FTZ’ine November 2019
October 31, 2019
FTZ’ine January 2020
January 7, 2020
A Blockbuster Month Ahead For Trade?
Impeachment hearings once again crowded out any progress on trade policy last month. Your nation’s capital became enthralled by captivating testimony from members of the Trump administration on negotiations over the release of military aide to Ukraine. That leaves time running very short for passage of USMCA, but a green light from the House Speaker right before the Thanksgiving break could mean fast passage will take place this month.
Impeachment hearings also likely added to the long list of factors working against reaching a trade deal with China, which was supposed to be completed last month. That leaves the FTZ industry preparing for the possibility of new tariffs on List 4b merchandise on December 15th. The sides have described themselves as very close to completing negotiations before that deadline, but threats from the President of new tariffs on steel from Brazil and Argentina, made just yesterday, may be a sign that a deal with China remains elusive.
The latest polls from Britain indicate that Boris Johnson’s gamble on a general election in Britain will pay off. A widening majority of Conservatives in Parliament makes the prospect more likely that the newest Brexit deadline of January 31, 2020 will actually be met.
Passage of USMCA, closing a Phase One trade deal with China, or agreement on the terms of Brexit would make December a chart-busting month for trade!
The FTZine staff wishes all our readers a very Merry Christmas with friends and family, and health and prosperity in the New Year.
Top Story: Latest British Polls Bolster Brexit Chances
It looks like Boris Johnson’s bet on his country’s continued support for Brexit is on the money. According to the latest model from poll takers YouGov, the British Prime Minister’s Conservative Party is expected to win a majority of 68 seats in Parliament in the general election to be held on December 12th. That would mark the party’s biggest majority since Margaret Thatcher’s 1987 victory, and virtually assure that Britain would leave the European Union by next January 31st.
"If we can get a working majority then we will come on Jan. 31 at the absolute latest," Johnson told LBC radio.
He also repeated his message that he saw no reason why Britain would need to extend the Brexit transition period beyond the end of 2020.
The margin of error in the model create a range in the Conservatives seat projection of between 328 and 385, YouGov said. Americans are no strangers to election poll misfires, and there is still plenty of time for events to push the election in a different direction.
When Johnson first called for a general election in Britain to break the deadlock on Brexit, it was unclear whether his unorthodox political style still held favor with British voters. However the current figures point to Johnson getting the ‘working’ majority he wanted, and far more than needed to enact the Brexit deal he has already negotiated with the European Union.
The value of the Pound Sterling rose in international markets after the poll was released, reflecting the relief of British businesses that the deadlock on Brexit has been broken.
The general election will not answer all the questions on Brexit though, as the UK economy remains intertwined with that of the continent and a free trade deal between Britain and the EU has yet to be worked out.
History had not been on the side of Johnson’s decision to hold an election. In the spring of 2017, Theresa May made the same gamble that her Conservative Party could win a working majority in a general election. Early in the campaign, the opposing Labour Party was twenty points behind in the polls. In the end, Labour actually gained thirty seats, and the election ended in a hung Parliament. Brexit stumbled from one no-vote to the next, and May eventually lost her premiership.
Tech Tip
Have you ever needed to update an entry after it was in CBP control? This is a bit tricky for self-filers, but if the entry has not been paid, it can be done!
Once an entry is in Customs control, only CBP can edit that transaction. But with their help, you can still make a correction before the entry is paid. Upon request, CBP can put the entry into ‘Rejected’ status and return it to Importer control. This will then make it possible to edit the entry and refile.
This is particularly useful if you are in a situation where a currency conversion, country of origin declaration, or value input error caused an entry to have a drastically inaccurate duty amount. If you haven’t made payment, it is worth asking for a rejection as long as you still have enough time to process the entry for payment before it will be late. Correcting an entry this way requires payment within 48 hours, regardless of the original payment deadline, so this method should only be used in unusual circumstances.
If, however, you don’t realize an update is needed until after payment has been made, a Post Summary Correction (PSC) is the way to make changes. If you are in that same situation having made an overpayment, that will mean waiting for liquidation or requesting accelerated liquidation for your refund to be issued.
Mexico Lobbies House Speaker in Support of USMCA
As the nation prepared for the Thanksgiving holiday, Mexico’s President Andrés Manuel López Obrador took the unusual step of lobbying Speaker of the House Nancy Pelosi to quickly take up passage of the United States Mexico Canada Agreement (USMCA), the replacement for NAFTA.
There is little in the new agreement that would make Mexico anxious for ratification, except for the certainty of having a permanent trade agreement that the Trump Administration supports.
In mid-November House Speaker Nancy Pelosi had cast doubt on the possibility of passing a deal by the end of 2019, saying “I’m not even sure if we came to an agreement today that it would be enough time to finish.” Then just before the holiday, she indicated that an agreement on changes had been reached with USTR that would allow the bill to move to the House floor.
