FTZ’ine August 2022

August 2, 2022

FTZ’ine October 2022

October 4, 2022

FTZ’ine September 2022

What I Did This Summer

Well, that was fast. With the Labor Day holiday just days, away your Nation’s Capitol can now look back at its accomplishments and disappointments of hot, dry Summer 2022.

There were legislative successes. First, Congress passed the CHIPS and Science Act to stimulate the reshoring of semiconductor manufacturing in the United States. Then, seemingly out of nowhere, a compromise was reached on a landmark spending plan to address climate change and health care costs.

There were diplomatic difficulties. A visit to Taiwan by House Speaker Nancy Pelosi sent China into a tailspin that resulted in missiles fired into important international shipping lanes. The U.S. government delivered HIMARS tactical missile launchers to Ukraine which led Russia to further ratchet up the conflict with threats to a large nuclear power plant and a call for a dramatic increase in Russian troop strength. As Europe struggles with its dependence on Russia for energy, hydrocarbon sales now earn Moscow $20 billion a month from oil and gas exports, helping compensate for Western sanctions and fund the conflict in Ukraine.

Fall will bring a return to school and uncertainty for international traders as the events of a sunny summer combine for an overcast global economic outlook in the coming months.

Top Story: Powell Clouds U.S. Economic Outlook

Speaking of fast, did you notice how quickly the summer stock market rally ended? It came to an abrupt end after a speech. An eight-minute speech. Somewhere in Wyoming. By just one person.

That person would be none other than Jay(Jerome) Powell, Chairman of the Federal Reserve who ended the 401(k) party when he said that the central bank was determined to bring down inflation even if it led to “some pain” for households, businesses and investors.

In 480 seconds Chairman Powell tumbled stock markets worldwide, with the S&P 500 falling nearly 3.5 percent just on the day of his appearance. The August 26th decline hasn’t stopped since, and September is historically the worst month of the year for stocks.

Chairman Powell’s comments didn’t just affect the United States. Asian and European stock markets reacted the same way as his Jackson Hole, Wyoming comments were the most direct sign yet that the Fed plans to continue raising interest rates for the foreseeable future.

The strong U.S. job market isn’t making the Fed’s task any easier. Last month’s jobs report far exceeded expectations, and unemployment dropped again to 3.5%. There are now two job openings for every unemployed worker in the U.S., on average.

Investors also sold their bond holdings. The yield on the two-year Treasury note hit a 15-year high on the day of the speech on fears that the economy will slow further.

Higher interest rates will create more investment flow into the United States, which will have the immediate effect of strengthening the dollar. That will bring down the cost of imports for traders, but reduce the revenue available from exports.

Chairman Powell cautioned that the Fed will continue to act until inflation subsides. The latest measure of inflation was over 8%, near its highest level in more than 40 years.

“We are moving our policy stance purposefully to a level that will be sufficiently restrictive to return inflation to 2%,” he said. Looking into the future, the central bank leader added that “restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy.”

The economy is coming off consecutive quarters of negative GDP growth, a commonly held definition of a recession. However, Powell and most other economists see the underlying economy as strong if slowing.

Chairman Powell repeatedly noted that he doesn’t think recession is an inevitable outcome for the U.S. economy.

Tech Tip: Option For Moving Zone To Zone In The Same Port

Ever since the in-bond regulations were updated to require electronic filing, zones have been asking CBP how to accomplish this for zone-to-zone transfers in the same port. Some zones may now have an option.

Because a movement between FTZs does not cross the U.S. border, the BOL is not registered with CBP. This has prevented the use of the electronic Permit to Transfer (ePTT) process because each in-bond request must have a BOL number registered in the Automated Commercial Environment (ACE).

One way to work around this technical limitation is for the receiving zone to file an individual zone admission prior to the goods being transported. In doing so, the BOL to be provided, according to the e214 CATAIR, is the “domestic carrier’s bill of lading or originating Zone Operator declared bill of lading reported on the In-Bond movement.” On such an admission, no other manifest data is required, but doing this makes the BOL visible in ACE. Then the ePTT can be electronically filed on that BOL. That eliminates the paper PTT process for CBP Officers and zone administrators.

Before you try this ePTT option, be sure to address carrier expectations with your port. If you have question about this or other in bond procedures, please send them to us at Info@iscm.co.

