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FTZ’ine February 2020
February 4, 2020
FTZ’ine April 2020
April 2, 2020

FTZ’ine March 2020

Coronavirus

One word pretty much sums up the news from last month, whether the topic was economics, trade, or politics.

Soccer teams playing to empty stadiums in Europe. Commercial flight cancellations reducing air freight capacity. A 15 year bull market coming to a screeching halt. Factories, especially in China’s Hubei Province, completely closed or struggling to produce without employees who have been quarantined. The affects of the coronavirus have now extended far beyond those who have actually contracted the disease. The new coronavirus named COVID-19 is thought to have been introduced to humans in December at a live wild animal market in the Chinese city of Wuhan. The effects are still unfolding as the virus continues to spread, highlighting the dependence the United States has on its global trading partners.

Globe

Top Story: COVID-19 Impact On Trade Expands

As the United States reported the first death in the country from the coronavirus last week, the total confirmed cases of the disease worldwide climbed to more than 90,000, and over 45,000 people infected have since recovered. At the same time reported deaths from the virus exceed 3,000. That would make the death rate of the coronavirus about 20 times that of the flu in the U.S., according to CDC figures.

Those statistics have led to containment actions that have impacted the flow of global trade. While the virus itself still has little impact on trade, actions to contain it do, and the industry is struggling to predict exactly how severe those restrictions may become as more regions become impacted.

Supply chains to date have been significantly squeezed by the reduction in factory output from areas subject to quarantine, and by the reduction in commercial traffic, especially air traffic, that hampers the flow of goods from affected areas.

The outbreak has become increasingly global and spread to nearly 60 countries. New hot spots include Iran, Italy, and South Korea. On Friday, the World Health Organization increased its risk assessment to “very high.”

In response to the widening outbreak, the stock market plunged at a rate not seen since the 2008 financial crisis. Yesterday, markets bounced back tremendously from last week’s brutal selloff, surging on news that global central banks were poised to provide stimulus to combat the outbreak's effects on the economy and markets.

Monday gains offset a little more than a third of last week's historic losses, but the full impact of the virus on the world economy is still unknown. Federal Reserve Vice Chairman Richard H. Clarida said that economic disruptions in China from the virus “could spill over to the rest of the global economy” but added that “it is still too soon to even speculate about either the size or the persistence of these effects, or whether they will lead to a material change in the outlook.”

The U.S. economy is currently growing steadily, with a jobless rate that has hovered near a half-century low for more than a year. Inflation remains below the Federal Reserve’s 2 percent target.

Deliveries to U.S. stores and factories will surely be impacted by quarantines in China, Japan, and Italy.

Items such as surgical masks are already reported to be in short supply. FTZs might be used to help defray the cost of hoarding production components and finished goods, but would only be effective if items ship before quarantines or other forms of disruption take effect. The elimination of passenger flights also reduces the freight capacity of the airlines, making it harder to access air shipments as a backup to supply shortages.

Other types of supply shortages might also take effect in an attempt to control the spread of the virus. President Trump told reporters the U.S. will consider closing its border crossings.

In response to a press conference question about the border with Mexico, the President said his administration was "thinking about" possibly closing the country's borders.

"But right now that's not a border as it pertains to what we're talking about here. This is not a border that seems to be much of a problem right now. We hope we won't have to do that."

Uncoordinated impacts may also present a challenge. Over the weekend, workers at the Louvre in Paris closed the museum out of fears of the spreading virus.

“We are very worried because we have visitors from everywhere,” said Andre Sacristin, a Louvre employee and union representative for its staffers. “The risk is very, very, very great," he said in a phone interview. While there are no known virus infections among the museum's 2,300 workers, “it’s only a question of time,” he said.

Tech Tip

Planning to apply for CTPAT soon? Well, you may have to rethink your timing - CBP has suspended application submission from January 1, 2020, through June 1, 2020.

The application process for the CTPAT program is now only done online. The application is completed in the CTPAT Portal in a two-step process. First, a company representative will create a Company Profile. Completion of the Company Profile will result in the representative receiving an account on the CTPAT Portal. Then the required Security Profile can be completed in the portal.

CBP recently revamped the CTPAT program and introduced “New Minimum Security Criteria” or MSC. Those criteria are published on CBP’s website, but the CTPAT portal is not yet updated with the new criteria. Until this is completed, CBP has suspended all applications to ensure that new applications conform to the new criteria. In addition, if your security profile is due during the months of March, April or May – you will ignore the due date and complete/submit the security profile after June 1, 2020, when the new security profile in the portal is ready.

Want more information about joining the CTPAT or other Trusted Trader programs? Submit your request here.

ACE
Plane

Boeing Asks For End To Tax Breaks To Avoid WTO Sanctions

Two Washington state legislators on Wednesday introduced bills that would remove the main aerospace tax break passed 16 years ago to benefit Boeing.

