FTZ’ine January 2024
January 4, 2024
FTZ’ine March 2024
March 4, 2024
The Race Narrows
A lot happened in the race for the Presidency last month. And those events are having a significant impact on trade already.
At least three Republican hopefuls dropped out of the race, and the final challenger to Donald Trump for the Republican nomination has not yet garnered enough votes in a state primary to create a contest. Yet.
On the Democrat side, President Biden won a primary where he wasn’t even on the ballot.
As the race quickly boiled down to familiar antagonists, it had an unexpected impact on business in Washington on everything from budget negotiations to border security and trade policy.
The U.S. still does not have a budget, but the U.S. economy remains resilient despite all the concerns expressed by economists. Markets remain near record territory in anticipation that the future looks good despite high-profile layoff notices at several companies, including carrier UPS.
Ocean freight rates are under dramatic pressure from the reduced operations at the two most important canals on the planet, the Panama and the Suez. Each has very different problems that no one sees going away soon.
Several U.S. agencies are expanding requirements for import reporting. The Fish and Wildlife Service implements additional reporting next week, and APHIS is expected to expand within the next three months.
Top Story: USTR Departures Signal Election-Year Trade Policy Freeze
Trade has become an unlikely flash point in the upcoming Presidential election, and the differing opinions of the current front-runners is already having an impact.
Politico reported that several senior trade officials at the Office of the United States Trade Representative (USTR) have resigned, according to current and former administration officials.
The wave of exits “certainly raises questions” about the trade agenda, said Senate Finance Chair Ron Wyden (D-Ore.), whose committee oversees trade policy and personnel. “They’ve lost a lot of people, a lot of good people.”
The exodus highlights the difficulty the White House has had in completing agreements with trade partners that complement its “worker-centered” trade policy.
At the same time President Biden’s leading challenger quickly gained traction with a simple trade policy “raise tariffs 10% on everyone.”
“Three years on, there has been a robust continuity among staff members at USTR, with an impressive number still proudly working alongside the Ambassador despite the rigors and sacrifices that come with public service,” said a spokesperson for USTR. “Ambassador Tai has complete confidence in her team’s ability to deliver on the President’s international economic agenda, one that positions the U.S. to compete and win on the global stage while putting American workers at the forefront of our trade policies.”
Those policy and personnel issues could become problems in an election year.
Despite the discontent, officials close to USTR Tai say that she still has the confidence of the President and is not planning a departure.
Tech Tip: Fishing For Your ACE Report?
Last weekend U.S. Customs upgraded the ACE Reports application. You already know this if you tried to run a report this week. ACE Reports now runs on SAP Business Objects 4.3, which has a completely new user interface from the one we have gotten used to. Most users will be able to select their ‘Importer’ account and work through the new menus to find their standard reports.
This coming Monday, the Fish and Wildlife Service (FWS) of the U.S. Department of the Interior will add ‘FW1’ flags to approximately 50 new HTSUS codes. That means a lot of FTZs are going to need to make FWS declarations even though they may have never had to do so before.
FWS is also updating approximately 30 HTS codes from FW3 to FW2. FTZ operators will want to avoid data rejections when they go to file next week’s weekly estimates by reviewing these new flags that affect 80 different product classifications.
Looking for that ACE Report you need? Trying to figure out how to handle the new FWS filing requirements? Contact us at info@iscm.co.
U.S. Economy Keeps Surprising Despite Red Flags
The Department of Commerce announced that the U.S. Economy grew at 3.3% in the last quarter of 2023.
The gross domestic product (GDP) increase, while down from the 4.9% rate in the third quarter, showed the economy was far from recession territory.
That level of growth easily topped forecasters’ expectations and additional data showed there is little sign that a recession is imminent in 2024 either.
For the full year 2023, G.D.P. grew 3.1 percent, up from less than 1 percent the year before and faster than the average for the five years preceding the pandemic.
“It’s hard to imagine how things could look better for the soft landing,” said Brian Rose, senior economist at UBS. “Looking back at last year, the combination of growth and inflation that we had was not considered in the realm of possibility by most people. To have such strong growth, low unemployment and to have inflation coming down that quickly, even the optimists weren’t that optimistic.”
The data also showed inflation growth slowed in the quarter. Consumer prices rose at a 1.7% annual rate in the final three months of the year, below the Fed’s long-run target of 2%. That buoyed markets as it gives Fed policymakers more flexibility to cut interest rates.
Narrowing Primary Options Highlight Trade Differences
Trade is not usually at the center of presidential races in the U.S.
But it will be this year.
Donald Trump has vowed to shake up trade if he is elected by putting a 10 percent tariff on all imports.
President Biden has kept many of the Trump administration’s tariffs in place, and he has further restricted the sale of some technology to China.
While the exact plans for further implementation of their trade policies will be revealed later in the contest, it is clear that tough trade policies will be on the agenda and getting plenty of attention during this election cycle.
Markets need to begin thinking about the structural impact of Donald Trump’s proposed 10% tariff increase, which “shakes up every asset class,” according to Michael Every, global strategist at Rabobank.
