FTZ’ine January 2021
January 2, 2021
FTZ’ine March 2021
March 2, 2021
Back To Business
It was QUITE the month in your nation’s capital, capped off with a frosty blanket of snow and ice. Before that heavy precipitation made your Nation’s Capital look angelic, however, there was a storming of the Capitol, a contested electoral college confirmation, and a vote in the House of Representatives that impeached a President of the United States for a historic second time.
The bruising winter storm was effective in briefly reorienting the DC narrative. An interesting effect of the pandemic is that even big storms like this one did not create the type of apoplexy that would have consumed DC just a few short years ago. Schools, offices, and agencies all know how to work from home now, and pivoting to remote work just isn’t the same news story around here anymore. With everything January threw at us now in the rear-view mirror, it is time to get back to business.
While the pandemic and the vaccine rollout continue to drive Congressional activity, the change in executive administration is already changing important conversations surrounding international trade, as you will see below.
Top Story: Madam Secretary
“I do not believe you will be serving as the governor of Rhode Island for very much longer.”
Those would normally sound like fighting words in Washington, but actually it was encouragement from Chairman Roger Wicker of the Senate Committee on Commerce, Science, and Transportation to Governor Gina Raimondo at the conclusion of a hearing last month on Raimondo’s nomination to be the next Secretary of Commerce.
Governor Raimondo, a former Rhodes scholar, is in line to take the helm of the Commerce Department with oversight of foreign-trade zones in the United States. Commerce comes with a $14 billion budget and more than 40,000 employees, .025% of whom are dedicated to administration of the FTZ program.
During the confirmation hearing, Governor Raimondo avoiding taking strong positions on controversial topics like the Section 301 tariffs on Chinese imports, and gave few hints about changes the Biden administration might make to existing trade policy.
If confirmed, which the FTZ’ine expects, Raimondo would become half of the first ever all-female Foreign-Trade Zones Board, joining Janet Yellen who is now the Secretary of the Treasury.
She did tell the Committee that China’s trade practices have been unfair, particularly when it comes to the dumping of steel onto the global market, undercutting American competitors. Governor Raimondo did not specifically commit to continuing the current export ban for Huawei Technologies, but the Biden administration has previously signaled it will likely keep those sanctions in place.
In her opening testimony Raimondo said “Some of the brightest minds in the federal government – indeed some of the best scientists in America – are at the Commerce Department, and they deserve leadership that’s supportive, transparent, and driven toward a common mission – building a stronger, more equitable, and more resilient American economy.”
Senator Sheldon Whitehouse of Rhode Island told his colleagues at the start of the hearing “You will like working with Secretary Raimondo,” he said. “She is smart, she is practical, she is results-oriented, and she likes getting stuff done.”
The Committee is not yet scheduled to vote on her nomination, but Chairman Wicker said multiple times that he expects her to win confirmation in short order.
Gina M. Raimondo was the first woman Governor of Rhode Island. She was the valedictorian of her high school graduating class at LaSalle Academy in Providence, Rhode Island. She went on to graduate with honors from Harvard, where she was recognized as the top economics student in her class. She won a Rhodes Scholarship to Oxford University where she earned a doctorate. She later graduated from Yale Law School. In 2016 she was recognized by Fortune as one of the World’s 50 Greatest Leaders. Fasten your seatbelts.
Tech Tip
It is a new year (one month old is still new), and each new year brings changes to filing processes at U.S. Customs. Here is a quick rundown of some resources you might want to keep handy:
And, of course, your subscription to FTZ’ine keeps you informed of all the national and international news that affects FTZ operators, users, and Grantees. Tell your friends to subscribe here.
UK TPP Aspirations May Jumpstart US FTA Talks
The United States headlined the original Trans-Pacific Partnership, a 12-country free trade agreement intended in part to counterbalance the influence of China in the Pacific region.
When the United States withdrew from negotiations 4 years ago, the remaining 11 countries pressed on to complete negotiations and implement the treaty. Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore and Vietnam signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in March of 2018 in Santiago, Chile.
Last week, Britain announced they would apply for inclusion in the CPTPP agreement. That may entice the United States to do the same as a way to quickly conclude free-trade negotiations with some of the US’s largest trading partners, including the UK.
