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December 2017 FTZine
December 1, 2017
April 2018
April 5, 2018

March 2018

March 2018

Top Story: Safeguard Action Reaches Into US Supply Chains

Earlier this year President Trump approved hefty tariffs on residential washing machines suggested by U.S. Trade Representative Robert Lighthizer. While some action was expected, the industry was surprised by a move to extend the high tariffs to washing machines produced in the United States.

This move to place tariffs on components had the effect of “moving the goal posts” and even apply to washers produced in Foreign-Trade Zones. Producers such as Samsung had committed hundreds of millions of dollars to build U.S. plants. Samsung says it will use imported parts until its factory runs at full capacity and becomes ready to produce key parts, expected to be by the end of the year. Until that happens, the company will pay hefty tariffs on its key components.

The tariffs exceeded the harshest recommendations from ITC members, with a 20 percent tariff set on the first 1.2 million imported large residential washers in the first year, and a 50 percent tariff on additional imports. Washington also imposed a 50 percent tariff on imported key parts in excess of 50,000 units in the first year, a move Samsung’s South Carolina plant manager fears could “cut us off at the knees”.

“Although we are installing production equipment and we are committed to producing the major parts in-house, there will be a transition period during which importing parts will be necessary to successfully launch this facility,” Tony Fraley, Samsung’s plant manager, told the commission in October.

The safeguard issue is set to top the agenda when government officials from the two countries meet later this week to discuss trade issues. South Korea has already filed challenges and demands for compensation at the World Trade Organization.

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Historic Steel and Aluminum Action Looms

Earlier this month the Trump Administration declared imports of steel and aluminum from China and other nations to be a threat to national security, setting the stage for President Trump to impose punitive tariffs on both commodities. In a report released just last week, the Commerce Department said a recent influx of foreign metals pose a risk to national security by threatening the viability of American defense manufacturers who require continuous access to supplies of those metals.

Possible action includes a dramatic 24% on steel import from all countries. These recommendations by Commerce give the President authority to decide the scope and severity of any trade action by mid April. The President has previously expressed his belief that tariffs on steel and solar cell imports are crucial to protecting American companies. Industry remains concerned that any attempt to create barriers would prompt swift retaliation from U.S. trading partners, including China and the European Union, which have already warned of reciprocal action in response to any action.

Secretary of Commerce Wilbur Ross outline three alternatives for the President to choose from: a broad 24% tariff on all steel imports, or a targeted 53% tariff on steel products from 12 countries, including China, Brazil, India, South Korea, Vietnam. Under this option, imports from all other countries would be limited to the level they imported in 2017. The Secretary also proposed an option that included no tariffs, but would limit steel imports from all countries to roughly 2/3 the level of last year.

For aluminum, the Secretary again outlined three options, including a flat 7.7% tariff on imports from all countries, or a targeted 23.6% tariff on aluminum from China, Hong Kong China Venezuela, or Vietnam. The third option involves putting into affect quotas to limit aluminum imports to lower levels them were shipped to the United States last year. These options are suggestions, and are not binding to the President, leading to broad speculation on how he might act before the April deadline.

March 2018
March 2018

TPP Talk Gains Momentum

The Trans-Pacific Partnership is once again getting positive coverage from the Trump administration, and this time it came from a most unusual source. Last week, U.S. Treasury Secretary Steven Mnuchin said that the United States is disgussing re-joining the 12-nation trade agreement.

Secretary Mnuchin, speaking at an investment summit meeting sponsored by the U.S. Chamber of Commerce, said that renegotiating the trade agreement was on the table and that he had been in talks with other countries about what it would take for the United States to reverse course on this 12 country agreement.

“I’ve met with several of my counterparts and other people and we have begun to have very high-level conversations about TPP” Mr. Mnuchin said, adding that President Trump still prefers one-on-one trade agreements. “It’s not a priority at the moment, but it something the President will consider.”

Last month we reported that the president had open the door to taking another look at TPP during the World Economic Forum in Davos, Switzerland. It is not clear why the administration would suddenly be sending trade policy signals through Secretary Mnuchin, whereas in the past Secretary of Commerce Ross or United States Trade Representative Lighthizer have taken the lead in trade policy and negotiations.

