FTZ’ine April 2022
April 5, 2022
FTZ’ine June 2022
June 1, 2022
The Shift Is On -
In baseball, putting on the shift means concentrating your defense on one side of the field where the current batter likes to hit. It is easy to tell when ‘The Shift’ is on because the defensive players are squeezed into a smaller-than-normal section of the field, and large parts of the field are wide open. In shipping, The Shift is when everyone tries to move their goods through a port ANYWHERE but the west coast because ILWU contract negotiations are about to get started, and no one wants their merchandise held hostage in the process. Port backlogs continue to grow around the country although there does not seem to be the traditional harsh rhetoric from either side before contract negotiations begin.
COVID-19 lockdowns at ports in China, especially Shanghai, are helping to keep the backlog on this side of the Pacific lower than they might otherwise be now.
The U.S. economy shrank 1.4% in the first three months of 2022, with prices rising quickly for food, energy and other essentials. Despite these threats and escalating interest rates, economists foresee a return to growth for the rest of 2022 based on undiminished job market strength and consumer spending.
Top Story: All Quiet On The Western Front
Talks between the ILWU and west coast terminal operators are due to begin on May 12th in San Francisco. Importers are holding their breath and hopeful that recent conciliatory tones will lead to a quick resolution as that will leave only 6 weeks to complete an agreement before the current one expires.
Trade experts expect negotiations to continue past the July 1 end of the 2015 contract now in place, as that would follow the union’s past strategy of leveraging work slowdown possibilities during negotiations. When the existing agreement expires, the “no strike” clause in it expires too.
In an interview with Transport Topics, a trucking news outlet, US Secretary of Labor Marty Walsh expressed optimism about the coming labor negotiations, saying he is willing to get directly involved if either side requests help.
“I think everyone is aware of the situation we are in today,” Walsh said. “But these are very seasoned negotiators on both sides. I’m not concerned.”
As occurs early in every contract year, importers who are able to do so have been sending more of their shipments to the East Coast to avoid the impact of possible work slowdowns or stoppages after July 1st.
The ILWU represents nearly 14,000 port workers in California, Oregon, and Washington, with more than 40 percent of U.S. incoming container traffic (normally) moving through the Ports of Los Angeles and Long Beach. The PMA represents shipping lines and terminal operators at 29 West Coast ports.
In April, ILWU President Willie Adams said in an interview with Port of Los Angeles (POLA) Executive Director Gene Seroka on the port’s monthly media call that fears about getting a deal done may be overblown.
“We will get an agreement,” said Adams. It is unusual for the union to comment publicly before formal talks begin, and even more unusual to say something optimistic. That has traders hopeful that negotiations will not be drawn out into peak season.
Brian Whitlock, Senior Analyst with Gartner’s Supply Chain practice, said “With the widespread media attention on shipping delays and impacts on holiday shopping, the PMA will need to contend with an American public that knows more about ports today than they ever have,” he said. With steamship lines reporting record revenue and profits, a quick deal is likely to be an expensive deal.
Tech Tip: Where Are the ISFs Going?
Are you using the ACE portal to file your ISFs? If so, you’ll need to buy third party software or enlist a trade partner to file for you after June 6th.
CBP announced in CSMS #51726538 - ISF Portal Retirement that the ISF portal within ACE will be retired. Importers that were using the portal to self-file Import Security Filings (ISFs) will no longer be able to do so and must have an alternative means of filing.
While the number of U.S. importers using the portal to file ISFs is small, a larger number are using the portal to run reports on the status and timeliness of ISFs filed by service providers. This too, was part of the ISF portal within ACE. Those reports, however, have already been transitioned to ACE (see CSMS #51573620 - Deployment of ISF Reports in ACE Reports on Thursday, April 14, 2022). In fact, the reports in ACE are more flexible than the monthly published reports in the ISF portal, with on-demand access and custom date range capabilities.
If you have questions about ISF filings, please email us at Info@iscm.co.
