USMCA to supplant NAFTA

The new agreement that has been signed is known as United States – Mexico – Canada Agreement  (USMCA). Unlike NAFTA, this new trade agreement will be reviewed in 6 years and is scheduled for termination/renewal in 16 years in a Sunset Clause, which is expected to help the agreement keep better pace with technology advancements and developments. As of right now limited information is available on line with the full agreement to be voted on by the US congress in early 2019. Key points in the agreement are detailed below.

  • Autos – will now require 75% vs. the current 62.5% content
    • Labor – requires 40-45% of auto components be made by workers paid at least $14/hr by 2020, $16/hr by 2023 with more union rights to workers in Mexico.
  • Steel & Aluminum – Tariffs remain the same but going forward new tariffs cannot be applied against CA & MX for at least 60 days
  • Dairy – US  will be given access to Canada’s dairy market
  • Dispute resolution – 2 methods remain in place in the USMCA
    •   State to State
    •   Chapter 19.
  • Wine – will now be allowed on the shelves next to CA Wine
  • Intellectual Property Rights – copyright protection now extended in CA to 70 years after the death of the author.
  • Drugs – Biologic drugs will be protected for 10 yrs from generic competitors up from 8 years previously
  • De Minimis – Mexico $50 to $100, Canada  C$20 to C$150 ($117)

We at Edward J. Zarach & Associates are keeping a close watch on these developments of the USMCA and will continue to update information as it becomes available. If you have any questions or concerns preparing for these new regulations, we encourage you to reach out to your representative for assistance.

Second tranche of additional China 301 duties begin August 23rd.

The Office of the United States Trade Representative announced on Tuesday that they have completed their work on the second proposed list of additional HTS numbers that will be subject to 25% duties from China. Unlike the first list which saw 818 out of an initially proposed 1300+ HTS numbers be put into effect, over 98% of the HTS numbers on the initially published list made it to the final list after comments and adjudication.

Beginning August 23rd, Customs and Border Protection will begin to collect 25% in additional duty on 279 of the originally proposed 284 numbers. This list includes $16 billion of products ranging from chemicals to plastic hoses, fertilizer spreaders, motors and more. As with the first list, importers will be able to write to request an exclusion and if one is granted to another company, they can make entry with that exclusion as well. The instructions for this process are expected to be identical to the first list, but have not yet been published. It is anticipated that exclusions will be very difficult to obtain and we strongly suggest that you speak to your Zarach representative about it in greater detail.

Unfazed by the US decision, China announced that correspondingly they would also impose sanctions beginning at 12:01 PM local time on a list of American products as well.

There are two things that warrant monitoring as this seemingly endless escalation continues and all importers should be wary.

  1. There are signs that while the comment period closes in early September for the third proposed list including handbags, bicycles and other retail-level consumer items, the proposed 10% may not be sufficient and the USTR may revise that list to 25%.
  2. Importers who find themselves caught in having to pay these additional duties will find that their continuous bonds are reaching their sufficiency at a much quicker rate than they calculated for the life of the bond. We are working with importers but also caution others to be aware that if they continue to import goods subject to these additional duties, they will need to seek much larger Customs bonds which will require additional data and financial instruments of collateral to guarantee them.

Edward J. Zarach & Associates is continuing to monitor these changes which impact importers of goods from China. We are also experienced in helping companies who are facing additional duties owing to the steel and aluminum duties that have been imposed as well. To learn more, contact us today.

 

 

USTR provides vehicle to request exclusion from 25% China 301 duties.

Companies and associations can write to request an exclusion from 25% duties under China 301 trade measures.

On July 6th, the Office of the United States Trade Representative (USTR) published a press release on their site detailing the process by which companies (or trade associations) can request exclusions from the 25% duties that were assessed on more than 800 HTS numbers from China. The instructions for requesting an exclusion were published the same date that the duties came into effect, triggering a reciprocal action from Beijing.

Unlike the steel and aluminum duties which were assessed and other categories of actions, the provision for a way out from underneath is a new one to importers and one that they can use to attempt to nullify the impact.

