FTZ’ine May 2020
May 5, 2020
FTZ’ine July 2020
July 1, 2020
Growing Grip of The Pandemic
The impact of the coronavirus has gotten deeper and is affecting trade in ways that could not have been predicted at the outset of the pandemic. Taiwan and Hong Kong have now become flash points in the trade dispute between the United States and China and tensions continue to escalate.
Rapidly growing unemployment is forcing companies to try and predict how consumer patterns will change and over what time frame. Businesses from restaurants to real estate are estimating changes to their demand patterns that are likely to be permanent. It’s a great time to be in the plexiglass business, but not an airport manager. Keep reading to stay in touch with all the impacts current events have on trade and the FTZ industry.
The FTZine staff hopes all will be well, and be vigilant.
Top Story: Trade Braces For Hong Kong Impact
Just last night Beijing again warned of new retaliation measures after President Donald Trump announced restrictions on Chinese students in the US. It was the administration’s latest move to protest a new national security legislation in Hong Kong.
"Any words and actions that harm the interests of China will be met with counter-attacks on the Chinese side," said foreign ministry spokesman Zhao Lijian. The President had already threatened to strip Hong Kong's special privileges with the US, which would then subject Hong Kong imports to the Section 301 duties currently in place only for mainland China, not Hong Kong or Taiwan.
But China reacted angrily to the moves saying it was "detrimental to both sides".
Taiwan's parliament has backed a plan to offer sanctuary to people who want to flee Hong Kong, but China warned the island not to get involved. Should Taiwan become directly entangled, the dispute could rapidly escalate on the world stage.
Under US legislation passed last year to support Hong Kong's anti-government protesters, the Trump administration must certify that the city still enjoys the freedoms promised by Beijing in 1997.
On Wednesday of last week, Secretary of State Pompeo told Congress that Hong Kong no longer merited that special treatment under US law, potentially paving the way for it to be stripped of trading privileges, including lower tariffs than mainland China.
Beijing said its new national security legislation will address secession, subversion, terrorism and foreign interference in Hong Kong, but Australia, Canada and the EU have criticized the security law and its implications for the former British territory. UK Foreign Secretary Dominic Raab said the UK would not turn a blind eye.
Hong Kong was handed back to China from British control in 1997, but under a unique agreement. Hong Kong's autonomy is guaranteed by that agreement, and the city enjoys some freedoms - of the press and association - unseen in mainland China.
Last week, Chinese Foreign Ministry spokesperson Zhao Lijian urged other countries to stop interfering in the matter.
"We will take necessary measures to resolutely counter the wrong acts of external forces interfering in Hong Kong affairs", he said.
Tech Tip
Did you experience a delay in acceptance of your cargo release filings in May? You’re not alone – it was a system-wide processing delay in ACE, CBP’s filing processing system. And the cause may surprise you.
In early May, CBP experienced a larger than anticipated surge in the number of Section 321 (Entry Type 86) filings. This is what brought cargo release to a slow grind systemwide.
CBP is already processing roughly 1.5 million Type 86 entries per day in their pilot of a new informal entry type to report shipments valued less than $800. This entry type is important because it paves the way for collecting necessary PGA and other previously unreported data for these shipments that had been entered using only manifest data before now. By making the process electronic they also broadened the entities able to file the so called de minimus entries, leading to a surge in volume
This entry type is not currently in use by FTZs, so you may be wondering why we are talking about it in the FTZ’ine. It goes to show how interrelated all processing by Customs has become in ACE and how any new functionality or data collection can impact everyone. Since this is only a pilot, it is likely that brokers and filers are only starting to process the volume that can be expected later when electronic filing becomes mandatory. This latest slow down came when several air carriers came on board at the same time.
As more filers come online, we can expect to see continued impact to all ACE data processing. Hopefully, the trade initiative to drive Section 321 access for FTZs will be successful to take advantage of this fast-growing segment of e-commerce.
To learn more about these efforts by the National Association of Foreign-Trade Zones, contact our Sr. Vice President and Vice Chair of the association, Melissa Irmen at Melissa.Irmen@iscm.co.
Coronavirus
The Covid-19 outbreak continues to severely affect international trade, creating a negative global economic outlook. “This is a crisis like no other,” Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF) warned. “Never in the history of the IMF have we witnessed the world economy coming to a standstill,” she said. “It is way worse than the global financial crisis.”
Georgieva’s comments are supported by American employment data: more than 40 million have thus far filed jobless claims and unemployment is in record territory at over 20%.
While the debate over how and when to reopen the U.S. economy, Nordstrom, the top-performing department store in the United States, said on Thursday that its net sales fell 40 percent to $2 billion in the first quarter, and that it posted a net loss of $521 million. About 40 percent of Nordstrom locations are now open but the company plans to permanently close 16 of its 116 full-line stores.
American and Delta Air Lines have begun to trim staff through buyouts to employees. Ports and airports are operating but struggling with a drastic loss in revenue that may take years to recoup. The Port of Los Angeles, the nation’s largest container port, was reported to predict a 25 percent fall in activity compared to the same period last year.
Before the pandemic, American had 130,000 employees and Delta had 90,000. As these bellwether companies and others shed employees, the companies may recover, but the impact to the consumer-led U.S. economy will just be beginning as those job losses affect spending patterns.
Uncertainty is a big hurdle for businesses trying to plan and commit financial and human resources to specific projects.