It remains to be seen how long Secretary Mnuchin my play an active role in trade negotiations, and whether the Trump administration will continue to pursue eliminating import tariffs through a new free-trade agreement, while at the same time taking a dramatically hard line with respect to import tariffs on items such as steel, aluminum, washing machines, and solar panels.

Commerce

U.S. Foreign-Trade Zone Board Activity

  • Plaza Warehousing & Realty Corporation received approval for subzone status subject to the existing activation limit of FTZ 61 in Caguas, Puerto Rico. LEARN MORE
  • BGM America, Inc. received approval for limited proposed production of Sailboats, Cabin Cruiser Powerboats, and Outboard Motor Boats, concerning a restriction requiring that a significant list of components be admitted to the subzone in privileged foreign status in their facility within Subzone 127A, in Marion, South Carolina. LEARN MORE
  • The Rhode Island Commerce Corporation, grantee of FTZ 105, requested the authority to reorganize zone 105 under the alternative site framework (ASF) adopted by the FTZ Board. LEARN MORE
  • The Madawaska Foreign-Trade Zone Corporation, grantee of FTZ 179, requested the authority to reorganize the zone under the alternative site framework (ASF) adopted by the FTZ Board. LEARN MORE
  •  Fuling Plastic USA, Inc. received approval for proposed production of Disposable Plastic and Paper Service Ware and Kitchenware Products in its facility within FTZ Subzone 272C, in Allentown, Pennsylvania. LEARN MORE
  • Plaza Warehousing & Realty Corporation was granted approval for the creation of FTZ sub-zone 61T in Caguas, Puerto Rico. LEARN MORE
  • Valeo North America, Inc. received approval for proposed production of Automotive Clutch and Compressor Assemblies for its facility within Subzone 47D, in Winchester, Kentucky. LEARN MORE
  • The application by Valeo North America, Inc. to establish Subzone 47D was approved for in Winchester, Kentucky. LEARN MORE
  • The application to establish Subzone 144C by Orgill, Inc., was approved in FTZ 144 in Tifton, Georgia. LEARN MORE
  • Lam Research Corporation (Lam) has requested expanded subzone status for FTZ 18. Subzone 18F consists of 13 sites in Fremont and Livermore, located in Tracy, California. LEARN MORE
  • Hyster-Yale Group, Inc. has requested an expansion of Subzone 98D for its facility in Sulligent, Alabama. LEARN MORE
  • Swagelok Company (Swagelok) has submitted a notification of proposed production activity for their facility in FTZ 40 located in Solon, Willoughby Hills, Highland Heights, and Strongsville, Ohio. LEARN MORE
  • E.R. Squibb and Sons, LLC has requested the expansion of Subzone 49C for its facility located in New Brunswick, New Jersey.  LEARN MORE
  • Quad/Graphics, Inc.—Chemical Research\Technology (Quad/Graphics—C\RT), has submitted a notice for proposed production of Offset and Gravure Publication Printing Ink for their facility in FTZ 41 located in Hartford and Sussex, Wisconsin. LEARN MORE
  • Cummins, Inc. has received approval for proposed production of Gas and Diesel Engines in their facilities within Subzone 23D, in Lakewood and Jamestown, New York. LEARN MORE
  • Estee Lauder Inc. received approval for proposed production of Skin Care, Fragrance, and Cosmetic Products in its facility within FTZ 35, in Bristol and Trevose, Pennsylvania. LEARN MORE

MTB, MTB, Where Art Thou?

Stuck in the Senate, my true love.

Many U.S. manufacturers had pinned hopes of tariff relief on the new process for passing a Miscellaneous Tariff Bill (MTB) in Congress.  The last successful MTB was passed over 8 years ago and expired in 2012.  Since then, the MTB has had a storyline that reads like a Shakespearean tragedy.

The first bill using the new, non-partisan vetting process passed in the House on January 16th of this year, but has yet to be even scheduled for a vote in the Senate.  The FTZine understands this first MTB will not be retroactive, so any tariff relief or reduction in the bill will only go into effect after the President actually signs the legislation.  This has left many manufacturers in a bind for which other duty-relief programs, such as Foreign-Trade Zones, may be the only reliable option.

 

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