FTZ’ine July 2020
July 1, 2020
FTZ’ine September 2020
September 1, 2020
Election Talk Heats Up
As Tropical Storm Isaias is bearing down on your Nation’s Capital today, talk of the November election has taken a slight pause. As soon as the winds outside the Capitol stop blowing though, expect the wind inside the Capitol to gust anew focused on how the election might take place in the face of the COVID-19 pandemic, and what type of economic aid the country needs next. There is currently a $2 trillion (yes, with a “t”) gap in the stimulus plans proposed by each side of the isle, and similar gaps in the accommodations for voting by mail to reduce opportunities for virus transmission in November.
Rumblings of an ‘October Surprise’ in the form of a working vaccine continue to circulate. U.S. European, and Chinese pharmaceutical companies have begun to produce vaccines in massive quantities even as trials continue as to their effectiveness. Hope of a vaccine or treatment has buoyed stock markets despite historic retraction in the brick and mortar economy. As tech giants reported record earnings last week, major retailers continued to file for bankruptcy. Stay tuned for all the news impacting FTZs and international trade.
Top Story: CBP Cracks The Door Open On U.S. 321 Entries
In a surprise ruling issued on July 28th to James Swanson, Director, Cargo Security and Controls , U.S. Customs Headquarters opened the possibility that merchandise could be brought into a U.S. warehouse for distribution using Section 321 de minimus entry procedures. While they will still not allow so-called 321 entries of foreign-status merchandise from foreign-trade zones, it does open the door that U.S. distribution facilities could take advantage of duty-free entry previously only available from foreign warehouses. Therefore FTZ distribution facilities could make use of the ruling to admit duty-free merchandise in domestic status.
Headquarters ruling HQ H290219 comes almost three years after a ruling request on behalf of Amazon. The ruling specifically allows the foreign shipper to act as the party for whom the $800 per day limit for such duty-free entries apply. This means the de minimus provision is still far more workable from a foreign location, but there are conditions under which informal, duty free entry could be made into a U.S. distribution center.
In other words, the ruling states that a 321 entry can be used at the time of import even if a sale has not taken place. However, when the final purchaser is not known, the consignee of the shipment must be used as the importer for the purposes of determining the $800/day limit. This limits the benefits of the ruling, but the smaller the foreign shipper’s organization, the more useful the provision becomes. The ruling also addressed the data requirements for such an informal entry into a U.S. warehouse. 19 C.F.R. § 143.23(k) provides that the following information is required as a part of an informal entry:
Earlier CBP rulings held that the ultimate consignee cannot be a foreign entity, rather a domestic ultimate consignee must be listed with every de minimis informal entry submitted. When a sale has not yet taken place in the U.S., i.e. there is no actual ultimate consignee, the owner of the U.S. premises of delivery at the time of entry of the unsold merchandise may be listed as the ultimate consignee. In situations where additional owner or purchaser information is not provided to CBP, the ultimate consignee, would be the entity used to determine the one person on one day Section 321 de minimis value qualifier.
Based on the ruling a foreign owner of the shipment or shipments may be identified as the one person on one day under 19 U.S.C. § 1321(a)(2)(C). If such an owner or purchaser is not identified, however, CBP shall use the named consignee to determine whether shipments are made in excess of $800 per person on one day.
The ruling noted that formal entries are required for all antidumping and countervailing duty entries. That same rule would not apply to entries subject to Section 301 or 232 duties.
Tech Tip
CBP has been working on updates to the broker regulations for quite a while. As a zone operator, at least one of these changes may impact you, especially if you self-file.
The regulation modernization is intended to coincide with the development of CBP trade initiatives including, the Automated Commercial Environment (ACE) and the Centers of Excellence and Expertise (CEEs). There are several updates including documenting a requirement that customs business must be conducted within the customs territory of the United States. This is CBP's current practice, and the broker community and CBP have agreed that this requirement should be set forth in the regulations. The proposal also requires each broker to maintain a current point of contact for issues related to the transaction of customs business. This contact will be called upon should recordkeeping need to be produced, and must make requested records available at a location specified by CBP employees within thirty (30) calendar days. This change would allow CBP greater flexibility in where it could examine the records.
Comments on these changes are due by August 4, and the proposed rules can be found at https://www.federalregister.gov/documents/2020/06/05/2020-04711/modernization-of-the-customs-brokers-regulations. If you have questions on the new rules, please send them to our Sr. Vice President Melissa Irmen at Melissa.Irmen@iscm.co.
U.S. Economy on Two Widely Divergent Paths
Last week the Bureau of Economic Analysis at the Department of Commerce said the US economy contracted at a 32.9% annual rate from April through June, its worst drop on record, and about 3 times the drop experienced during the 2008 recession.
The U.S. plunged into its first recession in 11 years, putting an end to the longest economic expansion in its history and wiping out five years of economic gains in just a few months.
A recession is commonly defined as two consecutive quarters of declining gross domestic product, or GDP. Between January and March, GDP declined by an annualized rate of 5%.
At the same time, technology companies are reporting record earnings, setting up an economic divide that determines how Americans are experiencing the pandemic.
In April, more than 20 million American jobs vanished as businesses closed and most of the country was under stay-at-home orders. It was the biggest drop in jobs since record-keeping began more than 80 years ago. Claims for unemployment benefits skyrocketed and have still not recovered to pre-pandemic levels.
While the labor market has been rebounding since states began to reopen, the country is still down nearly 15 million jobs since February. The International Monetary Fund (IMF) in turn announced they expect global economic growth will decline nearly 5% this year, as the coronavirus pandemic triggers the world's worst recession since the Great Depression.
