 2022
FTZ’ine April 2022
April 5, 2022
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A remarkable series of world events coincided to make for a very exciting month in international trade. After weeks of buildup, Russia invaded Ukraine and fighting and casualties are fierce in areas such as the capital Kyiv. The United States and Europe made good on their promises to punish Russia for military action and installed sanctions designed to place economic and political pressure on the government of Vladimir Putin.
Impact from the conflict was felt almost immediately here in the United States. Energy and food commodity prices fluctuated wildly (Russia and Ukraine produce 25% of the world’s wheat) and several catastrophic cyberattacks impacted different parts of the world economy, including a shutdown of the brokerage operations of Expeditors International.
The Ukraine crisis dominated the headlines, but the Biden administration also negotiated a TRQ arrangement to end the Section 232 additional duties on steel (but not aluminum) from Japan. That agreement will go into effect April 1st.
Looking for your dray carrier? He or she may be here in Washington circling the Beltway to protest government mandates related to the pandemic.
Travelling to DC for tonight’s State of the Union address? Bring your own cash if you need it. Most banks and ATMs in the area are out at the moment.
Top Story: Ukraine Warfare Has Supply Chains On Edge
The impacts of Russia’s invasion on Ukraine on global supply chains already weakened by the pandemic have been immediate and impactful.
The conflict immediately reflected in rising oil prices; Russia is the No. 3 producer of oil after the United States and Saudi Arabia. Russia produces roughly 10% of the world’s need for crude.
Ukraine’s main port, Odessa, is now closed as is most other commercial traffic in the Black Sea. Both play major roles in the wheat trade which could impact food prices worldwide. Commercial shipping into and out of Ukraine has mostly ceased now.
UPS said that it has suspended all shipping services to and from Ukraine, as well as international shipments with a destination address in Russia.
“Export services from Russia and domestic services in Russia are currently operating,” said UPS. “Packages in transit that cannot be delivered will be returned to the sender where possible. UPS will re-establish service as soon as it is practical and safe to do so.” FedEx said that in light of the current circumstances, FedEx and TNT services will be temporarily suspended in and out of Ukraine until further notice, adding that shipments already in transit will be temporarily held in its network.
A research post published by analysts in Gartner’s Supply Chain Practice noted “We expect severe shortages of hydrocarbon, critical minerals, metals and energy.” “Prices for those items will likely spike, thanks to both the shortages and behaviors such as irrational buying and protectionism. This will, in turn, impact manufacturing operations up and downstream. Additionally, important logistics routes such as the Black Sea route and rail and roads east to west and vice versa will be impacted and result in delays and disruption. Spillover to Chinese ports and other key transportation nodes is also expected. Supply chain leaders need to evaluate vulnerabilities based on different scenarios now, so they can start to create redundancies and alternatives.”
One benefactor to the conflict has been the U.S. natural gas industry. Shipments to Europe in the fourth quarter of 2021 were up more than 40 percent from a year earlier and more than double the pace in January 2021, according to the International Energy Agency. Those LNG shipments have been unusually large and have even outpaced gas imports from Russia in recent weeks, according to Wood Mackenzie, an energy research firm.
Tech Tip: ACE Portal Updates – We’ve Only Just Begun!
You may have noticed there are new ACE portal login procedures that became mandatory February 20, along with a refreshed user interface and updated account display.
This new portal login and interface is only Phase 1 of the updates. Coming this Spring, Phase 2 of the ACE Portal Modernization is planned to include:
- Document upload capabilities, including information about your FTZ (possibly including your procedures manual and other materials you must update with your FTZ officer)
- In-bond authorization
- Blanket declaration
Later, in the Summer or Fall of 2022, ACE portal users will be able to arrive and export in-bonds in the portal, possibly eliminating the need for ABI software to manage in-bonds.
You can find more information about the new portal login process, and sign up for an ACE portal account if you don’t already have one, here. All FTZ operators will need to have a portal account to verify your 9-digit FTZ ID and start using it before March 19.
If you have questions about the new FTZ ID or the changes to the ACE portal, please email us at Info@iscm.co.
Japan Reaches Agreement For 232 TRQ, UK On Deck
The U.S. and Japan have reached an agreement that will allow duty-free steel imports to begin later this year.
