Results of a GSP review have just been published as Presidential Proclamation 9813. This announcement lists changes to select products and countries. The GSP status of these identified articles is effective for goods entering on/after November 1, 2018.
A back-to-back letter of credit (LC) is a common, but often overlooked, form of trade financing.
In a typical back-to-back LC scenario, an intermediary trading company receives an inbound LC from the buyer’s (applicant’s) bank and, using that first LC as collateral, issues a second, outbound LC in favor of the supplier (beneficiary).
Back-to-back LCs are surprisingly simple to coordinate, as both LCs are nearly identical. The only differences between the two LCs in a back-to-back LC model are the credit amount vs. the unit price and the expiry date/period for presentation/latest shipment dates. The unit price is how much the product will cost the final customer, whereas the credit amount accounts for the wholesale costs. The timing of the two LCs must be staggered to allow time for each party to process and transport the shipment.
The additional layer of security that back-to-back LCs provide comes not only from the presence of two separate, albeit nearly identical LCs, but also from the fact that both LCs are available at the intermediary’s bank. This centralized method of monitoring reduces risk and secures all parties involved in the multi-tiered transaction at hand.
Back-to-back LCs therefore help build trust between buyers and sellers of goods around the world, reduce credit risk, and speed up cash flow. They’re beneficial to the intermediary trading company insofar as the company does not need to disclose to its supplier the details of the ultimate buyer of the goods or even the price at which they were sold.
President Trump’s promised trade war has begun and it doesn’t look like there will be any winners.
Earlier this year, Trump imposed a series of new import tariffs on goods made outside the US, particularly those made in China. The move has been controversial, largely because each affected country’s respective economy relies heavily on exports. As many economists predicted, however, China, India, the EU and Russia have all fired back.
The president signed the so-called “Trump Tariffs” in March in an attempt to combat “unfair trade practices“ in China and other manufacturing hubs. The newly established tariffs targeted $34 billion in Chinese-produced goods, as well as numerous steel and aluminum goods manufactured abroad.
Shortly after news of the proclamations broke, the EU pledged to place new tariffs on American-made goods in retaliation. Soon after, China announced plans to impose a 25% tariff on US exports, including motor vehicles, soy beans and lobster, which also total at $34 billion in value. Russia followed suit last week and began introducing its own tariffs on US goods, including mining and road building equipment as well as oil/gas industry products. India joined in last week as well, notifying the World Trade Organization that it would raise tariffs on 30 US products including almonds, seafood and chocolate.
Experts continue to debate the precise effects that the trade war will have, but many agree that US traders will struggle to maintain financial stability and accessibility to everyday consumer goods. Although the US is economically stronger than any of the other involved countries, we lack the infrastructure and workforce to supplement the manufacturing resources on which we’ve become dependent in recent decades.
The trade war also drew controversy within the White House and among the Republican party. Several party leaders including House speaker Paul Ryan and former White House economic advisor Gary D. Cohn lobbied against the trade plan. Cohn even resigned shortly after the plan was set in motion, though it is unclear whether he left specifically due to the trade war.
As of now, it is still unclear what the lasting effects of this trade war will be, but sources warn that US consumers and exporters will suffer the most. It may seem counterintuitive, but a combination of the price increases on goods that we continue to import to meet demand and the devastating effect that retaliatory tariffs will likely have on US farmers and manufacturers will probably have a far more detrimental effect than most activity in the ongoing struggle.
Needless to say, it’s difficult to predict precise outcomes this early in the process, but given the buying and manufacturing powers at hand, the international trade industry may change dramatically.
The following is an update on recent tariff adjustments on steel, aluminum, and Chinese-made products.
Steel and Aluminum Products:
Several Presidential Proclamations signed in March 2018 have collectively implemented Section 232 of the Trade Expansion Act of 1962. The Proclamations primarily serve to adjust imports of aluminum and steel into the United States. The proclamations indicate that covered steel mill and aluminum product imports will be subject to additional tariffs of 25% ad valorem and 10% ad valorem respectively. The following products are covered:
Steel mill product HTSUS classifications:
10 through 7216.50 including bars, rods, ingots and angles.
99 through 7301.10 including wire, bars, rods, ingots and sheet piling.
40 through 7302.90 including sleepers and plates.
11 through 7306.90 including pipes, hollow profiles and tubes.
Aluminum product HTS classifications:
7601, unwrought aluminum.