The implementing legislation for USMCA includes the same provisions in NAFTA that prevented duty-free entry from foreign-trade zones. Interested in lending your voice to the effort to amend USMCA to promote U.S. manufacturing? Contact Vice-Chairman of the National Association of Foreign-Trade Zones Melissa Irmen at Melissa.Irmen@iscm.co
The Mexican President, who also goes by his initials AMLO, wrote to the Speaker “Following up on my letter dated October 8, I would like to inform you that, with approval of our 2020 federal budget, which includes appropriations for implementing the labor law reforms that I have promoted, we have fully met our commitments regarding the United States-Mexico-Canada Agreement (USMCA).”
This implies that Mexico has now met one of the key demands U.S. Democrats have set before the agreement would be taken up for a vote in the House. It is still unclear if the House Speaker would be willing to give President Trump a key policy victory, or if these changes in Mexican labor law would be enough for Democrats to call it a victory of their own they can take into next year’s elections.
The Mexican President demonstrated a clear understanding of the U.S. politics in play, and addressed key confidantes of the Speaker: “I reiterate here what I have said in my conversations with the Congressional delegation led by Representative Richard Neal, Chairman of the Ways and Means Committee, and AFL-CIO President Richard Trumka, regarding a key concern that has been raised: you can be assured that we will fulfill our labor-related commitments.”
Support from the Chairman of the House Ways and Means Committee would seem to be a major step towards ratification in the U.S. Even so, the Mexican President recognizes that time is running short: “Mexico respectfully invites you to conclude this complex chapter between our countries and, as I said in my October 8 letter, let us move forward with the USMCA promptly, to ensure that the electoral process in your country, with the debates and passions typical of all democracies, doesn’t prevent or delay the conclusion of such an important event. I am convinced that history will judge us favorably for approving this needed platform of friendship, cooperation and prosperity between our societies and nations.”
Mexico's trade negotiator said he was cautiously optimistic about finalizing the pact after meeting with Canadian Prime Minster Justin Trudeau in Ottawa.
"If the amendments are acceptable, are improvements, there's no reason why we should not be shaking hands next week" on the rebranded US-Mexico-Canada Agreement (USMCA), Undersecretary for North America Jesus Seade told reporters.
USTR Robert Lighthizer met with Speaker Pelosi and House Ways and Means Committee Chairman Richard Neal before Congress recessed for the holiday. .
Coming out of those meetings Speaker Pelosi said that a verbal agreement has been reached with the Trump Administration. “We are within range of a substantially improved agreement for America’s workers. Now, we need to see our progress in writing from the Trade Representative for final review,” Pelosi said in a statement.
Canada has said it will ratify the agreement as soon as Washington does.
Support for the agreement in the House is relatively strong, and passage in the Senate is virtually assured. That means that scheduling a vote on the House floor by the Speaker is the final hurdle to complete implementation of the agreement.
Any changes desired by the FTZ industry would need to be made fast if they are to be included in a bill passed in 2019.
Delay of ‘Phase One’ Deal Leaves Tough Tariff Planning For FTZs
A new round of duties on $160B worth of Chinese imports, including consumer goods like laptops and smartphones, is scheduled to take effect on Dec. 15. The White House has said that only a ‘Phase One’ trade deal between the countries could forestall the tariffs, but the original deadline for that agreement came and went last month.
Several factors make it difficult for FTZs to predict if the two countries will reach an agreement before the new tariffs take effect.
The U.S. economy and stock market remain strong, reducing pressure on the Administration to accept less than the ‘great deal’ it has been looking for.
Progress on USMCA may actually harden the American position in the trade talks with China. The White House may view passage of its signature free-trade agreement as sufficient victory on the trade front to carry it into next year’s election, reducing the need to make the concessions that might be needed for a deal with China.
The recent Congressional condemnation, signed by the President, of China’s crackdown on protesters in Hong Kong has drawn retaliation from China. The protesters have taken to carrying American flags, drawing the U.S. further into the sensitive conflict with Beijing.
Military exercises by the United States in the hotly contested Taiwan Strait, and restrictions on import and export privileges for Chinese telecommunications giant Huawei have also tainted discussions between the superpowers.
That wide range of issues to be resolved makes it difficult for FTZs to plan their supply chain costs.
Both sides have said that they are they are close to a deal, a rare show of common interpretation in the talks. A deal by the middle of this month would not only eliminate the new December 15th round of tariffs, but would also likely roll back the 15% import duties that were added to $112 billion worth of Chinese goods on Sept. 1st.
The White House has been signaling "cautious optimism" that it could close a Phase One deal soon.
Following a conversation that U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin had with China’s chief trade negotiator, Vice Premier Liu He, the office said in a statement the two countries“made headway on specific issues and the two sides are close to finalizing some sections of the agreement.”
“Discussions will go on continuously at the deputy level, and the principals will have another call in the near future,” USTR concluded.
The trade dispute has already hit global growth. The International Monetary Fund said recently in its World Economic Outlook that it projects GDP growth of 3.0% in 2019, down from 3.2% in a July forecast.