Washington will suspend the 25% levy on incoming steel imports from Japan up to 1.25 million metric tons a year, according to officials from the Commerce Department and Office of the U.S. Trade Representative. Anything beyond that will still be subject to 25% additional charges. The agreement takes effect April 1.
The U.S. imported about 1.7 million metric tons of steel from Japan in 2017, the most recent year not affected by the tariffs. That made Japan the fifth-biggest exporter of the metal to the U.S.
Still, Japan only accounts for about 4% of all steel imported to the U.S., and about 1% of all metal consumed in the U.S., based on Commerce Department data.
The solution parallels the accord that the U.S. reached with the European Union to implement a Tariff Rate Quota (TRQ) system with quantity limits based on historical import levels of different types of steel.
“Today’s announcement builds on the deal we struck with the EU and will further help us rebuild relationships with our allies around the world as we work to fight against China’s unfair trade practices,” Commerce Secretary Gina Raimondo said in a statement.
Japan’s Trade Minister Koichi Hagiuda told reporters in Tokyo on Tuesday that the move was a step forward, but added: “We will continue to press the U.S. hard for a complete resolution.”
Japan wanted to focus the negotiations on steel, and thus Japan’s aluminum exports to the U.S. will still face 10% tariffs.
Japan did not institute retaliatory tariffs when the Section 232 additional tariffs went into effect, so no action was taken by Japan in response to the new agreement on steel.
All steel from Japan that will be subject to duty-free entry will need to be melted and poured in Japan.
U.S. steelmakers warned though that exempted nations can still act as pass-through points for metal coming from bad actors like China. They worry that Europe, which recently received a similar exemption, and Japan could unknowingly import metal from restricted countries and then export that to the U.S., flooding the market.
The U.S. and U.K. started talks in January to address tariffs on U.K. steel and aluminum imports and the problem of global overcapacity.
USTR Confirms Phase One Off Track
Last month the Biden administration released a new report criticizing China for failing to uphold a wide range of trade commitments, including promises it made when it joined the World Trade Organization in 2001, and in the Phase One trade deal signed with the Trump administration in 2020.
The report also appeared to take issue with any path to decouple from China, arguing that U.S. investment was instead needed to compete with China in an integrated global economy.
“We cannot build a wall between the United States and China and assume that it will address the problems posed by China,” the report said.
In its annual assessment of China’s compliance with its obligations to the W.T.O., the Office of the United States Trade Representative (USTR) criticized the Chinese government for flouting the global trade body’s rules. Instead, China expanded its state-led approach to its economy and trade, causing serious harm to workers and businesses around the world, particularly in industries targeted by its industrial plans, USTR Katherine Tai said in a statement.
Neither side appears any closer to making the concessions that would be necessary to wind down the trade barriers in place between the two countries.
Supply Chain Cyberattacks Linked to Ukraine Crisis
Russia has launched cyberattacks against Ukraine in an effort to destabilize its government and economy, and such activities may have already spilled over into the U.S. and other countries.
Just before the invasion, hacker groups linked to Russia's intelligence services were blamed for a cyberattack that defaced dozens of Ukrainian government sites with a message warning the country to "be afraid and expect the worst."
As the invasion began, Expeditors International issued a press release that its systems were under attack and it was unable to file any transactions to support imports or exports with U.S. Customs. That froze air, ocean, and rail shipments all across the U.S. Over one week later there is still no recovery of the systems and records at Expeditors, which has many FTZs and other importers scrambling for backup solutions.
The ‘Conti Team’, a cyber group known for ransomware attacks against hospitals and first responder networks, announced over this past weekend their “. . . full support of the Russian government. If any body [sic] will decide to organize a cyberattack or any war activities against Russia, we are [sic] going to use all our possible resources to strike back at the critical infrastructures of an enemy.”
This has many importers concerned that the Russian government may initiate broad attacks impacting important networks, especially if Ukraine is successful in thwarting Russia’s progress .
Microsoft has said it identified dozens of computer networks at Ukrainian government agencies and organizations infected with destructive malware disguised as ransomware. On Feb. 16, the New York Police Department warned that Russian or pro-Russian criminal threat actors could launch cyberattacks on infrastructure, government entities, and local law enforcement according to CBS News.
