FTZ’ine September 2019

September 5, 2019

FTZ’ine November 2019

October 31, 2019

FTZ’ine October 2019

Trade Takes A Back Seat

At the beginning of last month, trade was on the tip of everyone’s tongue in your Nations’ Capital. Fresh negotiations were getting traction with Japan and India, and the world was looking forward to the possibility of reduced tensions coming out of the meeting of world leaders at the United Nations General Assembly in New York.

That all changed with one phone call.

One phone call by the President of the United States that is. Now impeachment proceedings are the talk of the town and prospects for significant movement on major trade initiatives such as USMCA and China seem slim. Even the specter of war with Iran did little to change the narrative over the President’s contact with Ukraine and subsequent handling of call transcripts. Impeachment talk is likely to end any prospect of forward progress in talks with China, so zones had best prepare for the status quo to stay just that. See below for ways operators should prepare for CBP’s review of their status changes brought on by the recent trade remedies that look to remain in effect for the foreseeable future.

Top Story: New Free Trade Agreement Has Major Impact on FTZs

Last week the U.S. and Japan took a break from the United Nations General Assembly to sign a limited trade deal. The agreement will eliminate some tariffs and expand market access on farm, industrial and digital products, but does not address autos, a segment key to the U.S. foreign-trade zone community.

The U.S. President said "This is a big chunk, but in the fairly near future we're going to be having a lot more comprehensive deals signed with Japan". That implies more goods could be incorporated into a future agreement or agreements, however it appears safe to say that imports of autos and auto parts from Japan will not become duty-free under any trade agreement with the current administration, as they would have under the Trans Pacific Partnership.

The United States and Japan have reached an agreement in which Japan will eliminate or lower tariffs for certain U.S. agricultural products. For other agricultural goods, Japan will provide preferential U.S.-specific quotas.

Once this agreement is implemented, over 90 percent of U.S. food and agricultural products imported into Japan will either be duty free or receive preferential tariff access. For example, under the agreement, Japan will reduce tariffs on a range of agricultural products such as beef and pork, wheat and barley.

The agreement also provides for the limited use of safeguards by Japan for surges in imports of beef, pork, whey, oranges, and race horses, which will be phased out over time.

Once the agreement is fully implemented, American farmers and ranchers will have the same import treatment as CP-TPP countries selling into the Japanese market. The United States in return will provide tariff elimination or reduction on $40 million of agricultural imports from Japan, as well as certain machine tools, fasteners, steam turbines, bicycles, bicycle parts, and musical instruments.

Tech Tip

Having trouble filing your Post Summary Corrections (PSCs) to take advantage of exclusions for the 301 tariffs on entries past the liquidation date? Successful filing depends upon the entry being given an “Importer Extension” and not a “Customs Extension”.

Ask CBP to apply an Extension Code of 50 for “Importer Extension” to prevent rejections due to the filing being under CBP control.

CBP Announces Audit Requirements For Zone Status Changes

It looks as though the Section 301 tariffs on Chinese imports are going to be around a lot longer than anyone expected. This, along with the 232 tariffs on steel and aluminum and other potential actions on the horizon, have led to a complicated, and sometimes confusing, situation with zone statuses of admitted merchandise. And CBP is paying attention to zone status elections in much more detail as a result.

There have been varying PF status requirements associated with the multiple additional tariffs implemented on a regular basis. For some, the PF status requirement was retroactive, including all on-hand merchandise regardless of time of admission. For others, PF status must be elected upon admission to the zone.

As a result, many zones find themselves frequently using a quirky procedure to change the zone status of on-hand inventory from NPF to PF, either because it is mandated by the additional tariff or because there is a duty advantage to such action. Suddenly, zones are faced with filing status changes at a moment’s notice with timing and date reference being the key to locking in savings or preventing unwanted duty liability.

With this increased status activity in FTZs, CBP is intensifying scrutiny of all filings that include Chapter 99 tariffs. Maybe you’ve had an import specialist question an entry with 301 duties, or maybe you’ve tried to file Post Summary Corrections (PSCs) to correct duty calculations for such goods and faced a litany of questions about your PF status elections.