China U.S. Relations Continue To Decline

Bet you didn’t think that was possible, but the U.S. - China disputes over trade, security, technology, and Beijing’s treatment of Uyghur Muslims continue to widen, with no relief in sight.

The U.S. Trade Representative (USTR) announced last month that it will hold direct trade talks with Taiwan in a sign of support for the island democracy. In response, China warned that it will take action if necessary to “safeguard its sovereignty.”

China is actually a much larger trading partner to Taiwan than the United States is. But, China has used this reliance as a way to pressure Taiwanese officials to accept Chinese rule. That has prompted Taiwan to seek stronger relationships with its other trading partners including the United States, Japan, and South Korea.

USTR said “formal negotiations” would develop trade and regulatory ties, a step that would entail closer official interaction.

The trade talks come after Beijing fired missiles into the sea right after House Speaker Nancy Pelosi became the highest-ranking American official to visit the island in 25 years. Those missile strikes paused ocean trade with the island, the lifeblood of Taiwan’s economy.

Chinese President Xi Jinping’s government criticized the planned talks as a violation of its stance that Taiwan has no right to foreign relations. It warned Washington not to encourage the island to try to assert independence, a step Beijing says would lead to war.

“China firmly opposes this,” Ministry of Commerce spokesperson Shu Jueting said. She called on Washington to “fully respect China’s core interests.”

President Biden’s coordinator for the Indo-Pacific region, Kurt Campbell, said that trade talks would “deepen our ties with Taiwan” but stressed policy wasn’t changing. The United States has no diplomatic relations with Taiwan, our ninth-largest trading partner, but maintains extensive informal ties.

Being allowed to export more to the United States might help Taiwan blunt China’s efforts to use its status as the island’s biggest trading partner as political leverage. The Chinese government blocked imports of Taiwanese citrus and other food in retaliation for Speaker Pelosi’s August visit.

The U.S. Trade Representative said negotiations would be conducted under the auspices of Washington’s unofficial embassy, the American Institute in Taiwan.

A delegation including Indiana’s governor also held August trade talks with Taipei. That delegation included Gov. Eric J. Holcomb and Bradley B. Chambers, Indiana’s Secretary of Commerce.

Taiwan is the biggest producer of the world’s most advanced microchips. Worried about the Chinese threat to the island, the United States and others are trying to expand access to Taiwan’s crucial semiconductor industry.

Chassis Maintenance Issue Stalls West Coast Negotiations

The Wall Street Journal reported that the International Longshore & Warehouse Union (ILWU) has halted west coast contract negotiations on major issues like wages until a dispute is settled over which union will be responsible for equipment maintenance at the Port of Seattle.

The ILWU reportedly wants its members to handle the maintenance. The Pacific Maritime Association (PMA) on the other side of the negotiating table reportedly said that it can’t give the work to the ILWU because the federal government ruled two years ago that the International Association of Machinists and Aerospace Workers must be awarded those maintenance duties.

While no impact to operations has been reported, importers are frustrated that there is still no clarity on west coast port costs or availability based on suspended negotiations for 22,000 dock workers at 29 ports up and down the West Coast.

ILWU and PMA haven’t commented on the alleged roadblock, saying only that negotiations are ongoing and that any reports on particulars are speculative and “second, third or fourth hand.” The sides have mutually agreed to refrain from discussing the talks in public.

The news of the suspension in talks comes about three-and-a-half months into the contract negotiations and nearly two months since the contract for unionized West Coast port workers expired on July 1.

Fueled by concern over potential West Coast issues, some importers have redirected cargo to East Coast and Gulf Coast ports, though that’s led to congestion at some ports in those areas and is typically more expensive if bringing in product from Asia.

Separately, the nation’s freight railroads reached deals with the Transportation Communications Union/IAM, Brotherhood of Railway Carmen, and International Association of Machinists and Aerospace Workers to avert a nationwide railroad strike.

Those tentative rail agreements include a 24 per cent wage increase during the five-year period from 2020 through 2024 — with a 14.1 per cent wage increase effective immediately — and five annual $1,000 lump sum payments.

Economic Outlook, China Threats Complicate Section 301 Decision

President Biden’s economic team has reportedly sidelined any action on lifting the Section 301 additional tariffs. While doing so might be a step to address inflation, it could also send the wrong signal to China which recently fired missiles into important international shipping lanes.