Will Rebuilding Ukraine Be Good For U.S. Trade?
Although the outcome of the war in Ukraine is unknown, it might be useful to start thinking about reconstruction of the country. This is because without hope that their lives can return to normal, Ukrainians forced to flee the conflict could leave Europe with another long-term refugee problem to deal with.
Investing in the reconstruction of Ukraine could be lucrative to the U.S., Europe, and Ukraine, as it was after World War II, if appropriate sources of funding can be found.
One idea that has already been put forth is an excise tax on Russian oil and gas exports. Another would compensate Ukraine out of Russia’s blocked assets at Western central banks.
Putting the mechanics in place for such financing now may be an important deterrent to future aggressors if they understand that they will bear not only the cost of the conflict but also the cost of reconstruction.
The Ukrainian economy has experienced a large negative shock, with GDP contracting by at least 30%. Despite the massive disruption and mounting fiscal challenges, basic government duties are still being executed, and pledges of wartime support remain strong.
While functional, the Ukrainian government would not have the resources to address the staggering scale of destruction in the country. The Kyiv School of Economics estimates that “at least 4,431 residential buildings, 92 factories/warehouses, 378 institutions of secondary and higher education, 138 healthcare institutions, 12 airports, and 7 thermal/hydroelectric power plants have been damaged, destroyed or seized in Ukraine” by Russian forces.
Natalie Jaresko, the former Finance Minister of Ukraine, offered an analogy for thinking about the damage. The destruction wrought in Puerto Rico by Hurricane Maria totaled perhaps $90 billion. Puerto Rico has a population about one-14th that of Ukraine, concentrated in dramatically smaller territory. And hurricanes are easier to recover from than wars: Hurricanes may knock down buildings, but they do not leave land mines behind.
Ukraine’s allies could begin by immediately imposing a special excise tax on Russian oil and gas exports, as opposed to an outright ban of Russian goods. Fossil-fuel prices have skyrocketed: Russian oil-and-gas earnings for 2022 are on track to exceed $320 billion, more than one-third higher than in 2021. Since the start of fighting in late February, the European Union has paid Russia 35 times more for energy than it has given Ukraine in aid, the EU’s top foreign-policy official said in a speech to the European Parliament on April 6th.
Outright confiscation of seized Russian assets might run into legal difficulties, but a payment by Russia to Ukraine could be negotiated as part of the settlement to unfreeze those foreign assets. Ukrainian families that lost loved ones to Russian aggression could also receive payment from the frozen Russian funds. Rebuilding Ukraine is likely to be the biggest European project since the absorption of East Germany by the West in the 1990s.
Another postwar challenge for Ukraine will be reorienting its economy from Russia-facing to Europe-facing. The former Soviet Union used a different rail gauge from the European standard: 60 inches wide on the Soviet side of the line, compared with 56.5 inches to the west. That difference helped defeat Hitler in 1941, because German railcars could not run on Soviet tracks to supply the Russian Front. But Soviet rail gauges raise a barrier to trade between Europe and post-Soviet Ukraine. Very possibly, the country’s entire rail network will have to be changed to the narrower European gauge in order to reorient Ukraine’s trade toward the EU’s major ports of Rotterdam, Antwerp, Hamburg, and Bremen.
ITC Investigation of FTZs Heats Up
Just before the end of the month, the U.S. International Trade Commission (ITC) issued a Federal Register Notice proposing a questionnaire to assist their study on the competitiveness of the U.S. foreign-trade zones program in North America. The FTZ industry is hoping that the study will suggest to Congress that US manufacturers be granted the same access to USMCA duty and deferral provisions as their counterparts in Canada and Mexico.
Results from the rather detailed and lengthy questionnaire will inform the Commission’s investigation on the economic activity in U.S. FTZs and under similar programs in Canada and Mexico.
To support the study, the ITC will hold a virtual public hearing on Tuesday, May 17, 2022 on current FTZ policies and practices, and the effects of those policies and practices in the United States. Requests to appear at the hearing must be filed electronically with the Secretary to the Commission no later than 5:15 p.m. TODAY.
