FTZ’ine May 2021
May 3, 2021
FTZ’ine July 2021
July 1, 2021
Infrastructure Takes Center Stage
After a bruising battle that scuttled the first version of a $2T infrastructure proposal, the Biden Administration pivoted directly to a new federal budget, keeping its focus firmly on the health of the U.S. economy. With such attention to organizing federal spending to restart growth, little room is available for issues related to international commerce. As such, little has changed with respect to trade policy since we last talked.
China tariffs remain in place and while talks with the Biden Administration and China have just begun, the list of problematic commodities from China has broadened.
There is no timetable, or seemingly any discussion, on a Miscellaneous Tariff Bill or renewal of GSP.
Relations with USMCA partner Canada actually got worse due to a dispute over dairy exports.
CBP has internally agreed that merchandise subject to a WRO could be stored in a Foreign-Trade Zone until a determination is made on the import eligibility of the merchandise. Storage is only permissible with additional security restrictions and approval from the local port.
With this month’s photo of one of Abraham Lincoln’s stovepipe hats (3 out of 7 are known to still exist) we reflect on the first sitting President to give the last full measure of devotion in service to our country. The FTZine staff hopes all our readers enjoyed a long, peaceful, and enjoyable Memorial Day weekend.
Top Story: US Expands Forced Labor Restrictions On China Goods
U.S. – China trade relations continue on a gentle downward slope.
As part of the Phase One trade deal, China agreed that over the next two years, it would buy at least $200 billion more in U.S. goods and services relative to 2017 levels. Chinese purchases of U.S. goods for this year through April are 73% of what they should be to stay on track with the trade agreement, according to estimates from the Peterson Institute for International Economics.
Then in mid-May Secretary of State Antony Blinken told his Australian counterpart that the U.S. “will not leave Australia alone on the field — or maybe I should say ‘alone on the pitch’” in that country’s own pushback against Chinese trade practices.
Finally, just before the holiday weekend the U.S. government blocked imports of seafood from the entire fleet of a Chinese company accused of slave-like conditions on its fishing boats. This latest action adds another industry impacted by severe import restrictions on merchandise from China.
Customs and Border Protection said it will enforce a Withhold Release Order (WRO) on any imports linked to the more than 30 vessels operated by Dalian Ocean Fishing.
Both the State Department and Labor Department have also documented abusive conditions in the Chinese fishing industry, where mostly foreign crews often work 18 to 22 hours per day.
Indonesia's government in May 2020 accused Dalian of “inhuman” treatment of fishermen, with dozens of Indonesians forced to work 18 hours a day for no pay or less than agreed upon. It said the conditions led to illnesses that killed at least three fishermen, whose bodies were cast overboard into the Pacific Ocean.
CBP determined that Dalian's operations, across the fleet, met all 11 criteria for forced labor laid out by the International Labor Organization, including the holding back of wages, inhumane conditions and physical intimidation, said John Leonard, the Acting Executive Assistant Commissioner of CBP’s Office of Trade.
“This was a rather egregious example," Leonard said.
Much of the world’s polysilicon for photovoltaic cells comes from Xinjiang. The U.S. is now weighing sanctions over the alleged use of forced labor in the production of solar panels, possibly expanding the list of WRO-impacted commodities yet again.
A number of trade-related measures are included in the U.S. Innovation and Competition Act (S. 1260) making its way through the Senate, which authorizes sanctions for forced labor and other abuses in China’s Xinjiang Uyghur Autonomous Region.
Senate Finance Committee Chair Ron Wyden, D-Ore., offered an amendment to the bill that requires increased CBP inspection of goods from countries identified to be significant sources of counterfeit goods. While not expected to pass, at least in its current form, the proposed measure certainly reflects Congressional sentiment with respect to expansion of the prohibition on imports of goods made with forced labor.