7604 including rods, profiles and bars.
7605, aluminum wire.
7606 and 7607 including flat rolled products like foil, sheet, strip and plate.
7608 and 7609 including pipes, tubes, and pipe and tube fittings.
99.51.60 and 76126.96.36.199, forgings and castings.
The newly implemented tariffs will be added to all existing duties and will apply to all countries of origin except for a specific list of exempted countries. Exempted countries include Argentina, Australia, Brazil, Canada, Mexico, South Korea and European Union members, which include Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom.
As of now, exemptions are limited through April 30th, 2018, but it is unclear whether they will be extended beyond that date. Extension of the exemptions may lead to a change in the rates applied to other countries and/or restraints on quotas for some, or all countries of origin.
Products from China:
On March 22, 2018, President Trump announced his plan of actionto combat China’s unfair trade practices as addressed in the USTR Section 301 investigation of China’s Policies, Acts, and Practices pertaining to Intellectual Property, Innovation and Technology Transfer. As the president’s instructions, US Trade Representative Robert Lighthizer began the investigation in August of 2017.
President Trump has indicated that action against China will be taken in three stages:
Tariffs. Representative Lighthizer will propose a list of products with corresponding tariff increases within 15 days of the announcement on March 22, 2018. The final list will be published after a brief period for notice and comment.
WTO dispute settlement. Representative Lighthizer will attempt to settle the dispute in the World Trade Organization, or WTO to address discriminatory practices in China’s technology licensing.
Restricted investments. The Secretary of the Treasury will address concerns about investors in China or investments facilitated in China in US industries or technologies deemed important to the US.
On the bright side, President Trump signed an omnibus budget bill into law which aims to end the ongoing cycle of resolutions and government shutdowns. It also renews the General System of Preferences, or GSP, which seeks to ensure fair trade practices among WTO countries. The bill will extend GSP through December 31st, 2020 and retroactively renew it to the previous expiration on December 31st, 2017. Goods that arrive in between will be eligible for a refund, if indicated properly. The GSP will officially go back into effect on April 22, 2018.
An explosion and subsequent fire broke out at the Yantian Container Terminal on the evening of November 10th. The fire was said to be highly destructive, burning at least one container, assumed to be full of lithium batteries, straight through the bottom. Click herefor more details from Maritime Bulletin.
The shipping and logistics industry is constantly evolving. With the changing landscape of domestic and international trade, consumers’ varied and shifting priorities, and the breakneck pace of new technological developments, it can be difficult to keep up.
Here are some of the current trends in the logistics industry and a few that are on the rise:
Supply Chain Responsibility and Transparency
In recent years, consumers have become more mindful of where their goods are sourced and the ethics of the businesses they patronize. Consequently, producers of consumer goods are increasingly scrutinizing every step in the process of creating and selling their goods, from sourcing of raw materials (e.g. mining and farming) to manufacturing, shipping, and final sale to consumers.
US consumers generally have two main concerns regarding the production and sale of purchased goods: environmental effects (i.e. carbon footprint) and fair treatment of workers (mostly non-domestic) who harvest materials and manufacture goods. One solution that addresses both issues is the blockchain, a digital ledger that allows businesses to verify each vendor and manufacturer in their supply chain, regardless of the size and complexity of their networks.
Beyond comprehensive awareness of one’s supply chain, recent advancements in low-emission vehicles are helping the shipping community create more viable long-term solutions to the extremely pollutive nature of traditional ocean, air, and road transportation. When combined with technologies like blockchain, shipping service-consumers will have the option to choose shippers based on criteria beyond the standard twin considerations of speed and cost.
Warehousing goods is nothing new, but companies like Amazon have changed the nature of warehousing, both in terms of how many warehouses they operate and the way they use the space.
In recent years, Amazon has begun warehousing its goods using increasingly creative methods, both in the US and abroad, allowing them to expedite more shipments and give “Prime” members their money’s worth. They’ve even ramped up expectations and delivery speed in 27 US cities with “Prime Now,” a service that boasts a massive selection of household items, all of which are deliverable within an hour.
Warehousing on this scale reflects the changing face of retail. Vast quantities of commercial space that might have been used for retail ten years ago are now put to more practical use storing goods to be sold online.