The dramatic shift in direction will help resolve a dispute at the World Trade Organization (WTO) and avert the potential for the European Union (EU) to impose retaliatory trade tariffs that could affect not only sales of aircraft but also agricultural products. In a statement, Boeing said “we fully support and have advocated for this action.”

The company has saved hundreds of millions of dollars per year due to the tax breaks. According to the latest annual accounting of the aerospace tax incentives filed with the state, the specific tax break that will be eliminated saved Boeing $99.5 million in 2018.

U.S. Trade Deficit Narrows As Both Imports And Exports Drop

According to statistics released by the Census Bureau last week, the U.S. trade deficit narrowed to $65.5 billion in January from $68.7 billion in December.

The advance Census report stated, "Exports of goods for January were $135.7 billion, $1.4 billion less than December exports,". "Imports of goods for January were $201.2 billion, $4.6 billion less than December imports."

Maine lobsterman may soon be doing their part to help close the gap. Maine’s congressional delegation announced last week that as part of the Phase One trade deal, China is making U.S. lobster eligible for a tariff reduction.

The one-year exemption process may exclude $300 million worth of U.S. seafood from punitive tariffs imposed during a trade war with the United States, Sens. Susan Collins and Angus King and Reps. Chellie Pingree and Jared Golden, said in a joint statement. Hope those rubber bands are still on tight when they get there.

Balance
India

Trip Revives Prospects For India Trade Deal

Prime Minister Narendra Modi of India welcomed President Trump to India with a state dinner, tens of thousands of cheering onlookers and even a marching band on camels. However, the two sides still remain unable to reach a trade deal.

For both India and the United States, the trading relationship is an important one. India was the United States’ ninth-largest trading partner in goods in 2018, while the United States edged ahead of China to become India’s largest trading partner last year.

For the second time in a year the two countries have failed to reach even a limited agreeement to increase bilateral trade for dairy products, medical devices and Harley-Davidson motorcycles.

Negotiators from both countries have been working since 2018 on a deal that would lower Indian barriers to some American products, and restore India’s access to the unilateral General System of Preferences (GSP.)

During his visit, the President reiterated his previous complaints about India’s high tariffs on American products, including Harley Davidson's motorcycles and other goods.

“We’re being charged large amounts of tariffs, and you can’t do that,” President Trump said. “I just said that’s unfair, and we’re working it out.”

He added that “the money you’re talking about is major, but the United States has to be treated fairly. And India understands that.”

In March 2018, the President included India in the list of countries that would be hit by Section 232 steel and aluminum tariffs. India then responded with retaliatory tariffs on American almonds, apples and other goods. Last May, the Trump administration stripped India of the GSP status that exempted billions of dollars of its exports into the United States from tariffs.

The battle over milk and vegetarian cows has been another example of how the two sides can’t seem to find a middle ground.

India produces more milk than anyone else in the world, yet it’s still not enough to meet demand. But India is worried that cheap imported milk from the United States will wipe out its small farmers, who typically tend just a few cows each.

But there’s the matter of what those cows eat. In the United States, cattle feed typically includes ground-up parts of other animals. That does not pass muster with Hindus, most of whom are vegetarian.

Some American farmers are willing to keep cows on a purely vegetarian diet for 90 days before their milk is sent to India, said Tom Vilsack, the chief executive of the U.S. Dairy Export Council and the U.S. agriculture secretary under President Obama.

However, “the Indian government is not willing to accept that,” Mr. Vilsack said. “I don’t see any path forward.”

APHIS-Lacey Finalizes Relaxed Reporting Requirements For FTZs

The Animal and Plant Health Inspection Service (APHIS) announced their final rule promulgating an allowance for de minimus imports of Lacey Act materials that will no longer require a declaration.

The new de minimus exception to the declaration requirement will apply to all products subject to the Lacey Act. Importers of articles currently listed on the Lacey Act enforcement schedule, including FTZs, will receive the most immediate benefit from the new exception.

APHIS is adopting a de minimus threshold of no more than 5 percent of the total weight of the individual product unit, provided that the total weight per 10-digit HTSUS provision in an entry does not exceed 2.9 kilograms. APHIS-Lacey declarations remain limited to entry summary (7501) and no provision for filing at the time of admission was announced.

APHIS had originally proposed additional de minimus exceptions based on volume or value but eliminated them from the final rule. APHIS had also considered a ‘grace period’ to allow all declarations to be filed after importation, but this proposal was also dropped from the final rule which goes into effect on April 1, 2020.

The time of declaration filing for APHIS-Lacey Act materials is guided by the Lacey Act definition of ‘import’ which is more in line with the concept of ‘entry into U.S. commerce’. For this reason required declarations are filed at the time of entry summary and are not required for in-bond movements, FTZ admissions, or bonded warehouse entry. The APHIS finding with respect to the definition of ‘import’ is contrary to a finding by U.S. Customs that an import has already occurred at the time a product is admitted to a Foreign-Trade Zone, and therefore is ineligible for informal de minimus entry procedures at the time of withdrawal from the zone.

