FTZ’ine June 2023

FTZ’ine August 2023

July 31, 2023

FTZ’ine July 2023

Done Deal

FTZ users and operators cheered the news last month of a tentative contract between the ILWU and PMA to cover U.S. West Coast port workers. Ratification by the membership is still required, and is expected in late July. A yes vote, combined with other global events, will start to reorient supply chains as west coast unloading becomes a reliable option again.

Europe officially slipped into recession in 2023 as the war in Ukraine drags on and inflation remains difficult to control. The U.S. has so far not reached that threshold, but there are signs of a slowdown and the Fed is expecting to keep raising interest rates here too.

The Foreign-Trade Zones Board opened a public comment period on proposed changes to its regulations. The driving force behind the update is to allow for electronic payment, but there are several other minor modifications to look at as well.

Washington rolled out the red carpet last month for Prime Minister Modi of India. Trade was at the forefront of the agenda during meetings with President Biden, as the U.S. courts trading partners capable of helping to reduce supply chain dependence on China.

The FTZine staff wishes each and every reader a safe and enjoyable 4th of July weekend.

Top Story: 70 Million Clams

That’s just the bonus.

Which averages out to just over $3k for each of the 22,000 members of the International Longshore and Warehouse Union (ILWU).

According to the Wall Street Journal (WSJ), the six-year contract agreement reached between the ILWU and the Pacific Maritime Association (PMA) promises a 32% pay increase on top of that ‘pandemic’ bonus to each ILWU member. Dockworkers will see a 10% pay increase of $4.62 an hour in the first year, which changes to an additional $2 an hour in each year thereafter.

The deal has not yet been ratified by membership, and no details were released with respect to progress on automation, of keen interest to the foreign-trade zone industry.

It’s a six-year contract, but since it is retroactive to the end of the last one, in July, 2022, the new one will only last five more years.

Both the ILWU, who represents more than 22,000 dockworkers, alongside the PMA, who represents employers at 29 ports from California to Washington state, have declined to disclose further details of the agreement.

Port disruptions in Los Angeles, Long Beach, Oakland, and most recently, Seattle had added pressure for White House intervention to help expedite negotiations and broker an agreement. Union Pacific had to temporarily pause its ramp activity at California ports due to the disruptions.

The Biden Administration sent the new Acting Labor Secretary, Julie Su, to monitor contract talks while negotiations completed.

Tech Tip: More FTZ Functionality Coming to Modernized ACE Portal

U.S. Customs and Border Protection (CBP) began gradually deploying Phase 4 of the Automated Commercial Environment (ACE) Portal Modernization in June.

Phase 4 changes will continue the migration of ACE functionality from the ‘legacy’ application to the ‘modernized’ portal, and CBP expects to complete this latest migration by September.

Typically, functionality migrated to the modernized ACE Portal remains available in parallel in the legacy ACE application for a period of time. However, in this rollout, access to some functions will be removed.

Account create and edit functionality added in this rollout will allow FTZ and other facility users to make changes in the details, contacts, or address tabs in their account view. Remember, to properly access the new modernized portal functionality, you should be using the new ACE Portal URL as well: https://ace.cbp.gov

Trade Account Owner (TAO) users will be able to provision other trade users with account access, grant cross-account access, and merge accounts.

If you have questions or comments about managing your Portal account, or maximizing its functionality, ask us at Info@iscm.co.

Europe Officially In Recession Now

Revised economic data from Europe showed gross domestic product (GDP) fell by 0.1% in the fourth quarter of 2022 and 0.4% in the first quarter of 2023. Two consecutive quarters of negative growth generally defines a recession.

Surging inflation following the war in Ukraine hit the cost of living in the E.U. which has weighed down consumer spending.

The U.K. avoided entering a recession at the start of the year, while growth in the US also remained positive. One bright note is that GDP volumes in the E.U. are more than 2% higher than the level recorded in the final quarter of 2019 before the Covid pandemic struck – unlike in the U.K., where the economy remains 0.5% smaller.

Households across Europe have come under pressure, triggered a sharp increase in gas prices, fueling the highest rates of inflation since the foundation of the single-currency bloc.

Several countries were in recession or came close to recording two consecutive quarters of decline, including Germany, the E.U.’s largest economy. France recorded close to zero growth, with flatlining growth in the fourth quarter and a modest increase of 0.2% in the first three months of 2023.