China’s war games around Taiwan have led Biden administration officials to reconsider their thinking on whether to scrap some tariffs or potentially impose others on Beijing, setting those options aside for now, according to sources familiar with the deliberations.

President Biden has not made a decision either way, officials said. His team has been wrestling for months with various ways to tamp down skyrocketing inflation.

With elimination of all the tariffs on the back burner for now, focus is on a possible expansion of the list of permitted exclusions.

The Trump administration had approved tariff exclusions for more than 2,200 import categories, including many critical industrial components and chemicals, but those expired as President Biden took office in January 2021. USTR Katherine Tai has reinstated only 352 of them. Industry groups and more than 140 U.S. lawmakers have urged her to vastly increase the numbers.

Some senior administration officials, including Treasury Secretary Janet Yellen, had argued the duties were imposed on “non-strategic” consumer goods that had unnecessarily raised costs for consumers and businesses, and removing them could help ease rampant inflation. USTR Tai argued the tariffs were “significant leverage” that should be used to press China for changes to its behavior.

Now Planes Are In Short Supply Too . . .

Been to the airport lately? Now passengers aren’t the only ones paying more to fly. A tight supply of aircraft is driving up the price airlines pay to rent planes, just as passenger demand returns. That could put additional pressure on freight rates as well.

The rent on a new Boeing 737 Max rose more than 20% between April 2020 and this July to $316,000 a month, estimates aviation advisory firm IBA Group. The competing Airbus A320neo climbed to $324,000 a month, up more than 14% from April 2020, and the highest price since before the Covid pandemic. The larger version, the A321neo, was going for $375,000 per month in July.

More than 51% of the world’s nearly 23,000 single- and double-aisle jetliners are owned or managed by leasing firms, as opposed to airlines, according to aviation consulting firm Cirium.

Reasons for leasing vary and include weak credit ratings that drive up borrowing costs, and the desire, or need, to conserve cash, rather than shelling out to buy new planes, which can run more than $100 million apiece at list prices.

The higher costs come as airlines are already facing high inflation, resulting in expenses that usually get passed along in fares and freight rates. Aircraft rents are approaching or in some cases surpassing 2019 prices, and this year’s surge in oil prices make newer, fuel-efficient planes more attractive than older ones.

The trend is the result of a resurgence in airline bookings while Boeing and Airbus – still recovering from a demand and production lull during the earlier days of the pandemic along with supply chain issues – are unable to ramp up production as much as they would like to.

Global passenger traffic rose in 76% in June from a year earlier, but is still down about 29% compared with before the pandemic, according to the International Air Transport Association’s latest available data.

Airlines and airports around the world have been extending passenger caps and cuts to flight schedules through the fall and winter, attempting to steady operations after a wild summer of global travel disruptions that show no signs of easing.

IRA EV Provision Irks Friendshoring Partners

The European Union expressed concern last month that a new U.S. tax credit plan aimed at encouraging Americans to buy electric vehicles would discriminate against European producers and break World Trade Organization rules.

Under the Inflation Reduction Act signed by President Biden last month, a tax credit of up to $7,500 could be granted to lower the cost of an electric vehicle. To qualify though, the new law requires that the electric vehicle must contain a battery built in North America with minerals mined or recycled on the continent.

“The European Union is deeply concerned by this new, potential, trans-Atlantic trade barrier,” European Commission spokeswoman Miriam Garcia Ferrer said. “We think that it’s discriminatory, that it’s discriminating against foreign producers in relation to U.S. producers.”

The provisions in the new law strain relationships with trusted trading partners at a time when the U.S. is trying to develop a common trade front to counter the military tactics and ambitions of Russia and China.

“Of course this would mean that it would be incompatible with the WTO,” EC spokeswoman Miriam Garcia Ferrer said. The commission is the EU’s executive branch, and part of its responsibilities is to conduct trade with the outside world on behalf of the bloc’s 27 nations.

The idea behind the U.S. requirement is to encourage domestic manufacturing and mining, build a robust battery supply chain in North America, and lessen the industry’s dependence on overseas supply chains that could be subject to disruptions.

Production of lithium and other minerals that are used to produce EV batteries is now dominated by China. The world’s leading producer of cobalt, another component of the EV batteries, is the Democratic Republic of Congo.