The U.S. Trade Representative (USTR) requested a general factfinding investigation and report on the conditions of competitiveness in foreign-trade zones in a letter received by the ITC on December 14, 2021. The May 17th hearing is being conducted in response to this request.
In addition to the hearing on the 17th, other important milestones for the ITC study:
Any request to appear at the hearing must be made through the Commission’s Electronic Document Information System (https://edis.usitc.gov). No in-person paper-based filings or paper copies of any electronic filings are accepted. All written submissions (except for confidential business information contained and appropriately marked therein) will be available for public inspection.
First Hearing Held For Forced Labor Prevention Act Enforcement
At the beginning of last month, the Department of Homeland Security (DHS) held a public hearing on the use of forced labor in China, and potential measures to prevent the importation of goods produced with forced labor.
The hearing was a requirement of the Uyghur Forced Labor Prevention Act (UFLPA), a new law set to go into effect in June. It bans the import all goods made in the Xinjiang region of China, or with ties to certain entities or programs unless the importer can demonstrate to the U.S. government that its supply chains are free of forced labor.
Human rights activists, labor leaders and others at the hearing urged the Biden administration to ban products made with forced labor in the Xinjiang region of China, saying slavery and coercion taint company supply chains that run through the region and China more broadly.
The trade was looking to the hearing to see how stringently CBP might apply the law, which could end up affecting a handful of companies, or immediately halting wide swaths of trade from China.
Under the law, the US Forced Labor Enforcement Task Force will seek to identify companies using forced labor in other regions of China, and identify companies inside and outside of China using components and raw materials sourced from Xinjiang. Such companies would also be banned from importing into the US.
It is unclear how many organizations the government will name, but trade experts said many businesses that relied on Chinese factories might realize that at least some part or raw material in their supply chains could be traced to Xinjiang.
“I believe there are hundreds, perhaps thousands, of companies that fit the categories” of the law, John M. Foote, a partner in the international trade practice at Kelley Drye & Warren, said in an interview.
It is already illegal to import goods made with slave labor. But for products that touch on Xinjiang, the law will shift the burden of proof to companies, requiring them to provide evidence that their supply chains are free of forced labor before they are allowed to bring the goods into the country.
Xinjiang is believed to be the source of one-fifth of the world’s cotton and 45 percent of its polysilicon, a key material for solar panels. But Xinjiang is also a major provider of other essential products and raw materials, including coal, petroleum, gold and electronics, making it difficult to identify and remove from the supply chain.
. . . Just Don’t Call It a Free Trade Agreement
The United States and Britain forged a deal in Baltimore in March to end a four-year dispute and remove U.S. steel and aluminum tariffs as well as U.K. retaliatory tariffs on motorcycles, whiskey, Levi’s, and other products.
The U.K. had hoped for a broader deal on trade with its former colony, and negotiations continued last month in Scotland, dubbed the “U.S.-U.K. Dialogue on the Future of Atlantic Trade” to try and reach an agreement that encompassed a wider range of goods.
Just don’t call it a free trade agreement.
“The free trade agreement is a tool,” U.S. Trade Representative Katherine Tai said in response to repeated questions from reporters about the potential of an FTA with the UK. “It is a very 20th century tool. It has its place certainly in the toolbox,"
This was a somewhat surprising comment given the size of the free-trade agreements the U.S. now participates in, and heralded a stark change in the way the administration might engage close trading partners.
Ambassador Tai said she wants to make sure "that we don’t spend years and spend a lot of blood, sweat and tears working on something that isn't going to be relevant to the needs of our people or our economies."
The United States and the United Kingdom resumed trade talks at the end of March, two years after they were frozen and eight months after the U.K.’s “fast track” status under Trade Promotion Authority expired.
Finally Forward
The Ever Forward was finally moving forward after it was refloated on Easter Sunday.