Tech Tip
Have you been getting notices that Internet Explorer will no longer be supported by Microsoft after June 15, 2022? Maybe you’ve already switched to using Microsoft Edge, or maybe you figure IE’s demise is over a year away so it doesn’t really impact you. If you are a user of CBP’s ACE portal, however, you do want to make sure you are upgrading your browsers.
In April 2020, amid the crush of pandemic closings and virtual office openings, CBP issued CSMS #42259311 – “Deployment of ACE Security Changes will Impact Internet Browser Version Capability”. In this CSMS message, CBP indicated that “While ACE does not explicitly support browsers other than Internet Explorer, CBP is aware that they are used.” In this message were listed the versions of popular browsers that would be required to support ACE reports, but many users still saw portal issues when using browsers other than Internet explorer, particularly in the Accounts view.
In December 2020, CBP issued CSMS #45056897 – “ACE Reports Now Compatible with Additional Web Browsers”. In this brief message, CBP stated, “ACE Reports has been upgraded so that it can now be accessed with additional web browsers, and is therefore no longer restricted to Internet Explorer version 11.”
Both this and the earlier message focused on ACE reports, so ACE portal users still need to check query results, particularly when switching between Account Type View and between Accounts. If you are experiencing erratic results in portal selections, check which browser you are using. Microsoft Edge (and IE until it is discontinued and automatically redirects to Microsoft Edge after June 15, 2022) are still the best browsers to use when interacting with CBP through ACE.
If you have questions regarding ACE, ACE reports and ACE portal functionality, send them to us at Info@iscm.co to learn how ISCM can help.
Supply Chains Give Economy Fits And Starts
Just before the holiday weekend the Department of Commerce confirmed the U.S. economy grew at an impressive annual rate of 6.4% in the first three months of this year.
Federal government stimulus appears to have done its job to jump start the economic recovery. However, reports of broad shortages from semiconductors to building materials threaten the delicate recovery from last year's pandemic-fueled recession.
Ford, which garnered significant coverage for the May announcement of its electric pickup truck, separately reported multiple plant closures and layoffs brought about by a global semiconductor shortage. Ford expects to lose 50% of its second quarter production this year, which will trickle down to parts suppliers in the form of plant shutdowns and layoffs.
The global chip shortage, fueled by pandemic demand for home office computing, and an overall increase in consumer spending, was made worse by a March fire at a Ford semiconductor supplier in Japan, and by semiconductor plant shutdowns in Texas due to the ice storm.
Ford expects the semiconductor shortage “will get worse before it gets better” and cost it more than $2.5 billion in lost profits this year.
Ford has already announced numerous plant shutdowns and shift eliminations so far this year. The Dearborn assembly plant that builds the F-150 pickup truck was shut down for two weeks in April. The Kansas City plant that also builds the F-150 and the Transit cargo van shut down for a month. Its plant in Chicago that assembles the Explorer SUV was shut down for nearly all of April.
The semiconductor shortage that is crushing output in the auto industry will add another ugly element to the economic recovery: inflation.
Used vehicle prices have already spiked some dealers are selling new vehicles over sticker prices to make up for lost unit sales.
Europe Postpones Additional Tariffs On U.S. Exports
Last week the European Union decided to postpone a planned increase in tariffs on U.S. exports that had been set in motion by the Section 232 tariffs on steel and aluminum from the E.U.
With the decision, “we are walking the talk in our efforts to reboot the trans-Atlantic relationship,” EU trade chief Valdis Dombrovskis said when announcing the 27-nation bloc would not automatically increase some tariffs targeting U.S products such as distilled spirits.
“We are creating the space to resolve these issues before the end of the year,” Dombrovskis said.
In a joint statement, both sides said that “to ensure the most constructive environment for these joint efforts, they agreed to avoid changes on these issues that negatively affect bilateral trade.”
“The EU is not a national security threat to the U.S. But the distortions created by global excess capacity -- driven largely by third parties — pose a serious threat to the market-oriented EU and U.S.,” Dombrovskis said.