Demand for many commodities, including petroleum, has been falling rapidly, and this will also create a balance of payments problems for countries in Latin America and Africa who rely on exports of these commodities to finance their imports. If the 2008 financial crisis is a precursor, those currencies will devalue and these lesser-developed countries will have difficulties purchasing products and services.
Train Your Way
Training should be as flexible as the working arrangements we find ourselves in today. At ISCM, we believe you should have Your Training Your Way!
Training doesn’t have to be one-size-fits-all. Contact ISCM to learn more about getting Your Training Your Way today!
Major Economies In Recession
According to the Japanese Cabinet Office, Japan’s economy has officially entered a recession based on new economic data released last week. Seasonally adjusted real gross domestic product contracted by 3.4 percent between January and March 2020.
The new Japanese data showed that all major indicators of economic health had taken a hit, with production, exports, and consumer spending all down for the first quarter of the year. The second quarter, when the effects of the virus intensified, is expected to be worse. Japanese companies are major users of foreign-trade zones.
Japan was last in a recession in late 2015 and the new recession is expected to exact a heavy cost on Japanese businesses and consumers. Although the world’s third-largest economy shrank an annualized 3.4%, it was not as bad as the world’s second-largest economy.
China, where the virus first spread, shrank 9.8% last quarter on a non-annualized basis from the previous three months. That translates into a drop of close to 40% in terms comparable with Japan’s.
The U.S. economy contracted 4.8% in the first three months of the year, but is expected to shrink more than 30% this quarter in annualized terms. Canada is seen shedding more than 40% of GDP.
US Land Borders Remain Closed to Non-Essential Traffic
The U.S., Canada and Mexico will contiue to keep their shared borders closed to non-essential traffic in June.
Chad Wolf, the acting Secretary of Homeland Security, announced last week that the U.S.-Canada and U.S.-Mexico land border closures have been extended until June 22.
Canada's Prime Minister Justin Trudeau held a press conference, saying the extension of the closure was a mutual agreement between the United States and Canada. Canada sends 75% of its exports to the U.S. and about 18% of American exports go to Canada. The U.S.-Canada border is world’s longest between two nations.
“This will keep people in both of our countries safe.” Trudeau said.
FTZ Board Activity
- Amgen Manufacturing Limited submitted a notification of proposed production activity for pharmaceuticals within FTZ 7 in Juncos, Puerto Rico. MORE
- The Arizona Regional Economic Development Foundation submitted an application for the expansion of its service area under the alternative site framework within FTZ 139 in Sierra Vista, Arizona. MORE
- Golden Pass LNG Terminal LLC submitted a notification of proposed production activity for liquified natural gas processing within FTZ 116 in Port Arthur, Texas. MORE
- Janssen Pharmaceuticals Inc. submitted a notification of proposed production activity for pharmaceutical products within FTZ 26 in Athens, Georgia. MORE
- Golden Pass LNG Terminal LLC submitted an application for subzone status for its facility within FTZ 116 in Port Arthur, Texas. MORE
- Cheniere Energy, Inc. received approval for subzone status for its new facility as subzone 122X in Portland, Texas. MORE
- CoLinx, LLC submitted a notification of proposed production activity for tapered roller bearing unit and gearhead kitting within FTZ 148 in Crossville, Tennessee. MORE
- LiCAP Technologies, Inc. submitted a notification of proposed production activity for electrodes within FTZ 143 in Sacramento, California. MORE
- Puma Energy Caribe, LLC submitted an application for the expansion of subzone 7F of FTZ 7 in Bayamon and Guaynabo, Puerto Rico. MORE
- Greater Miami Foreign-Trade Zone, Inc. received approval to expand the alternative site framework service area of FTZ #32 to include all of Miami-Dade County in Miami, Florida. MORE
- LiCAP Technologies submitted an application for subzone status for its new facility in Sacramento, California. MORE
- Rohr, Inc. submitted a notification of proposed production activity for aircraft engine parts within FTZ 183 in San Marcos, Texas. MORE
- Rohr, Inc. submitted a notification of proposed production activity for aircraft engine parts within FTZ 82 in Foley and Loxley, Alabama. MORE
- Andersen Regional Manufacturing, Inc. received authorization of production activity for windows for residential and commercial buildings within FTZ 277 in Goodyear, Arizona. MORE
- PPC Broadband, Inc. received authorization of production activity for hardline coaxial cables within FTZ 90 in Dewitt, New York. MORE
- MTD Consumer Group Inc. received approval of production activity with rare quantity restrictions for textile grass-catcher bags within FTZ 158 in Verona, Mississippi. MORE
- Mitsubishi Electric Automotive America, Inc. received approval for subzone status for its new facility as subzone 47F in Maysville, Kentucky. MORE
- Rauch North America, Inc. submitted a notification of proposed production activity for non-alcoholic beverages within FTZ 277 in Waddell, Arizona. MORE
Growing Grip of The Pandemic –
The impact of the coronavirus has gotten deeper and is affecting trade in ways that could not have been predicted at the outset of the pandemic. Taiwan and Hong Kong have now become flash points in the trade dispute between the United States and China and tensions continue to escalate.
Rapidly growing unemployment is forcing companies to try and predict how consumer patterns will change and over what time frame. Businesses from restaurants to real estate are estimating changes to their demand patterns that are likely to be permanent. It’s a great time to be in the plexiglass business, but not to be an airport manager. Keep reading to stay in touch with all the impacts current events have on trade and the FTZ industry.
The FTZine staff hopes all will be well, and be vigilant.