Adam Meyers, senior vice president of intelligence at CrowdStrike, says the current round of cyberattacks on Ukraine could indicate Russia is refining its cyber capabilities. Russia's game plan with online attacks, he says, is to create chaos and inflame tensions between the two countries.
"From what we've seen in Ukraine historically, it's almost been a laboratory of experimentation for Russia," Meyers said.
He pointed to the NotPetya attack, which crippled computers across Ukraine in 2017. The malware locked up files like criminal ransomware would. When experts took a closer look, however, they realized that its true purpose was to destroy data rather than make money.
NotPetya did what it was intended to do -- wreak havoc in Ukraine. It also spread to unintended targets far outside of that country, shutting down companies including FedEx, Merck, Cadbury and AP Moller-Maersk.
Quentin Hodgson, a senior international and defense researcher at the Rand Corporation focusing on cybersecurity, said Russia's cyberoperations are unique because they aren't clearly separated from conventional military and intelligence operations as they are in other countries, including the US.
The Department of Homeland Security and the White House say there is no specific threat to the United States at the moment, but the threat is real.
“If they think they have nothing to lose, the gloves will come off, and they will try to inflict the maximum amount of pain on us,” says computer security industry expert Dmitri Alperovitch.
White House press secretary Jen Psaki said “What we need private sector companies to do is to harden their cyber security capabilities now.”
DHS says make sure your software and anti-virus systems are up to date, take steps to quickly notice an intrusion on your software, have a crisis plan and always have a backup away from network connections.
FTZs Have Site ID Conundrum With CBP
Foreign-Trade Zones have been struggling with the transition to CBP’s 9-character Zone IDs. CBP has previously referred to the 9-character Zone ID as ‘expanded’ (CBP Zone IDs were previously 7 characters) though a recent CSMS message confirmed that this number will actually be changing for many zones.
The e214, Cargo Release (3461), Entry Summary (7501), and Automated Export System (AES) filings from zones will all require the new 9-character number beginning March 19th. That means zones who do not look up and use this number will soon have all their critical FTZ filings rejected by CBP.
The new ID format is broken into three segments. The first three characters match the zone number assigned by the FTZ Board, right justified with leading zeroes if necessary. The second three numbers correspond to the site number or subzone letter designation assigned by the FTZ Board when the site or subzone was established, right justified with leading zeroes if necessary. But the final three characters are newly assigned by CBP and can only be found by logging in to the Operator’s ACE portal account.
Those last three digits are unique to each FIRMS Code, thus an operator will see as many Zone IDs in the ACE Portal as they have FIRMS codes for their FTZs. This will have zone operators logging into the ACE portal, perhaps for the first time, in preparation for the deadline.
So Zone operators need to consult the ACE Portal to confirm the Zone IDs assigned to their operations. For many folks, that will mean establishing or re-establishing their ACE Portal accounts.
The ACE Portal revision last month may complicate that process. Operators should therefore start to recover their accounts immediately if they have not already done so.
There is no defined relationship between the new 9-character Zone ID and the previous 7-character ID. CBP advises trade users not to attempt to "create" their own Zone ID, although this appears to be generally possible for subzones.
The new 9-character Zone ID can be found in the header of the FTZ Site profile called "Zone ID #" once successfully inside the Modernized ACE Portal.
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Carbon Black, that is.
On Feb. 16, the Felicity Ace, a 650-foot, 60,000-ton roll-on roll-off ship caught fire on its way from Embden, Germany to the United States. The Panama-flagged ship was approximately 90 nautical miles southwest of the Azores Islands carrying over $400 million worth of Volkswagen Group vehicles, including Porsches, Bentleys and Audis.
All 22 crew members abandoned the vessel and were picked up by a nearby tanker and taken to shore by a Portuguese Navy helicopter. No significant injuries have been reported although the fire burned for over a week.
The blaze highlights the difficulties of shipments containing lithium-ion batteries and products containing them. Battery Electric Vehicles (BEVs) were on board and it is not yet known if any part of the ship’s cargo can be saved.
Two large salvage tugs from Gibraltar eventually stemmed the fire, and last week a Portuguese Navy official confirmed the smoke and visible flames were gone. No cause has yet been determined as to what started the fire.