Britain said that within February its Trade Minister will speak to counterparts in Japan and New Zealand and formally apply to join the trans-Pacific trading bloc.
"One year after our departure for the EU we are forging new partnerships that will bring enormous economic benefits for the people of Britain," Prime Minister Boris Johnson said in a statement.
The British government said joining CPTPP would remove tariffs on food and drink and cars, while helping to boost the technology and services sectors.
China’s U.S. Farm Purchases Continue To Grow
At the end of last month China bought almost 6 million metric tons of U.S. corn, its biggest weekly purchase ever based on data from the U.S. Department of Agriculture. China is on track to exceed for a second year a corn-buying quota set by the World Trade Organization.
Data from China’s own Customs agency shows the country imported 6.7 million tons of corn in the first nine months of 2020, versus 3.9 million tons a year earlier, driven by a spike in domestic corn prices and supply shortages.
Chinese grain imports are being driven by a strong recovery by Chinese hog farms, which has pushed feed demand higher. China’s hog population is recovering after an outbreak of disease caused widespread death and slaughter of herds. Those hogs are now getting big and hungry and ongoing dry conditions in South America are hurting prospects for that region’s 2021 corn and soybean exports.
That leaves China with few options other than the United States to purchase grains on a scale needed to feed their population. For this reason the positive development is not seen as a broad thawing of trade tensions between the two countries. White House Press Secretary Jen Psaki said last week that the Phase-One trade deal requiring China to purchase $200 billion worth of U.S. goods was “under review” along with the rest of the U.S. posture toward Beijing.
U.S. Steel Presses For Section 232 Tariff Extensions
In an earnings call with Wall Street analysts late last month, U.S. Steel CEO David Burritt reiterated earlier comments that the Section 232 tariffs on steel imports to the U.S. need to continue.
According to a transcript of the call Burritt noted that “If we learned anything from the pandemic, you've got to have a resilient supply chain, and that means (steel) mined, melted, and made in the good old U.S.A.”
“It’s a bit of a no-brainer you wouldn’t take 232 off, especially when you know that we can supply most of the customers’ needs from a U.S. manufacturing base”
In a letter to President-elect Biden just after the new year, the American Iron and Steel Institute, the Steel Manufacturers Association, the United Steelworkers union, the Committee on Pipe and Tube Imports and the American Institute of Steel Construction urged keeping the 25% tariffs on steel imports imposed in 2018 to ensure the viability of domestic steel production.
The groups said that excess global steelmaking capacity, already 700 million tons above demand, was expected to grow further as China, Vietnam, Turkey and other countries add production. Steel exports from South Korea, Russia, Ukraine and Indonesia also continue to increase, according to the groups.
Candidate Biden told the United Steelworkers last May that he would keep the Section 232 tariffs in place until a global solution to excess production capacity and subsidies can be negotiated. Since then, President Biden has said he will not make any changes to tariffs until after he consults with U.S. allies.
FULL Calendar Puts MTB and GSP on Back Burner
A COVID relief bill requiring heavy negotiation between the two parties is squeezing the floor calendars of both Chambers of Congress. Add to that a second impeachment trial in the Senate, and the timing for reconsideration of the Miscellaneous Tariff Bill (MTB) and the General System of Preferences (GSP) is up in the air.
Further, changes in Committee Chairs in the Senate means bills may have to be reconfigured to move forward.
In the past, lapses in GSP have almost always been covered by retroactive action in Congress, meaning importers should be able to recover duties paid until GSP is reauthorized.
The same is not always true for MTB, so companies with provisions may not be able to count on recovery of duties paid if and when a new MTB is passed.
U.S. Ban on All Cotton From Xinjiang Roils Supply Chains
U.S. Customs and Border Protection (CBP) announced a sweeping ban of cotton and tomato imports from China’s Xinjiang Uyghur Autonomous Region effective January 13, 2021.
CBP issued the Withhold Release Order (WRO) against cotton products and tomato products produced in Xinjiang based on information it said reasonably indicates the use of forced labor to produce the items.
The WRO applies to cotton and tomato products originating in the Xinjiang region and to all products made in whole or in part using the subject cotton or tomatoes, regardless of where the downstream products are produced. These products include apparel, textiles, tomato seeds, canned tomatoes, tomato sauce, and other goods made with cotton and tomatoes.