Growth across the 20-country single currency area was, however, also dragged down by Ireland, where GDP fell by 4.6% in the first quarter of this year.

Inflation across Europe has fallen sharply in recent months, with the annual rate cooling from a peak of 10.6% last autumn to reach 6.1% in May – fueling speculation that the European Central Bank could be near the end of its cycle of interest rate increases to tame rapid growth in prices.

Will ILWU Contract Reorient FTZ Supply Chains?

At the beginning of the month, foreign-trade zone users and other importers continued to choose east coast and gulf coast ports due to the protracted contract discussions between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA).

Current difficulties in getting to the U.S. east coast from Asia may accelerate a swing back to west coast unloading for ocean shipments, now that the ILWU and PMA have a deal.

Drought-induced declines in the water level at the Gatun Lake, which supplies the Panama Canal with fresh water, have resulted in surcharges and weight and draft limits for vessels traversing the canal.

Unusual dust storms have impacted transit through the Suez Canal, adding uncertainty to that route to the east coast.

And the ILWU in Canada, a separate union that covers all the western ports north of the border, has authorized a strike at any moment, threatening shipments that route through our northern trading partner.

With Panama, Suez, and now Canadian routes less attractive, the U.S. west coast looks poised for a return to the center of many FTZ supply chains.

The Panama Canal Authority (PCA) administrator, Ricaurte Vásquez, reported that the canal experienced its driest May since 1950.

Should water levels continue to drop, the canal, which underwent an expansion to accommodate for larger vessels in 2016, may be forced to limit the daily number of vessels in transit.

The PCA has already reduced the canal’s draft limit to 44 feet from its standard 50 feet requirement, with ultralarge Panamax ships restricted to 39.5 feet of depth. That restricts the weight of containers the ships may carry.

Larger containerships will have to either reduce their container load or distribute their cargo among more ships, reducing their efficiency. Ocean carriers have already added fees to address increased operational costs resulting from the new draft limits.

Further north, 99.24% of ILWU Canada voted in favor of supporting a strike, which can now happen at any time. Just as in the U.S., negotiations between the British Maritime Employers Association and ILWU Canada Have been difficult.

Which means that in an odd twist, the west coast may quickly become the best option for U.S.-bound freight from Asia.

Foreign-Trade Zones Board Proposes New Proceedings

The Foreign-Trade Zones Board (FTZB) at the U.S. Department of Commerce has issued a written proposal to amend its regulations at 15 CFR §400. The modifications, as proposed, would allow for additional electronic fee payment options and make other minor clarifications and corrections to the FTZB regulatory language.

While the Board has begun accepting “eChecks”, the revisions proposed would allow for the submission of additional forms of electronic payment, including pay.gov. Adopting the language would make almost all FTZB application types eligible to be paper-free.

This proposed action will also move the existing requirement to admit merchandise subject to AD/CVD actions in “Privileged foreign” status to the “General conditions, prohibitions and restrictions applicable to authorized zones” section. This move of the existing language is intended to clarify that the provision applies to all merchandise that is admitted to FTZs, a constant concern of public commenters on production applications.

Written comments must be received no later than July 10, 2023 in order to be considered by the Board before the regulations are finalized.

The proposed edits will allow for additional flexibility on the submission of application fees and otherwise clarify existing language and practices. The proposed edits are not expected to impact the number of requests submitted to the FTZ Board or the operation and management of existing zones.

All comments must be submitted through the Federal eRulemaking Portal at https://www.regulations.gov .

Trade Tensions With China Put Spotlight On India

Indian Prime Minister Narendra Modi met President Joe Biden last month during his first state visit to the U.S.

Key agenda items were strengthening of defense ties in an unsettled world, partnerships in technology, and India’s role in the Indo-Pacific.

While in the U.S., Prime Minister Modi also met the CEOs of Tesla, Apple, Google, and Microsoft.

Ties between India and the U.S. could be at a turning point. The U.S. removed India from the list of countries benefiting from the Generalized System of Preferences (GSP), but now finds itself looking for a trading partner to supplant China in U.S. supply chains.

India has also not been shy about expanding its purchases of Russian oil, which not only protracts the conflict in Ukraine, but gives Indian companies an unfair advantage over American competitors that are shut off from low-cost Russian petroleum supplies.