The IMF's latest outlook is nearly 2 percentage points worse than its last forecast in April, representing a slower-than-expected global recovery. The organization also downgraded its 2021 growth projections from 5.8% to 5.4%, which would leave global gross domestic product next year about 6.5 percentage points lower than pre-pandemic projections from January.
"We are definitely not out of the woods," IMF chief economist Gita Gopinath said at a news conference. "We have not escaped the great lockdown.
But while the global economy faces potential unemployment and contraction not seen since the Great Depression, tech companies are benefiting from new consumer habits initiated during the lockdowns that analysts believe will turn into longer-term shifts in how people shop, work and entertain themselves. Share prices of Amazon and Microsoft hit at or near records yesterday. Facebook is moving to acquire high-skilled talent, announcing the hiring of 10,000 new workers this year.
Expected UK FTA Fails To Coalesce
With the leaders from both countries needing a trade win from somewhere, anywhere, it was widely expected that the U.S. and U.K. would be able to quickly work out the terms of a trade deal between them. Progress has proved elusive, and U.S. Trade Representative Robert Lighthizer said last month that a deal with the UK is now unlikely before the November election.
Among the issues complicating the talks are disagreements over US agriculture exports and UK taxes on tech companies. "There are very, very fundamental issues that we have to come to grips with," Mr Lighthizer said.
The two countries exchange $315B worth of trade each year, and started a second round of talks in July, after opening formal negotiations in June. Ambassador Lighthizer said the two sides have yet to agree on any part of a deal. Some issues depend on what comes out of UK talks with the European Union, and will take longer to negotiate.
"There hasn't been an enormous amount that's happened yet," he said.
A host of other issues threaten to derail the trade negotiations.
Last week the Ambassador warned that the US would respond with tariffs if countries raise taxes on tech companies, as the UK did this spring. The UK's Department for International Trade said the negotiations with the US "were proceeding at pace".
"The second virtual round of negotiations is currently underway and we welcome the US' repeated commitment to reaching an agreement," it said.
PANY/NJ Results Confirm Pandemic Impact To Ports
The pandemic has not been kind to the service industries tied to international trade, including U.S. ports. The Port Authority of New York and New Jersey (PANY/NJ) announced it lost $800 million in revenue since March as a result of the COVID-19 pandemic.
In a statement, the Port Authority said it had lost on average $240 million in revenue a month since March, a figure it described as “unprecedented”, and that it expects to lose $3 billion by March 2022.
“Due to the global pandemic, Port Authority revenues were down nearly $800 million just through June of this year – an unprecedented number for this agency,” said Chairman Kevin O’Toole.
The Port said it is examining “operating costs including potential incremental costs necessary to address COVID-19 operating protocols as activity increases.” Which could mean higher fees for container moves through PANY/NJ are in the future.
FTZ Board Activity
- Puma Energy Caribe, LLC received approval for the expansion of subzone 7F in Carolina, Puerto Rico. MORE
- LLFlex, LLC received authorization of production activity for aluminum foil paper laminate, foil-backed paperboard, coated paper, coated paperboard, and cable wrap within FTZ 230 in High Point, North Carolina. MORE
- Offshore Energy Services, Inc. received authorization of production activity for line pipe with weld-on housings and connectors within FTZ 124 in Broussard, Louisiana. MORE
- PRO-PIPE USA, LLC received authorization of production activity for high-density polyethylene pipe within FTZ 106 in Shawnee, Oklahoma. MORE
- Barco Stamping Co., Inc. submitted a notification of proposed production activity for stamped lighting fixture components within FTZ 219 in Yuma, Arizona. MORE
- Zoetis, LLC received authorization of production activity for pharmaceutical products within FTZ 43 in Kalamazoo, Michigan. MORE
- Traxys Cometals USA, LLC received authorization of production activity for manganese and aluminum alloying agents within FTZ 158 in Burnsville, Mississippi. MORE
- ISK Biosciences Corporation received authorization of production activity for agricultural chemicals within FTZ 77 in Memphis, Tennessee. MORE
- Ricoh Electronics, Inc. submitted a notification of proposed production activity for toner products, thermal paper, and film within FTZ 26 in Lawrenceville and Buford, Georgia. MORE
- New London Foreign Trade Zone Commission submitted an application for the reorganization of FTZ 208 under the alternative site framework in New London, Connecticut. MORE
- HP International Trading B.V. LLC submitted a notification of proposed production activity for Inkjet Ink and 3D printing fluids (bulk and cartridges) and related subassemblies within FTZ 61 in Aguadilla, Puerto Rico. MORE
- LiCAP Technologies received approval for subzone status for its new facility as subzone 143E in Sacramento, California. MORE
- Plaza Warehousing & Realty Corporation submitted an application for the expansion of subzone 61T of FTZ 61 in Caguas, Puerto Rico. MORE
Election Talk Heats Up –
As Tropical Storm Isaias is bearing down on your Nation’s Capital today, talk of the November election has taken a slight pause. As soon as the winds outside the Capitol stop blowing though, expect the wind inside the Capitol to gust anew focused on how the election might take place in the face of the COVID-19 pandemic, and what type of economic aid the country needs next. There is currently a $2 trillion (yes, with a “t”) gap in the stimulus plans proposed by each side of the isle, and similar gaps in the accommodations for voting by mail to reduce opportunities for virus transmission in November.
Rumblings of an ‘October Surprise’ in the form of a working vaccine continue to circulate. U.S. European, and Chinese pharmaceutical companies have begun to produce vaccines in massive quantities even as trials continue as to their effectiveness. Hope of a vaccine or treatment has buoyed stock markets despite historic retraction in the brick and mortar economy. As tech giants reported record earnings last week, major retailers continued to file for bankruptcy. Stay tuned for all the news impacting FTZs and international trade.