The Portuguese Navy continues to monitor the scene, but the crewless ship was left floating across the Atlantic Ocean.
The ship will next be towed to land, likely to the Bahamas. The Felicity Ace was built in 2005 and is owned by a subsidiary of MOL.
FTZ Staff Activity
- FTZ Board Staff processed a Minor Boundary Modification (S-14-2022) in FTZ 64G on behalf of Spectrum Logistics Inc., dba Shoreside Logistics, in Jacksonville, FL, on February 1, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-15-2022) in FTZ 84AF on behalf of Watco Transloading, LLC, in Houston, TX on February 3, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-16-2022) in FTZ 32 on behalf of IVI Logistics, LLC, in Doral, FL, on February 7, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-17-2022) in FTZ 35J on behalf of Sharp Corporation, in Conshohocken, PA, on February 7, 2022
- FTZ Board Staff processed a Subzone (S-18-2022) in FTZ 123 on behalf of Kaiser Premier LLC, in Fort Morgan, CO
- FTZ Board Staff processed a Minor Boundary Modification (S-19-2022) in FTZ 105E on behalf of J. Goodison Company, in North Kingstown, RI, on February 10, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-20-2022) in FTZ 41I on behalf of CNH Industrial America LLC, in Sturtvant, WI, on February 14, 2022
- FTZ Board Staff processed a Subzone (S-21-2022) in FTZ 196A on behalf of TTI, Inc., in Fort Worth, TX
- FTZ Board Staff processed a Termination (S-22-2022) in FTZ 75 on behalf of Orbital Sciences Corporation, in Gilbert, AZ, on February 16, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-23-2022) in FTZ 202 on behalf of Tolead Logistics US Inc., in Verona, CA, on February 18, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-24-2022) in FTZ 94 on behalf of Capin Vyborny LLC, in Laredo, TX, on February 24, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-25-2022) in FTZ 54A, Site 2 on behalf of W Schonbek LLC, in Plattsburgh, NY, on February 24, 2022
FTZ Board Activity
- TTI, Inc. submitted an application for subzone expansion within FTZ 196 in Fort Worth, Texas. MORE
- OBlockz LLC received approval for subzone status for subzone 27S in Lawrence, Massachusetts. MORE
- Kaiser Premier, LLC submitted an application for subzone status for its facility within FTZ 123 in Fort Morgan, Colorado. MORE
- Valbruna Stainless, Inc. received approval to operate its Pompton Lakes, New Jersey facilities as Subzone 49X. MORE
- AstraZeneca Pharmaceuticals, LP submitted a notification of proposed production activity for additional components of pharmaceutical products within FTZ 177 in Mount Vernon, Indiana. MORE
- AstraZeneca Pharmaceuticals, LP submitted a notification of proposed production activity for additional components of pharmaceutical products within FTZ 99 in Newark, Delaware. MORE
- BMW Manufacturing Company, LLC received authorization of production activity for additional components of passenger motor vehicles within FTZ 38 in Spartanburg, South Carolina. MORE
- St. Lucie County submitted an application for the reorganization of FTZ 218 under alternative site framework in St. Lucie County, Florida. MORE
Change Your Password –
A remarkable series of world events coincided to make for a very exciting month in international trade. After weeks of buildup, Russia invaded Ukraine and fighting and casualties are fierce in areas such as the capital Kyiv. The United States and Europe made good on their promises to punish Russia for military action and installed sanctions designed to place economic and political pressure on the government of Vladamir Putin.
Impact from the conflict was felt almost immediately here in the United States. Energy and food commodity prices fluctuated wildly (Russia and Ukraine produce 25% of the world’s wheat) and several catastrophic cyberattacks impacted different parts of the world economy, including a shutdown of the brokerage operations of Expeditors International.
The Ukraine crisis dominated the headlines, but the Biden administration also negotiated a TRQ arrangement to end the Section 232 additional duties on steel (but not aluminum) from Japan. That agreement will go into effect April 1st.
Looking for your dray carrier? He or she may be here in Washington circling the Beltway to protest government mandates related to the pandemic. Travelling to DC for tonight’s State of the Union address? Bring your own cash if you need it. Most banks and ATMs in the area are out at the moment.