When the Section 232 tariffs were first imposed, Europe retaliated by raising tariffs on U.S.-made motorcycles, bourbon, peanut butter and jeans, among other items.
U.S. exporters were predictably relieved.
“This news couldn’t come soon enough. Distillers across the United States are breathing a huge sigh of relief after bracing for a 50% tariff on American whiskeys in just a matter of days,” said Chris Swonger, president of the Distilled Spirits Council. He said more tariffs “would have forced many craft distillers out of the EU market,” one of the most lucrative markets in the world.
Withhold Release Order Procedures Continue to Roil Supply Chains
After a series of militant attacks, the Chinese government detained a million or more people in Xinjiang, a major cotton-producing region in China’s northwest. The region is home to the Uighur Muslims and other ethnic groups, and critics accuse the Chinese government of torture, forced sterilization and dispersion of cultural and religious groups beginning in 2017.
Evidence of forced labor comes from people who have left China and government documents, but it is difficult to prove definitively at specific factories since outside parties are unable to investigate freely. Diplomats and journalists traveling independently to Xinjiang are followed, and most residents, wary of getting in trouble, are unwilling to talk critically.
It also makes it difficult to disprove the use of forced labor when U.S. Customs and Border Protection issues a WRO to quarantine merchandise it suspects was produced using coerced labor.
An importer of edible oils from Malaysia is now suing CBP in the hopes of recovering its losses and bringing transparency to the WRO process.
The complaint is based on a CBP detention under a WRO on palm oil and products produced with palm oil made in Malaysia by Sime Darby Plantation. The importer asserts that it provided sufficient documentation to CBP to demonstrate that the detained goods were not produced by Sime Darby and were therefore outside the scope of the WRO. CBP rejected the importer’s claim, stating that the documents were incomplete, and then denied the importer’s protest and excluded the shipment.
The trade is hoping that a court ruling will look beyond the instant case and answer questions including:
Apart from cotton, much of the world’s polysilicon for solar panels comes from Xinjiang.
The world gets 45% of its polysilicon supply from the problematic Xinjiang province. Other parts of China supply another 35%. Only 20% of world solar panel supply comes from the U.S. and other producers.
In response, the U.S. is now weighing sanctions over the alleged use of forced labor in the production of solar panels, which will complicate the Biden administration’s plans to promote renewable energy.
The results of the court case could become more and more important as the use of Withhold Release Orders expands to more and more import sectors. Stay tuned.
Canada Trade Relations Sour With The Milk
Last week U.S. Trade Representative Katherine Tai announced plans to sue Canada over its controversial dairy practices, accusing the country of breaching the US-Mexico-Canada Agreement (USMCA.)
For years, Canada has strictly controlled the production of milk, butter and cheese through supply management – a complex system of production controls and tariffs meant to keep domestic prices stable. Imported products – such as American cheese – are slapped with a 300% levy.
While Canada has announced plans to allow more imports without hefty tariffs, Tai alleged that Canada is still using its complex system of licenses and tariffs to favor Canadian producers rather than products from other countries.
Canada’s trade minister, Mary Ng, said in a statement that she was “disappointed” at the decision and that her government would “protect and defend” the practice of supply management.
Further underscoring those disagreements the Commerce Department just announced it will double the tariffs on softwood lumber used in construction.
West Coast Port Congestion easing, but slowly
The queue waiting for entry into the Ports of Los Angeles and Long Beach was 19 container ships as of last week, compared with 21 the week before, according to officials who monitor marine traffic in San Pedro Bay. The bottleneck has persisted since November, peaking around 40 vessels in early February.
Another 18 container carriers are scheduled to arrive soon, with nine of those expected to drop anchor and wait to be unloaded.
According to the Port of L.A., the average wait for berth space was 6.1 days, compared with 6.6 a week ago, That number peaked at around 8 days in April, but is normally less than 1. Shippers remain concerned that the backlog may not be cleared before import volumes start to surge again in August ahead of the Christmas retail season.