The former president touts the plan as tripling tax revenue from tariffs while providing an incentive for American domestic production.
Treasury Secretary Janet Yellen said earlier this month that the plan would “raise the cost of a wide variety of goods that American businesses and consumers rely on,” though she noted that tariffs are appropriate “in some cases.”
Trump floated the 10% tariff during an interview last year with Fox Business’ Larry Kudlow, his former White House economic advisor, saying “it’s a massive amount of money.”
“It’s not going to stop business because it’s not that much,” he stated, “but it’s enough that we really make a lot of money.”
One would expect that U.S. trading partners would place retaliatory tariffs on U.S. exports, making any gains from the increase in U.S. duties harder to estimate.
Canal Woes Continue Upward Pressure On Container Rates
Pirate attacks in the Red Sea by Houthi militants have now graduated to missile and drone attacks on ocean vessels using the Suez Canal.
That means ship operators have to either risk an airborne strike and pay sharply higher insurance rates, or circumnavigate the canal and take the longer, more expensive route around Africa.
The extreme drought in Panama continues to affect Gatún Lake, and the Panama Canal Authority has now reduced daily traffic by nearly 40% compared with last year.
The main alternative for Asian shipments to the U.S. East Coast was . . through the Suez Canal.
So now no matter how FTZ operators book their freight, rates are going up as capacity goes down.
The Red Sea attacks have already forced shutdowns at European auto plants and raised fears of a surge in EU consumer prices.
The calculated location of the Red Sea attacks normally handles 12 percent of global trade, including nearly one-third of the world’s container ship traffic.
For shipping companies, costs have already increased, though container rates have not yet risen as much as they did during the pandemic.
Even so, retailers like Ikea have warned that avoiding the Suez Canal could delay the arrival of merchandise at stores.
This could impact inflation and complicate the jobs of the worlds’ central banks. JPMorgan Chase estimated on Thursday that worldwide consumer prices for goods would climb an extra 0.7 percent in the first half of this year if shipping disruptions continue.
The Red Sea and Suez Canal have become increasingly important in the past two years for oil and liquified natural gas shipments, as European countries tried to stop buying fuel from Russia.
So Russia sharply increased the oil it ships through the Suez Canal, much of it to India, while Europe stepped up natural gas purchases from the Middle East, also through the Suez Canal. About 12 percent of the oil carried worldwide by tankers passes through the Red Sea, and almost as much of the world’s liquefied natural gas, according to the U.S. Energy Information Administration.
Separately, Reuters reported that the Panama Canal’s toll revenues have dropped by roughly $100 million since October 2023, month-on-month (MoM).
Germany Terminates Watch Import
Arnold Schwarzenegger’s right to import merchandise into Germany has been Terminated.
According to a German Customs spokesperson, the movie star and former California governor was detained at Munich’s airport for more than two hours after arriving from Los Angeles with an unregistered luxury watch.
A 1992 Swiss referendum rejected EU membership by 50.3% to 49.7%. So even though Arnold’s Audemars Piguet watch was produced in Europe, it needed to be declared to German Customs officials when he entered the E.U. This detail was missed and he now faces criminal tax evasion proceedings in Germany.
"None of the people I know and sat next to on our commercial flight filled out a declaration form, including Arnold — he got to customs, and they told him he was 'randomly' selected to be searched," Schwarzenegger's representative Daniel Ketchell told The Washington Post.
Schwarzenegger was on his way to a charity auction in Austria, where the watch may have been an item put up for sale.
The actor agreed to pre-pay potential taxes on the watch, but the ATM which the Customs officers brought him to had a limit too low and the bank itself was closed. Finally, the Customs officers produced a credit card machine that worked, and Arnold was released to continue his travel.