President Biden has only hosted two state visits during his presidency, the first with his French counterpart Emmanuel Macron in December 2022, and the second with South Korea’s president Yoon Suk Yeol this past April.

India and Russia have long shared a steadfast relationship, with India relying heavily on the Kremlin for weapons in addition to oil.

The South Asian nation is the world’s largest buyer of Russian arms, accounting for approximately 20% of Russia’s outside sales, Reuters has reported.

However, because of the war in Ukraine, Russia has not been able to send critical defense weapons it had promised India, pushing the Indian military to look to others — such as the U.S. — for supplies.

Russian oil currently accounts for almost 20% of India’s annual crude imports, a significant increase from just 2% in 2021, Reuters reported.

Tensions between India and China over the disputed border in the Himalayan region has been ongoing since the 1950s with no end in sight. Twenty Indian soldiers were killed in June 2020 in hand-to-hand combat with Chinese troops, followed by another clash in December 2022.

FTZ Staff Activity

FTZ Board Staff processed a Minor Boundary Modification (S-92-2023) in FTZ 22AE on behalf of Tele-Fonika Cable Americas Corporation, Lockport, IL on May 30, 2023
FTZ Board Staff processed a Minor Boundary Modification (S-93-2023) in FTZ 22 on behalf of Flexport International, LLC, Franklin Park, IL on May 30, 2023
FTZ Board Staff processed a Minor Boundary Modification (S-94-2023) in FTZ 147 on behalf of PolyVisions Holdings, Inc., Manchester, PA on June 1, 2023
FTZ Board Staff processed a Minor Boundary Modification (S-95-2023) in FTZ 75S on behalf of Rinchem Company, LLC, Surprise, AZ on June 1, 2023
FTZ Board Staff processed a Minor Boundary Modification (S-96-2023) in FTZ 84 on behalf of KMP USA, LLC, Katy, TX on June 5, 2023
FTZ Board Staff processed a Minor Boundary Modification (S-97-2023) in FTZ 50 on behalf of Starship Logistics, LLC, Carson, CA on June 6, 2023
FTZ Board Staff processed a Minor Boundary Modification (S-98-2023) in FTZ 26 on behalf of TPE Acquisition LLC dba Whiplash, Locust Grove, GA on June 8, 2023
FTZ Board Staff processed a Minor Boundary Modification (S-99-2023) in FTZ 244 on behalf of Delta Children’s Product Corporation, Perris, CA on June 12, 2023
FTZ Board Staff processed a Minor Boundary Modification (S-100-2023) in FTZ 230J on behalf of Gildan Activewear (Eden) Inc., Reidsville, NC on June 14, 2023
FTZ Board Staff processed a Minor Boundary Modification (S-101-2023) in FTZ 121 on behalf of GE Vernova Operations LLC, Schenectady, NY on June 20, 2023

Foreign-Trade Zone Board Activity

BMW Manufacturing Company, LLC received authorization of production activity for additional components of passenger motor vehicles within Foreign-Trade Zone 38 in Spartanburg, South Carolina. MORE
LEGO Manufacturing Richmond, Inc. submitted a notification of proposed production activity for LEGO® bricks and toy sets within Foreign-Trade Zone 207 in Chester and Colonial Heights, Virginia. MORE
Bollore Logistics USA, Inc. received approval for subzone status for its facility within Foreign-Trade Zone 265 in Conroe, Texas. MORE
Derecktor Fort Pierce, LLC submitted a notification of proposed production activity for refurbished water vessels and hulls within Foreign-Trade Zone 218 in Fort Pierce, Florida. MORE
Puerto Rico Steel Products Corporation submitted a notification of proposed production activity for construction and fencing products within Foreign-Trade Zone 163 in Coto Laurel, Puerto Rico. MORE
The Land of Sky Regional Council has established the new Foreign-Trade Zone 301 in Western North Carolina. MORE
GE Vernova Operations, LLC submitted a notification of proposed production activity for turbines and generators within Foreign-Trade Zone 121 in Schenectady, New York. MORE
Lenox Corporation submitted a notification of proposed production activity for kitchenware, tableware, home décor sets within Foreign-Trade Zone 255 in Hagerstown, Maryland. MORE