Déjà vu? December brings another government shutdown deadline
Congress will need to devote at least some time this month to a budget or spending package to avoid a December shutdown of the federal government that lasts into next year. Does that sound familiar?
Just before the Thanksgiving recess President Trump signed a continuing resolution to avert a government shutdown . . . for three more weeks.
That bill also includes a 3.1% pay raise for the military and additional funding to support the 2020 census, but only funds the government through December 20th.
This marks the second time this year that Congress has had to pass a short-term funding bill to avoid a possible shutdown. Funding for a wall at the southern border is once again the sticking point in negotiations.
Congress must reach a deal by Dec. 20 on the twelve fiscal 2020 government funding bills in order to avoid a government shutdown. The 2020 fiscal year began last October 1st.
Eleven of the bills do not seem contentious but the bill that would contain funding for construction of a wall at the border is once again impeding the ability to come to a compromise.
Senate Appropriations Committee Chairman Richard Shelby met recently with House Speaker Nancy Pelosi, House Appropriations Committee Chairwoman Nita Lowey and Treasury Secretary Steven Mnuchin to discuss how to fund the government.
Treasury Secretary Mnuchin’s inclusion was a bit unusual as the Administration would normally be represented in such talks by acting White House Chief of Staff and Director of the Office of Management and Budget Mick Mulvaney.
Mulvaney's tenure grew tenuous in October when he acknowledged that the White House held up military aid to Ukraine that Congress had authorized. He later recanted those remarks and the damage to his reputation was done.
In a budget breakthrough, Shelby and Lowey reached a deal on the top-line numbers, known as 302(b)s, for each of the bills. However, funding of the specific line for the border wall remains contentious.
“We need to get our work done by December 20,” an exasperated House Majority Leader Steny Hoyer told reporters. “Will we be able to? The wall, I think, is a major impediment. But that’s only one bill. It ought not to adversely affect the other 11 bills being held hostage, essentially.”
In addition to a hold-up over the wall, Senate leadership disagrees with Democrats over the levels of funding to the Departments of Education and Labor.
The wall funding negotiations, on top of tense impeachment hearings, mean another shutdown cannot be ruled out to bring in 2020.
FTZ Board Activity
- Black & Decker (U.S.), Inc. submitted an application for Production Authority for Lithium Ion Battery Assembly for Cordless Power Tools within FTZ 12 in McAllen, Texas. MORE
- Franks International, LLC submitted an application for subzone status for its facility within FTZ 124 in Gramercy, Louisiana. MORE
- The Lobster Trap Co. submitted an application for subzone status for its facility within FTZ 28 in New Bedford, Massachusetts. MORE
- Commerce Warehouse Group, LLC submitted an application for subzone status for its facility within FTZ 38 in Spartanburg County, South Carolina. MORE
- Patterson Pump Company received approval to operate its facility as subzone 26Q in Toccoa, Georgia. MORE
- Flextronics America, LLC submitted a Notification of Proposed Production Activity for Automated Data Processing Machines within FTZ 183 in Austin, Texas. MORE
- Volkswagen Group of America Chattanooga Operations, LLC submitted a Notification of Proposed Production Activity for Passenger Motor Vehicles within FTZ 134 in Chattanooga, Tennessee. MORE
- Puma Energy Caribe, LLC submitted an application for the expansion of Subzone 7F in Mayaguez, Puerto Rico. MORE
- ZF Chassis Systems Duncan, LLC received authorization of production activity for Automotive Suspension Systems within FTZ 38 in Spartanburg County, South Carolina. MORE
- ProAmpac Holdings, Inc. received authorization of production activity for Flexible Packaging Applications within FTZ 201 in Holyoke, Massachusetts. MORE
Impeachment hearings once again crowded out any progress on trade policy last month. Your nation’s capital became enthralled by captivating testimony from members of the Trump administration on negotiations over the release of military aide to Ukraine. That leaves time running very short for passage of USMCA, but a green light from the House Speaker right before the Thanksgiving break could mean fast passage will take place this month.
Impeachment hearings also likely added to the long list of factors working against reaching a trade deal with China, which was supposed to be completed last month. That leaves the FTZ industry preparing for the possibility of new tariffs on List 4b merchandise on December 15th. The sides have described themselves as very close to completing negotiations before that deadline, but threats from the President of new tariffs on steel from Brazil and Argentina, made just yesterday, may be a sign that a deal with China remains elusive.
The latest polls from Britain indicate that Boris Johnson’s gamble on a general election in Britain will pay off. A widening majority of Conservatives in Parliament makes the prospect more likely that the newest Brexit deadline of January 31, 2020 will actually be met.
Passage of USMCA, closing a Phase One trade deal with China, or agreement on the terms of Brexit would make December a chartbusting month for trade!
The FTZine staff wishes all our readers a very Merry Christmas with friends and family, and health and prosperity in the New Year.