Jim Swanson, CBP’s Director of Cargo Security and Control, recently stated there is no intent to have zones redo the work they've already done for status changes. However, all administrators must have clear records and be able to trace the process of status changes through record keeping and inventory procedures.

Want to be sure you’re ready for CBP’s next spot check? ISCM provides thorough Audit Compliance Review for FTZs including:

• Records Review – Walk through of maintained records as well as recordkeeping procedures

• ICRS System Report Review – Review of filed submissions and synchronization with operation management systems

• Physical Security Review – Assessment of current security, patterned after the CBP Security Review

• FTZ Process/Procedure Review – Investigation of physical processes to procedural documentation for primary FTZ functions and reporting

• Trade Compliance Review – Examination of supporting procedures such as training, FTA management, and Classification in relation to zone activity.

Email us today to find out how we can help you be prepared when CBP visits your zone.

Brexit Continues to Baffle

There is now only one month left for Prime Minister Boris Johnson to fulfill his pledge to extract Great Britain from the European Union on Oct. 31st. Parliament added a wrinkle to his original plan by passing a law that if he fails to strike a deal and get Brexit approved by lawmakers by Oct. 19, he must request a delay.

Johnson calls that law the “surrender act” and has said he will not request a delay. This conflict means that it is still impossible to predict if the U.K. will still be a member of the E.U. 31 days from now.

The Prime Minister had earlier attempted to suspend Parliament to reduce the possibility that Members could interfere with his pledge to withdraw England from the E.U., even if there was no agreement on exactly how to do so.

Eleven judges decided unanimously the five-week suspension of Parliament was unlawful.

Opposition parties then passed the law that would require the Prime Minister to request a Brexit delay if no agreement was reached. That seemed to box the Prime Minister into a corner, but he remained defiant in restating his pledge.

“There is a lot of people who basically want to stop us delivering Brexit on Oct. 31 but I have to tell you that we are not going to be deterred from that ambition, we are going to get on and do it,” Prime Minister Johnson said.

How he can possibly deliver on such a promise is absolutely unclear, and is frustrating companies trying to prepare for the trade framework that will exist after separation.

The minister responsible for no-deal planning, Michael Gove, said such a scenario was still possible but when asked how that could happen, could only respond “The answer... is to reflect on what Yogi Berra, the American baseball coach said, which is ‘One should never make predictions, especially about the future,’” Gove said.

Without the benefit of Berra’s further guidance, Prime Minister Johnson may need to draw from the trade playbook recently used by the colonials and declare the need for emergency powers to effect the outcome of the national referendum. That is just as likely to produce political fireworks in England as the trade remedies employed for similar reasons did in the U.S.

What a month October is shaping up to be for Britons.

New Focus In DC Likely Dooms USMCA Before 2021

Just last week President Trump cast doubt on getting the required congressional vote on the USMCA free-trade agreement that his administration negotiated to replace NAFTA.

“I don’t know that they’re ever going to get to a vote,” the President told reporters on Wednesday in New York. “I don’t think they can do any deals” referring to Democrats’ push for impeachment.

Even before Mr. Trump’s remarks during the United Nations General Assembly, the U.S. Chamber of Commerce said the push for USMCA needs to continue. “The American people expect their elected officials to walk and chew gum at the same time,” said Neil Bradley, the chamber’s executive vice president and chief policy officer.

Already ratified in Mexico, the free-trade agreement faces hurdles in Canada, and the political calendar may have doomed consummation of the agreement before the next U.S. election.

Mr. Bradley of the U.S. Chamber of Commerce further said “It is imperative for our economy that lawmakers and the administration keep moving forward on and complete enactment of USMCA. There are no excuses for inaction.”

Part of that impetus may come from the fact that failure to pass USMCA could leave the three countries without any trade agreement at all. The President could renew threats to pull the U.S. out of the existing North American Free Trade Agreement in an effort to get Congressional action.