The world has gone digital and logistics is no exception. Across the board, shippers are taking advantage of cloud computing well beyond the blockchain. The cloud allows shippers to store as much information as necessary in a secure online database that easily adjusts to fluctuating volumes, intuitively organizes transactions and effectively contains costs. The cloud also safeguards data if on-site monitoring devices are damaged.
Earlier this year, some logistics companies began arming their pickers with wearable technology, like Google Glass, to reduce human error and ensure accuracy. While the trend seems to have lost momentum, accuracy-checking technology remains a hot topic in the industry.
Although it’ll be a long time before robots take over the shipping process, robotic technology to increase logistical efficiency is advancing at an impressive rate. Various degrees of automation have been implemented in the last few years to increase efficiency and accuracy.
As it currently stands, logistical robotic technology is limited to systems that transport goods to the picker. However, industry leaders are eagerly awaiting technological advancements that will allow robots to take over the picking process altogether, wherein they will be able to pick from conventional racks and conveyance equipment and move goods within the warehouse.
Autonomous transportation vehicles
On the cutting edge of the logistics industry, vehicles that transport goods without a human operator are a growing trend. Although the technology is still in its infancy, several varieties of unmanned carrier vehicles are in development.
Australia has established a government initiative, known as the Australian Driverless Vehicle Initiative or ADVI, devoted to developing autonomous road vehicles. The technology is still relatively new, but long-haul trucks may be the first to go driver-less, as they are subject to fewer regulations than passenger vehicles.
Perhaps more well-known is the carrier drone, famously developed by both Amazon and several medical supply companies overseas. Drones are particularly exciting because they enable direct deliveries regardless of traffic or road conditions. They are meant to simplify fast delivery to urban areas with heavy road traffic, impoverished areas where roads are inadequate, and war zones to which traditional delivery vehicles might be unable to travel.
Harmful invasive pests and pathogens are found in the solid wood packing material (SWPM) that accompanies shipments in international trade. Wooden pallets, crating, and dunnage can harbor environmentally and economically harmful species that use the wood as host material, feed upon it, or hitch a ride on it and then threaten domestic timber. Outbreaks of the Asian long-horned beetle, Anoplophora glabripennis (Motschulsky), pine shoot beetle, Tomicus piniperda (L.), and the emerald ash borer, Agrilus planipennis (Fairmaire), have been traced to importations of SWPM. Coping with the risks associated with the introduction of these pests via SWPM has become an increasingly important issue with the expansion of international trade.
For over a dozen years now, regulations have been in place that require treatment and marking of non-exempt wood packing material (WPM) imported into the United States. CBP recently issued a notice that effective November 1, 2017 penalties will be issued for violations of the wood packaging material regulations. The full notice with a link to detailed regulatory requirements can be found at CSMS# 17-000609 – ISSUANCE OF WOOD PACKAGING MATERIAL PENALTY. Importers are encouraged to understand these regulations and monitor compliance.
CBP informed the trade community today of anticipated trade interruption due to Hurricane Irma. At this time planning is centered on potential impact to southern Florida ports. CBP issued CSMS 17-000540 yesterday with the same basic instructions as those recently issued in regard to Hurricane Harvey.
As of 3:00 PM September 6, 2017, only the port of Key West is closed (not a cargo-processing port) and CBP expects to keep other ports open but with reduced operational hours, subject to adjustment based on storm impact.
Miami and Tampa Fish and Wildlife port will be closed on Thursday, September 7, and Friday, September 8, and expected to reopen on Monday, September 11, subject to adjustment based on storm impact. Puerto Rico Fish and Wildlife office is closed until further notice. Fish and Wildlife advised that if FWS cargo is diverted, the closest operational FWS office should be contacted for instructions. EPA will monitor pesticide imports at the local level and will work with filers on any shipments. FDA has issued internal guidance, and CBP will share further updates as they become available.
Longshore workers from 29 ports across the west coast have voted to determine whether to extend the collective bargaining agreement they share with the Pacific Maritime Association, or PMA, for an additional three years. Early reporting on the ballot suggests that the extension will pass with 67% of votes, but the union’s Coast Balloting Committee will announce official results on August 4th. The agreement was scheduled to expire on July 1, 2019, but assuming the extension passes, it will be in effect through July 1, 2022.
The International Longshore and Warehouse Union (ILWU) voted on the unprecedented extension proposal after a year of debating and democratic process, allowing all registered longshore workers from Bellingham, WA to San Diego, CA to vote. The extension promises to raise wages, solidify health benefits and increase pensions.