APHIS also reiterated their Federal Register notice on February 3, 2009 (74 FR 5911, Docket No. APHIS-2008-0119) which confirmed that they did not intend to enforce the declaration requirement for informal entries such as Section 321 de minimus entries. By extension, therefore, importers can sidestep Lacey Act reporting requirements for shipments under $800 in total value which use informal entry procedures.

The enforcement schedule is available on the APHIS website, organized by HTS code.

The Lacey Act, first enacted in 1900, combats trafficking in illegally taken wildlife, fish, or plants. The Food, Conservation and Energy Act of 2008, effective May 22, 2008, amended the Lacey Act by expanding its protection to a broader range of plants and plant products.

Cherry Blossom
England

UK-EU Trade Negotiations Off To A Rough Start

Britain released a list of negotiating points for its trade discussion with the EU that are set to begin this week.

A document describing a tough stance may put London on a collision course with Brussels just as both economies are hoping exports will help them avoid dipping into recession.

Mindful of Brexit’s December 31st deadline for having a trading framework in place, 10 Downing Street said the two sides have until June to agree on a broad outline of an agreement, otherwise Britain would aim for a looser, Australian-style agreement that could be completed before the end of the year.

A trade deal with the bloc should provide a “predictable, transparent and business-friendly environment” for cross-border financial services activities, Britain said.

“The agreement should ensure that the UK and EU’s state-owned enterprises operate in a fair and transparent manner and do not discriminate against businesses in the other party when buying and selling on commercial markets,” the document said.

Britain also said it should not be required to follow EU standards and that the agreement with the EU should not constrain its tax sovereignty in any way.

Britain said the agreement should provide for streamlined customs arrangements covering all trade in goods in order to smooth trade while also ensuring customs authorities are able to protect their regulatory, security and financial interests.

The mandate said the deal “should facilitate trade in all categories of motor vehicles, equipment and parts, based on international standards on vehicle safety and environmental protection.” Motor vehicle production forms a large part of Britain and Germany’s export economy, and therefore is likely to be a contentious point in the negotiations. Britain’s car production is down an annual 2.1%, as an increase in exports failed to outweigh a 23.9% fall in domestic demand, according to data from the Society of Motor Manufacturers and Traders.

slide deck2

FTZ Board Activity

  • Warehouse Specialists, LLC submitted an application for subzone status for its 48-acre facility within FTZ 107 in Council Bluffs, Iowa. MORE
  • Regent Tek Industries, Inc. submitted a Notification of Proposed Production Activity for thermoplastic road marking material within FTZ 52 in Shirley, New York. MORE
  • Ricoh Electronics, Inc. received the authorization of production activity for thermal paper and film within FTZ 26 in Lawrenceville and Buford, Georgia. MORE
  • Puerto Rico Storage & Distribution, Inc. submitted an application for subzone status for its 3.9-acre facility within FTZ 61 in Aguadilla, Puerto Rico. MORE
  • Steelite International USA, Inc. received the authorization of production activity for hospitality industry serveware within FTZ 33 in New Castle, Pennsylvania. MORE
  • Traxys Cometals USA, LLC submitted a Notification of Proposed Production Activity to add additional components for manganese and aluminum alloying agents within FTZ 158 in Burnsville, Mississippi. MORE
  • Seadrill Americas Inc. submitted an application for subzone status for its 51.2-acre facility within FTZ 124 in New Iberia, Louisiana. MORE
  • Winnebago Industries, Inc. applied to expand Subzone 107A  by adding sites in both Forest City and Charles City, Iowa. MORE
  • Andersen Regional Manufacturing, Inc. submitted a Notification of Proposed Production Activity for windows for residential and commercial buildings within FTZ 277 in Goodyear, Arizona. MORE
  • Cheniere Energy, Inc. received the authorization of production activity for liquified natural gas processing within FTZ 122 in Portland, Texas. MORE
  • Kubota North America Corporation received the authorization of production activity for additional components of agricultural and specialty vehicles within FTZ 26P in Jefferson and Gainesville, Georgia. MORE
  • Waters Technologies Corporation submitted an application for subzone status for its 44.7-acre facility within FTZ 27 in Milford, Massachusetts. MORE

Coronavirus – one word pretty much sums up the news from last month, whether the topic was economics, trade, or politics.
Soccer teams playing to empty stadiums in Europe. Commercial flight cancellations reducing air freight capacity. A 15 year bull market coming to a screeching halt. Factories, especially in China’s Hubei Province, completely closed or struggling to produce without employees who have been quarantined. The affects of the coronavirus have now extended far beyond those who have actually contracted the disease. The new coronavirus named COVID-19 is thought to have been introduced to humans in December at a live wild animal market in the Chinese city of Wuhan. The effects are still unfolding as the virus continues to spread, highlighting the dependence the United States has on its global trading partners.

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