Even before impeachment proceedings were announced, the replacement U.S.-Mexico-Canada Agreement faced uncertain prospects. The legislative calendar before U.S. national elections next October is growing shorter and shorter.

The Canadian federal elections three weeks from now further complicate the timeline for passage. The Canadian Parliament has already dissolved and the agreement will have to be reintroduced in the next Parliament, which may be led by a new Prime Minister and governing coalition.

USMCA raises labor standards in an effort to improve working conditions in Mexico and tightens rules for auto-industry trade in an effort to raise wages. While labor groups including the International Brotherhood of Teamsters said it is an improvement over NAFTA, the new deal has been widely criticized for not having stronger enforcement provisions to prevent U.S. companies from moving across the border to cut costs.

FTZ Board Activity

Patterson Pump Company submitted a Notification of Proposed Production Activity for specialty pumps in a new subzone of FTZ 26 in Toccoa, Georgia. MORE
HP International Trading B.V. LLC received approval to operate its facility in Aguadilla, Puerto Rico as Subzone 61V. MORE
Puerto Rico Wood Treating Industries, Inc. received approval to operate its facility in Carolina, Puerto Rico as Subzone 61W. MORE
Hitachi Automotive Systems Americas, Inc. received authorization of production activity for additional automotive components within Subzone 29F in Harrodsburg and Berea, Kentucky. MORE
Merck & Co., Inc. received authorization of production activity for pharmaceuticals within FTZ 185 in Elkton, Virginia. MORE
Lasko Products, LLC submitted a Notification of Proposed Production Activity for small consumer appliances including fans, heaters, and humidifiers within a new site of FTZ 78 in Franklin, Tennessee. MORE
Coreworks, LLC received authorization of production activity for brazed aluminum heat exchangers and cryogenic equipment within FTZ 84 in Katy, Texas. MORE
LLFlex, LLC received authorization of production activity for aluminum and steel cable wraps within FTZ 29 in Louisville, Kentucky. MORE
Stihl, Incorporated received authorization of production activity for additional components for outdoor power equipment within FTZ 20 in Norfolk, Virginia. MORE
Gulfstream Aerospace Corporation submitted a Notification of Proposed Production Activity for disassembly of additional aircraft components within Subzone 168E in Dallas, Texas. MORE
The City of Conroe submitted an application to add additional acreage to the ASF service area of Foreign-Trade Zone 265 in Conroe, Texas. MORE
Patterson Pump Company submitted an application for subzone status for its facility within FTZ 26 in Toccoa, Georgia. MORE
Benteler Steel/Tube Manufacturing Corp. submitted a Notification of Proposed Production Activity for seamless quality steel tubes within FTZ 145 in Shreveport, Louisiana. MORE
South Florida Lumber Company submitted a Notification of Proposed Production Activity for steel frames within FTZ 281 in Medley, Florida. MORE
Abbott Laboratories received approval to expand Subzone 22F in Elk Grove Village, Illinois. MORE
Bristol-Myers Squibb Holdings Pharma, Ltd. received authorization of production activity for pharmaceuticals within FTZ 7 in Mayaguez, Puerto Rico. MORE
MVP International Group, Inc. received authorization of production activity for candles, reed diffusers, and wax melts within FTZ 230 in Elkin and Boonville, North Carolina. MORE
United Furniture Industries, Inc. submitted an application for subzone status for its facilites within FTZ 158 in Nettleton and Amory, Mississippi. MORE
Hitachi Automotive Systems America, Inc. submitted an application for the expansion of Subzone 29F in Louisville, Kentucky. MORE
DENSO Manufacturing Michigan, Inc. submitted a Notification of Proposed Production Activity for automotive HVAC and engine cooling products within FTZ 43 in Battle Creek, Michigan. MORE
Northern Mississippi FTZ, Inc. submitted an application for reorganization of FTZ 262 under the alternative site framework in Southaven, Mississippi. MORE
Pueblo, Inc. submitted an application for subzone status for its facility within FTZ 61 in Guaynabo, Puerto Rico. MORE

That all changed with one phone call.