FTZ Staff Activity

FTZ Board Staff processed a Minor Boundary Modification (S-111-2022) in FTZ 32 on behalf of FOH, Inc., in Miami, FL on July 7, 2022
FTZ Board Staff processed a Minor Boundary Modification (S-112-2022) in FTZ 281 on behalf of Mass Parts LLC, in Medley, FL on July 8, 2022
FTZ Board Staff processed a Minor Boundary Modification (S-113-2022) in FTZ 241 on behalf of Almod Diamonds Ltd., Inc., in Miramar, FL on July 8, 2022
FTZ Board Staff processed a Minor Boundary Modification (S-114-2022) in FTZ 94 on behalf of Transplace Mexico, in Laredo, TX on July 11, 2022
FTZ Board Staff processed a Minor Boundary Modification (S-115-2022) in FTZ 18G on behalf of Tesla, Inc., in Stockton, CA on July 12, 2022
FTZ Board Staff processed a Minor Boundary Modification (S-116-2022) in FTZ 8I on behalf of Whirlpool Corporation, in Clyde, OH on July 12, 2022
FTZ Board Staff processed a Minor Boundary Modification (S-117-2022) in FTZ 151E on behalf of Whirlpool Corporation, in Fostoria, OH on July 12, 2022
FTZ Board Staff processed a Minor Boundary Modification (S-118-2022) in FTZ 70Y on behalf of BW Retail Solutions, LLC, in Chesterfield and Richmond, MI on July 14, 2022
FTZ Board Staff processed a Minor Boundary Modification (S-119-2022) in FTZ 12C on behalf of Black & Decker (U .S.), Inc., in Mission/Pharr, TX on July 19, 2022
FTZ Board Staff processed a Minor Boundary Modification (S-120-2022) in FTZ 59A on behalf of Kawasaki Motors Manufacturing Corporation, in Lincoln, NE on July 20, 2022
FTZ Board Staff processed a Minor Boundary Modification (S-121-2022) in FTZ 29S on behalf of UPS Supply Chain Solutions, Inc., in Shepherdsville, KY on July 21, 2022
FTZ Board Staff processed a Minor Boundary Modification (S-122-2022) in FTZ 149H on behalf of Maxter Healthcare Inc., in Rosharon, TX on July 25, 2022
FTZ Board Staff processed a Minor Boundary Modification (S-123-2022) in FTZ 26V on behalf of BW Retail Solutions, LLC, in McDonough, GA on July 25, 2022
FTZ Board Staff processed a Minor Boundary Modification (S-124-2022) in FTZ 26 on behalf of DSV Air and Sea, Inc., in Atlanta, GA on July 26, 2022
FTZ Board Staff processed a Minor Boundary Modification (S-125-2022) in FTZ 18I on behalf of Bloom Energy Corporation, in Newark, CA on July 27, 2022
FTZ Board Staff processed a Minor Boundary Modification (S-126-2022) in FTZ 57D on behalf of Exela Pharma Sciences, LLC, in Lenoir, NC on July 27, 2022
FTZ Board Staff processed a Minor Boundary Modification (S-127-2022) in FTZ 32 on behalf of Hublot of America, Inc., in Miami, FL on July 28, 2022
FTZ Board Staff processed a Minor Boundary Modification (S-128-2022) in FTZ 9 on behalf of Hawaii Fueling Facilities Corporation - Hilo Airport, in Hilo, HI on July 28, 2022
FTZ Board Staff processed a Minor Boundary Modification (S-129-2022) in FTZ 9 on behalf of Hawaii Fueling Facilities Corporation - Kona, in Kona, HI on July 28, 2022
FTZ Board Staff processed a Minor Boundary Modification (S-130-2022) in FTZ 9 on behalf of Hawaii Fueling Facilities Corporation - Kahului Airport, in Kahului, HI on July 28, 2022
FTZ Board Staff processed a Minor Boundary Modification (S-131-2022) in FTZ 9 on behalf of Hawaii Fueling Facilities Corporation - Lihue Airport, in Lihue, HI on July 28, 2022
FTZ Board Staff processed a Minor Boundary Modification (S-132-2022) in FTZ 147 on behalf of Newell Brands Distribution, LLC, in Newville, PA on August 1, 2022
FTZ Board Staff processed a Minor Boundary Modification (S-133-2022) in FTZ 57 on behalf of Newell Brands Distribution, LLC, in Gastonia, NC on August 1, 2022
FTZ Board Staff processed a Minor Boundary Modification (S-134-2022) in FTZ 43H on behalf of DENSO Manufacturing Michigan, Inc., in Battle Creek, MI on August 2, 2022
FTZ Board Staff processed a Minor Boundary Modification (S-135-2022) in FTZ 49Q on behalf of Kinder Morgan Liquids Terminals, LLC, in Perth Amboy, NJ on August 4, 2022
FTZ Board Staff processed a Minor Boundary Modification (S-136-2022) in FTZ 180 on behalf of Prism Team Services Inc. of The East Bay, in Hayward, CA on August 4, 2022