The list of products from China subject to WRO’s may grow to include solar panels and other merchandise as investigations into China’s use of forced labor expand.
Many importers are having difficulty with the sudden need to trace the raw material sources of the products they import. This has made it difficult for importers to predict if their products will be subject to the WRO, and difficult to understand how and when to gain release of merchandise that has been erroneously detained.
Further, it is unclear how to handle merchandise subject to the WRO that has already arrived on U.S. soil, but is no longer eligible for entry.
This is the fourth WRO that CBP has issued since the beginning of Fiscal Year 2021, and the second on products originating in Xinjiang.
According to a report by the consultancy Horizon Advisory, Xinjiang’s rising solar energy technology sector is connected to a broad program of assigned labor in China, including methods that fit well-documented patterns of forced labor.
Despite China’s good behavior with respect to farm goods purchases, such findings of the use of slavery in multiple product sectors will make it difficult for the Biden administration to relax any of the punitive tariffs in place on Chinese merchandise imported into the United States.
Solar panels could be the next critical material to face Withhold Release Orders by CBP upon arrival into the United States.
Major solar companies including GCL-Poly, East Hope Group, Daqo New Energy, Xinte Energy and Jinko Solar are named in the Horizon Advisory report as bearing signs of using some forced labor.
In a statement, a representative for the Chinese Embassy in Washington called forced labor in Xinjiang “a rumor created by a few anti-China media and organizations,” adding that all workers in Xinjiang enter into contracts in accordance with Chinese labor law. “There is no such thing as ‘forced labor,’” the representative said.
Together, the solar companies named in the report supply more than a third of the world’s polysilicon, so a WRO on such products would be a major disruption of the global supply chain for solar energy products.
FTZ Board Activity
- JJS Transportation and Distribution Co., Inc. received approval to operate its facility in Valley Stream, New York as Subzone 37F. MORE
- Rivian Automotive, LLC submitted a notification of proposed production activity for electric vehicles and components within FTZ 114 in Normal, Illinois. MORE
- OFS Fitel, LLC received authorization of production activity for optical fiber products within FTZ 26 in Carrollton, Georgia subject to limitations. Glass fiber must be admitted in privileged foreign status, and aramid yarn must be admitted in domestic status. MORE
- Volkswagen Group of America Chattanooga Operations, LLC received authorization of production activity for additional components of passenger motor vehicles within FTZ 134 in Chattanooga, Tennessee. MORE
- Economic Development Council, Inc. submitted an application to reorganize FTZ 114 under the alternative site framework in Peoria, Illinois. MORE
- Robert Bosch Tool Corporation received approval to operate its facility in West Memphis, Arkansas as Subzone 273A. MORE
- Coating Place, Inc. submitted an application for subzone status for its facility within FTZ 266 in Verona, Wisconsin. MORE
- Baxter Healthcare Corporation submitted an application for subzone status for its facility within FTZ 262 in Byhalia, Mississippi. MORE
- Lam Research Corporation received approval to expand Subzone 18F in Fremont, California. MORE
- Teijin Carbon Fibers, Inc. received an extension on the rebuttal comment period for its application for production authority within FTZ 38 in Spartanburg County, South Carolina. MORE
- BMW Manufacturing Company, LLC submitted a notification of proposed production activity for additional components of passenger motor vehicles within FTZ 38 in Charleston, South Carolina. MORE
Back To Business:
It was QUITE the month in your nation’s capital, capped off with a frosty blanket of snow and ice. Before that heavy precipitation made your Nation’s Capital look angelic, however, there was a storming of the Capitol, a contested electoral college confirmation, and a vote in the House that impeached a President of the United States for a historic second time.
The bruising winter storm was effective in briefly reorienting the DC narrative. An interesting effect of the pandemic is that even big storms like this one did not create the type of apoplexy that would have consumed DC just a few short years ago. Schools, offices, and agencies all know how to work from home now, and pivoting to remote work just isn’t the same news story around here anymore. With everything January threw at us now in the rear-view mirror, it is time to get back to business.
While the pandemic and the vaccine rollout continue to drive Congressional activity, the change in executive administration is already changing important conversations surrounding international trade, as you will see below.