ILWU International President Robert McEllrath said “The ILWU was founded on principles of democracy, and the rank-and-file always have the last word on their contracts. There was no shortage of differing views during the year-long debate leading up to this vote, and members didn’t take this step lightly. In the end, the members made the final decision to extend the contract for three years.”
A galaxy of constantly changing regulations governs the complex world of US imports. In our previous article on this subject, we focused on agricultural and licensed products. This time, we focus on some of the primary regulatory requirements imposed on other varieties of goods.
Prescription drugs, and even certain non-prescription drugs, are strictly regulated in the US, so much so that imported medications and medical equipment must be declared and permitted by CBP and the FDA ahead of shipment. Adding to the difficulty of regulatory compliance, international laws regarding medical supplements and equipment change quickly and often, which requires importers to stay vigilant and nimble.
Paperwork is paramount. For example, drug paraphernalia imports are illegal in the US unless intended for “authentic medical conditions.” If you import goods classified as drug paraphernalia, it is safest to include as much documentation as possible to specify and confirm the intended use of the items in question, including medical records if possible. Thorough documentation should, in theory, help your goods move more quickly, but you should always build in extra time in case CBP flags your shipment for inspection.
Depending on your level of experience in the automotive industry, you may have trouble auditing your automobile imports since regulations are more technical than those for most other products.
First and foremost, any automobiles imported into the US must adhere to the Environmental Protection Agency’s fuel-emission requirements, unless the vehicle was manufactured before a designated date. Gasoline-fueled cars or light-duty trucks, for example, must adhere to federal emission standards unless they were manufactured before January 1st, 1968.
Furthermore, if the vehicle has ever been driven outside the US, its undercarriage must be thoroughly cleaned to remove any foreign soil or dangerous pests. CBP indicates that you must have the car steam-sprayed or thoroughly cleaned by other means prior to shipment to prevent ecological damage.
There are also specific documentary requirements for automobile imports including EPA form 3520-1 and DOT form HS-7. Depending on the vehicle’s size, vintage, and fuel efficiency, there may be more. As always, do your research or hire a customs broker if you aren’t confident in your compliance.
Ceramic Home Goods
Although items like ceramic tableware and other home goods are not restricted per se, some ceramic goods from outside the US contain dangerous levels of lead in their glaze. These products are ultimately unsafe because the lead can seep into food and beverages served on or in them. Therefore, when importing ceramics, the primary concern is lead concentration.
CBP recommends testing the lead content in imported ceramics to avoid distribution of harmful goods. Since a lot of countries do not have strict legal guidelines for vessels intended to handle food, foreign government agencies will often skip this step. Thus, it is up to the ceramics importer to obtain satisfactory inspections and documentation.
If you must import and distribute ceramics that are not safe for food or drink, or you cannot ensure quality control or compliance, you must provide clear instructions to use those ceramics for decorative purposes only when you distribute them to avoid endangering customers and possible litigation.
One of the more prevalent challenges in importing is monitoring your supply chain. If your goods come from a foreign country, and you aren’t familiar with your supplier’s practices, you could find yourself in possession of, and liable for, stolen cultural artifacts. The best way to avoid this is to know with whom you are doing business and remain extra cautious in countries that are home to frequent artifact smuggling. As always, obtaining thorough documentation is key to avoiding confrontations with the CBP and other government agencies with jurisdiction over the matter.
While alcohol imports are generally legal in the US, one must acquire a permit from the Alcohol and Tobacco Tax and Trade Bureau before importing alcohol for sale. It is also important to note that most alcohol regulations differ between states. Thus, there are limits on the quantity of alcohol one can bring into certain states. Importers must always thoroughly research the regulations of state into which they plan to import alcohol and acquire any additional permits.
It is important to note that absinthe and any comparable spirits fall under stricter regulations. If you import absinthe, you need full details on the brand you plan to purchase and its packaging. Bottles labeled with the word “absinthe” or printed with images implying psychotropic effects may not be imported into the US. The product must also contain less than 10 parts per million of thujone due to its potentially dangerous effects.
These are just a few of CBP’s regulatory requirements and restrictions. CBP’s numerous regulations cover virtually all commercially traded goods. Before importing goods, educate yourself thoroughly, or, hire a competent customs broker to guide you through the process and to ensure that your goods are never delayed or detained due to lack of compliance.