After two unsuccessful attempts to nudge the vessel into open water, roughly 500 of the 5,000 containers it was carrying were removed. Two barges and five tugboats were then able to dislodge the vessel more than a month after it ran aground in the Chesapeake Bay.
A full moon and high spring tide helped provide a lift to the salvage vessels as they pulled and pushed the massive ship from the mud, across a dredged hole and back into the shipping channel.
Once refloated, the more than 1,000-foot Ever Forward was weighed down again by water tanks to ensure safe passage under the Chesapeake Bay Bridge on its way to an anchorage off Annapolis, The Baltimore Sun reported.
Marine inspectors will examine the Hong Kong-flagged Ever Forward’s hull before the Coast Guard allows it to return to the Port of Baltimore to retrieve the offloaded containers. It will eventually reload those containers and continue its voyage.
The ship was headed from the Port of Baltimore to Norfolk, Virginia, on March 13th when it ran aground just north of the Chesapeake Bay Bridge.
Officials have said there were no reports of injuries, damage or pollution, and the shipping channel remained open to one-way traffic during the operation.
The Coast Guard hasn't yet concluded what caused the Ever Forward to run aground.
FTZ Staff Activity
- FTZ Board Staff processed a Minor Boundary Modification (S-44-2022) in FTZ 54A on behalf of W Schonbek LLC, in Plattsburgh, NY, on April 6, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-45-2022) in FTZ 64E on behalf of Bacardi U.S.A., Inc., in Jacksonville, FL, on April 5, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-46-2022) in FTZ 94 on behalf of Unimex Trade & Logistics LLC, in Laredo, TX, on April 4, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-47-2022) in FTZ 75P on behalf of LCY Electronic Materials Inc., in Phoenix, AZ, on April 5, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-48-2022) in FTZ 75Q on behalf of Chang Chun (Arizona) LLC, in Casa Grande, AZ, on April 5, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-49-2022) in FTZ 75 on behalf of Sunlit Arizona LLC, in Phoenix, AZ, on April 5, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-50-2022) in FTZ 64J on behalf of Seaonus Stevedoring Talleyrand, LLC, in Jacksonville, FL, on April 6, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-51-2022) in FTZ 46K on behalf of Patheon Pharmaceuticals Inc., in Cincinnati, OH, on April 5, 2022
- FTZ Board Staff processed a Subzone (S-52-2022) in FTZ 84 on behalf of Coreworks Heat Exchangers, LLC, in Waller, TX
- FTZ Board Staff processed a Minor Boundary Modification (S-53-2022) in FTZ 21 on behalf of Absolute Haitian Corporation, in Moncks Corner, SC, on April 7, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-54-2022) in FTZ 18H on behalf of RK Logistics Group, in Fremont, CA, on April 6, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-55-2022) in FTZ 49D on behalf of Merck & Co., Inc., in Rahway, NJ, on April 11, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-56-2022) in FTZ 104K on behalf of Anatolia Tile & Stone (USA) Inc., in Port Wentworth, GA, on April 12, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-57-2022) in FTZ 94 on behalf of Specialized Customs Services, in Laredo, TX, on April 12, 2022
- FTZ Board Staff processed a Termination (S-58-2022) in FTZ 281F on behalf of Customs and Trade Services, Inc., in Miami, FL, on April 12, 2022
- FTZ Board Staff processed a Termination (S-59-2022) in FTZ 281 on behalf of Genera LLC, in Miami, FL, on April 13, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-60-2022) in FTZ 255 on behalf of Lakeside Corporate Center, in Cascade, MD, on April 14, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-61-2022) in FTZ 281 on behalf of DSV Air & Sea, Inc., in Medley, FL, on April 14, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-62-2022) in FTZ 115 on behalf of Port of Beaumont Navigation District, in Beaumont, TX, on April 15, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-63-2022) in FTZ 59A on behalf of Kawasaki Motors Mfg. Corp., in Lincoln, NE, on April 18, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-64-2022) in FTZ 