FTZ Board Activity

Piramal Pharma Solutions submitted a notification of proposed production activity for pharmaceutical products within FTZ 35 in Sellersville, Pennsylvania. MORE
The Land of Sky Regional Council submitted an application to establish a Foreign-Trade Zone in Western North Carolina under the alternative site framework. MORE
Albion Laboratories, Inc. submitted a notification of proposed production activity for mineral amino acid chelates within FTZ 30 in Ogden, Utah. MORE
Expeditors International of Washington, Inc. received approval for the expansion of Subzone 68A in El Paso, Texas. MORE
Lucid Motors USA, Inc. submitted a notification of proposed production activity for electric automobiles and subassemblies within FTZ 75 in Casa Grande and Tempe, Arizona. MORE
CoLinx, LLC received authorization of production activity for spherical roller bearing kits within FTZ 148 in Crossville, Tennessee. MORE
Oldach Associates, LLC submitted an application for the expansion of Subzone 61Z in Cataño, Puerto Rico. MORE
Burger Boat Company submitted an application for subzone status for its facility within FTZ 167 in Brown County, Wisconsin. MORE
M.M.O. Companies, Inc. received authorization of production activity for disassembly of firearms and ammunition within FTZ 31 in Mascoutah, Edwardsville and Collinsville, Illinois. MORE
DMA Sales, LLC received approval for subzone status as subzone 21I for its facilities in Marion and Nichols, South Carolina. MORE
Swafford Warehousing, Inc. received authorization of production activity for medical kits within FTZ 38 in Greer, South Carolina. MORE
Flemish Master Weavers submitted a notification of proposed production activity for machine-made woven area rugs within FTZ 186 in Sanford, Maine. MORE
Sager Electronics received approval for the expansion of Subzone 168G in Lewisville, Texas. MORE
Exela Pharma Sciences, LLC submitted a notification of proposed production activity for pharmaceutical products within FTZ 57 in Lenoir, North Carolina. MORE
Hyundai Motor Manufacturing Alabama, LLC submitted a notification of proposed production activity for passenger automobiles, trucks, and cargo trucks within FTZ 222 in Montgomery, Alabama. MORE
Shipbuilders of Wisconsin, Inc., d/b/a Burger Boat Company submitted a notification of proposed production activity for construction and repair of vessels and hulls within FTZ 167 in Manitowoc, Wisconsin. MORE
Wyeth Pharmaceuticals, LLC submitted a notification of proposed production activity for COVID-19 vaccine within FTZ 27 in Andover, Massachusetts. MORE
AIAC International Pharma, LLC received authorization of production activity for pharmaceutical products within FTZ 61 in Arecibo, Puerto Rico. MORE
Epson Portland, Inc. submitted a notification of proposed production activity for inkjet ink printer bottles (empty and filled) within FTZ 45 in Hillsboro, Oregon. MORE

What I Did This Summer

Well that was fast. With the Labor Day holiday just days away your Nation’s Capitol can now look back at its accomplishments and disappointments of hot, dry Summer 2022.

There were diplomatic difficulties. A visit to Taiwan by House Speaker Nancy Pelosi sent China into a tailspin that resulted in missiles fired into important international shipping lanes. The U.S. government delivered HIMARS tactical missile launchers to Ukraine which led Russia to further rachet up the conflict with threats to a large nuclear power plant and a call for a dramatic increase in Russian troop strength. As Europe struggles with its dependence on Russia for energy, hydrocarbon sales now earn Moscow $20 billion a month from oil and gas exports, helping compensate for Western sanctions and fund the conflict in Ukraine. Fall will bring a return to school and uncertainty for international traders as the events of a sunny summer combine for an overcast global economic outlook in the coming months.