FTZ Staff Activity
- FTZ Board Staff processed a processed a Termination (S-243-2023) in FTZ 122O on behalf of International Resistive Company of Texas, LLC, Corpus Christi, TX on December 20, 2023
- FTZ Board Staff processed a Minor Boundary Modification (S-244-2023) in FTZ 230C on behalf of Patheon Softgels Inc. (aka Banner Pharmacaps), Greensboro, NC on December 20, 2023
- FTZ Board Staff processed a Minor Boundary Modification (S-245-2023) in FTZ 22U on behalf of Expeditors International of WA, Inc., Melrose, IL on December 20, 2023
- FTZ Board Staff processed a Minor Boundary Modification (S-246-2023) in FTZ 72 on behalf of Sentry BioPharma Services, Inc., Edinburgh, IN on December 21, 2023
- FTZ Board Staff processed a Minor Boundary Modification (S-247-2023) in FTZ 20 on behalf of RTS Holdings, LLC dba RoadOne IntermodaLogistics, Suffolk, VA, on December 21, 2023
- FTZ Board Staff processed a Minor Boundary Modification (S-248-2023) in FTZ 72 on behalf of Pasha Automotive Services, San Diego, CA on December 21, 2023
- FTZ Board Staff processed a processed a Termination (S-249-2023) in FTZ 153G on behalf of Rohr, Inc., Chula Vista, CA, Lathrop, CA on December 21, 2023
- FTZ Board Staff processed a processed a Termination (S-250-2023) in FTZ 153H on behalf of Tesla, Inc., Lathrop, CA on December 21, 2023
- FTZ Board Staff processed a Minor Boundary Modification (S-1-2024) in FTZ 75 on behalf of Puma North America, Glendale, AZ on January 3, 2024
- FTZ Board Staff processed a Minor Boundary Modification (S-2-2024) in FTZ 30D on behalf of Specialized Bicycle Components, Inc., Salt Lake City, UT on January 3, 2024
- FTZ Board Staff processed a Minor Boundary Modification (S-3-2024) in FTZ 17F on behalf of Panasonic Energy Corporation of North America, DeSoto, KS on January 4, 2024
- FTZ Board Staff processed a Minor Boundary Modification (S-4-2024) in FTZ 50 on behalf of Space Exploration Technologies Corporation dba Spacex, Hawthorne, CA on January 4, 2024
- FTZ Board Staff processed a Termination (S-5-2024) in FTZ 52A on behalf of Festo Corporation, Hauppauge, NY on January 8, 2024
- FTZ Board Staff processed a Minor Boundary Modification (S-6-2024) in FTZ 84 on behalf of Dixie Cullen Interests, Inc., Houston, TX on January 8, 2024
- FTZ Board Staff processed a Minor Boundary Modification (S-7-2024) in FTZ 302 on behalf of Pilot Air Freight, LLC dba Pilot Freight Services, Socorro, TX on January 9, 2024
- FTZ Board Staff processed a Traditional Minor Boundary Modification (S-8-2024) in FTZ 115 on behalf of Port of Beaumont Navigation District of Jefferson County, Beaumont, TX on January 17, 2024
- FTZ Board Staff processed a Minor Boundary Modification (S-9-2024) in FTZ 281 on behalf of Blue Water Shipping US, Inc., Hialeah Gardens, FL on January 22, 2024
- FTZ Board Staff processed a Minor Boundary Modification (S-10-2024) in FTZ 122S on behalf of Corpus Christi Polymers LLC, Corpus Christi, TX on January 23, 2024
- FTZ Board Staff processed a Minor Boundary Modification (S-11-2024) in FTZ 104 on behalf of Salon Logistics, Gardena City, GA on January 24, 2024
- FTZ Board Staff processed a Minor Boundary Modification (S-12-2024) in FTZ 202 on behalf of LionExt Inc., City of Industry, CA on January 24, 2024
Foreign-Trade Zone Board Activity
- Samsung Austin Semiconductor, LLC submitted an application to expand Subzone 183B in Austin Texas. MORE
- Greater Maricopa Foreign Trade Zone, Inc. withdrew its application to expand Foreign-Trade Zone 277 through the addition of a new magnet site in El Mirage, Arizona MORE
- Twin Disc, Inc. submitted a notification of proposed production activity for power transmission products within Foreign-Trade Zone 297A in Lufkin, Texas. MORE
- Volkswagen Group of America, Inc. submitted a notification of proposed production activity for additional components of passenger motor vehicles within Foreign-Trade Zone 134 in Chattanooga, Tennessee. MORE
- Lithion Battery, Inc. submitted a notification of proposed production activity for lithium-ion battery packs and accessories within Foreign-Trade Zone 89 in Henderson, Nevada. MORE
- Patheon Pharmaceuticals Inc. received authorization of production activity for pharmaceutical products within Foreign-Trade Zone 46 in Cincinnati, Ohio. MORE
- Epson Portland, Inc. received authorization of production activity for inkjet ink cartridges and bottles within Foreign-Trade Zone 45 in Hillsboro, Oregon. MORE
- The City of Eagle Pass, Texas submitted an application to reorganize and expand Foreign-Trade Zone 96 through the Alternative Site Framework with a service area of Maverick, County, Texas MORE
- Port Arthur LNG, LLC submitted an application to expand Subzone 116F by adding a new site in Port Arthur, Texas. MORE
- Toyota Motor Manufacturing Kentucky, Inc. received authorization of production activity for dual fuel cell modules within Foreign-Trade Zone 29E in Georgetown, Kentucky. MORE
The Race Narrows:
A lot happened in the race for the Presidency last month. And those events are having a significant impact on trade already.
At least three Republican hopefuls dropped out of the race, and the final challenger to Donald Trump for the Republican nomination has not yet garnered enough votes in a state primary to create a contest. Yet.
On the Democrat side, President Biden won a primary where he wasn’t even on the ballot.
As the race quickly boiled down to familiar antagonists, it had an unexpected impact on business in Washington on everything from budget negotiations to border security and trade policy.
The U.S. still does not have a budget, but the U.S. economy remains resilient despite all the concerns expressed by economists. Markets remain near record territory in anticipation that the future looks good despite high-profile layoff notices at several companies, including carrier UPS.
Ocean freight rates are under dramatic pressure from the reduced operations at the two most important canals on the planet, the Panama and the Suez. Each has very different problems that no one sees going away soon.
Several U.S. agencies are expanding requirements for import reporting. The Fish and Wildlife Service implements additional reporting next week, and APHIS is expected to expand within the next three months.