1E on behalf of Jos. H. Lowenstein & Son’s, Inc., in Brooklyn, NY, on April 18, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-65-2022) in FTZ 15J on behalf of MRIGlobal, in Kansas City, MO, on April 18, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-66-2022) in FTZ 94 on behalf of Crane Worldwide Logistics LLC, in Laredo, TX, on April 19, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-67-2022) in FTZ 283 on behalf of Mountain Horse Solutions, in Union City, TN, on April 19, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-68-2022) in FTZ 119O on behalf of TK Trading Company, Inc., dba Storm Creek, in Eagen, MN, on April 19, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-69-2022) in FTZ 32 on behalf of Longo Customs Services Miami Corp., in Hialeah, FL, on April 20, 2022
- FTZ Board Staff processed a Minor Boundary Modification (S-70-2022) in FTZ 32 on behalf of General Power Limited Inc., in Miami, FL, on April 20, 2022
FTZ Board Activity
- Patheon API, Inc. submitted an application for subzone status for its facility within FTZ 21 in Florence, South Carolina. MORE
- All Ways Pacific LLC received approval to operate its facility as Subzone 44O within FTZ 44 in Dayton, New Jersey. MORE
- CooperVision Manufacturing PR LLC received authorization of production activity for disposable contact lenses within FTZ 7 in Juana Diaz, Puerto Rico. MORE
- González Trading, LLC submitted an application for subzone status for its facility within FTZ 61 in Toa Baja, Puerto Rico. MORE
- CoLinx, LLC submitted a notification of proposed production activity for spherical roller bearing kits within FTZ 148 in Crossville, Tennessee. MORE
- LCY Electronic Materials Inc. received authorization of production activity for specialty chemicals for microchip production within FTZ 75 in Casa Grande, Arizona. MORE
- Chang Chun (Arizona) LLC received authorization of production activity for specialty chemicals for microchip production within FTZ 75 in Casa Grande, Arizona. MORE
- Swafford Warehousing, Inc. submitted a notification of proposed production activity for medical kits within FTZ 38 in Greer, South Carolina. MORE
- CGT U.S., Ltd. received authorization of production activity for polyvinyl chloride (PVC) coated upholstery fabric cover stock production within FTZ 80 in New Braunfels, Texas. MORE
- Coreworks Heat Exchangers, LLC submitted an application for subzone status for its facility within FTZ 84 in Waller, Texas. MORE
- AIAC International Pharma, LLC submitted a notification of proposed production activity for pharmaceutical products within FTZ 61 in Arecibo, Puerto Rico. MORE
- Wyeth Pharmaceuticals, LLC received authorization of production activity for mRNA bulk drug substance within FTZ 27 in Andover, Massachusetts. MORE
- Kaiser Premier LLC received approval to operate its facility as Subzone 123J within FTZ 123 in Fort Morgan, Colorado. MORE
- DB Research Group, LLC submitted an application for subzone status for its facility within FTZ 61 in Caguas, Puerto Rico. MORE
The Shift Is On –
In baseball putting on the shift means concentrating your defense on one side of the field where the current batter likes to hit. It is easy to tell when ‘The Shift’ is on because the defensive players are squeezed into a smaller-than-normal section of the field, and large parts of the field are wide open. In shipping, The Shift is when everyone tries to move their goods through a port ANYWHERE but the west coast because ILWU contract negotiations are about to get started, and no one wants their merchandise held hostage in the process. Port backlogs continue to grow around the country although there does not seem to be the traditional harsh rhetoric from either side before contract negotiations begin.
COVID-19 lockdowns at ports in China, especially Shanghai, are helping to keep the backlog on this side of the Pacific lower than they might otherwise be now.
The U.S. economy shrank 1.4% in the first three months of 2022, with prices rising quickly for food, energy and other essentials. Despite these threats and escalating interest rates, economists foresee a return to growth for the rest of 2022 based on undiminished job market strength and consumer spending.