Port of L.A. Executive Director Gene Seroka said in a webcast the influx of ocean freight pushed the ratio of imports to exports to a record 4.3 to 1.
FTZ Board Activity
- Watco Transloading, LLC submitted an application for subzone status for its facilities within FTZ 161 in Parsons, Kansas. MORE
- Cycle Force Group, LLC submitted a notification of proposed production activity for electric and non-electric bicycles within FTZ 107 in Ames, Iowa. MORE
- Celgene Corporation received approval for the expansion of subzone 40I in Eastlake, Ohio. MORE
- Wyeth Pharmaceuticals, LLC submitted a notification of proposed production activity for mRNA bulk drug substance within FTZ 27 in Andover, Massachusetts. MORE
- Volkswagen Group of America Chattanooga Operations, LLC submitted a notification of proposed production activity for additional components of passenger motor vehicles within FTZ 134 in Chattanooga, Tennessee. MORE
- Rivian Automotive, LLC received authorization of limited production activity for electric vehicles and components within FTZ 114 in Normal, Illinois. MORE
- STIHL, Incorporated submitted a notification of proposed production activity for additional components of handheld outdoor power equipment within FTZ 134 in Virginia Beach, Virginia. MORE
- The Economic Development Alliance of St. Clair County submitted an application for the reorganization of FTZ 210 under the Alternative Site Framework in St. Clair County, Michigan. MORE
- Hidalgo County Regional Foreign Trade Zone has received approval for designation as the new Grantee of Foreign-Trade Zone 156 in Hidalgo County, Texas. MORE
- Sheffield Pharmaceuticals, LLC submitted a notification of proposed production activity for Over-the-Counter (OTC) healthcare products within FTZ 208 in New London and Norwich, Connecticut. MORE
- BMW Manufacturing Company, LLC received authorization of production activity for additional components of passenger motor vehicles within FTZ 38 in Spartanburg, South Carolina. MORE
- Piramal Critical Care, Inc. received approval to operate its facility in Linden, New Jersey as Subzone 44N. MORE
- Foreign-Trade Zone 29 received approval to expand a magnet site under the Alternative Site Framework in Louisville, Kentucky. MORE
- Teijin Carbon Fibers, Inc. submitted an amendment to the notification of proposed production activity within FTZ 38 in Spartanburg County, South Carolina. MORE
- Swagelok Company submitted a notification of proposed production activity for finished bar stock within FTZ 33 in Koppel, Pennsylvania. MORE
- AbbVie Ltd. submitted a notification of proposed production activity for additional pharmaceutical products and components within FTZ 7 in Barceloneta, Puerto Rico. MORE
- Woodfield Distribution LLC received approval for the expansion of subzone 49V in Dayton, New Jersey. MORE
Infrastructure Takes Center Stage –
After a bruising battle that scuttled the first version of a $2T infrastructure proposal, the Biden Administration pivoted directly to a new federal budget, keeping its focus firmly on the health of the U.S. economy. With such attention to organizing federal spending to restart growth, little room is available for issues related to international commerce. As such, little has changed with respect to trade policy since we last talked.
China tariffs remain in place and while talks with the Biden Administration and China have just begun, the list of problematic commodities from China has broadened.
There is no timetable, or seemingly any discussion, on a Miscellaneous Tariff Bill or renewal of GSP.
Relations with USMCA partner Canada actually got worse due to a dispute over dairy exports.
CBP has internally agreed that merchandise subject to a WRO could be stored in a Foreign-Trade Zone until a determination is made on the import eligibility of the merchandise. Storage is only permissible with additional security restrictions and approval from the local port. With this month’s photo of one of Abraham Lincoln’s stovepipe hats (3 out of 7 are known to still exist) we reflect on the first sitting President to give the last full measure of devotion in service to our country. The FTZine staff hopes all our readers enjoyed a long, peaceful, and enjoyable Memorial Day weekend.