Published in the Federal Register, there are key elements to the program that applicants must be aware of.

  1. The period to request an exclusion runs through October 9, 2018.
  2. The public has fourteen days to respond to requests for exclusion once published on regulations.gov and after that period, an additional seven days to reply to any comments in favor of exclusion.
  3. Exclusions will apply for one year from date of publication and are retroactive to July 6, 2018.

There are a number of additional nuances and  simply writing to request an exclusion does not guarantee its acceptance. For more information about this opportunity for companies and associations, contact Lorrie Roddy, Director of Compliance, in our Chicago office at (630) 595-7300.

 

 

Employee Spotlight: Marcela Schaub

After almost four decades in the logistics profession, Marcela Schaub knows the industry like the back of her hand. Starting in export in the late 1970’s, she’s worked in almost every facet, mastered almost every job, and applies the same tenacity to her current position as Vice President with Edward J. Zarach & Associates. Her mantra of flexible perseverance is a perfect summation of what it takes to be successful in an ever-evolving career. “If you’re not flexible and persevering you’ll never make it in this business.”

An adventurer at heart, Marcela began her career as a travel agent but left in 1974 to take a part time job when her best friend informed her of a position that came available in ocean export. The fit was instantaneous and she worked throughout the company and industry in various positions from imports to a trading house to air freight and finally compliance. Her ability to adapt her skills and understand the complex nuance of logistics catapulted her to become first a National Vice President of Customs for Celadon Jacky Maeder and then the Director of North American Fashion at Panalpina. While she found much success, the breakneck pace of fashion eventually began to wear on her over the years and she began seeking a new position with more flexibility and creativity in a smaller office.

“I want to build something great from the ground up. Larger multi-national companies are perfect for learning and specializing, but if you want to get into the ideas, deep into the potential of building logistic solutions, a smaller place is where the dream lives,” she explains, noting that she herself is a glass-half-full person. “I enjoy finding a comprehensive solution to total success. I want to be part of change, of growth.”

In her spare time, this Argentinean born dynamo enjoys flying with her husband, Rene who has his pilot’s license and living on the shore, having left the frantic Manhattan pace behind. Married 22 years to a kindred spirit and fellow logistician workaholic, she is a voracious reader who enjoys opera, cooking, traveling and yes, as always, working hard to create something outstanding.

Photo Credit: Marcela Schaub, during an excursion around the city while Rene piloted.

Steel and aluminum to get additional duties – at 25% and 10% respectively – effective March 23rd

Updated Information as of Thursday, March 8, 2018: This afternoon, President Donald Trump announced global tariffs of 25% on steel and 10% on aluminum will take effect March 23.    Though it appears steel and aluminum imports from Mexico and Canada will be exempted from the trade remedies while NAFTA negotiations continue forward, other countries may find tariffs applied if “national security” is determined to be at risk from trade practices. President Trump went a step further today and proposed “mirror taxes” against countries who charge higher tariffs on US goods, like China and India, though he has yet to propose any specific action. Congress is still pushing the executive branch to further narrow the countries, products and quotas to which these steel and aluminum tariffs will apply.

Last Thursday, the President announced to the world that he had decided to impose additional duties on shipments of steel and aluminum to the United States of 25% and 10%, respectively.

The President’s remarks were considered by many to be premature because the final rates had not yet been set. Secretary Ross and the Commerce Department presented an initial combination of options which included:

  • Country specific rates
  • Country specific quota levels
  • A combination of country specific, quota and all-other rates

Given the timing that the findings of the report were presented to the White House, they technically had until nearly the middle of April to make the official announcements and warn America’s trading partners of the potential ramifications.

Fast forward to this week and America and steel and aluminum exporters are all wondering alike what the final outcome will be. We do know a few things.

Where does that leave companies today? The pushback from Congress, as well as from business-centric organizations like the US Chamber of Commerce means that the administration must firmly draw up plans for the tariffs which must be published in the Federal Register. Once published, the respective agencies like Commerce and Customs will know what tariff numbers will fall within the scope and what the duty rates will be and whether there will be variances for countries or quantities.

Here at Edward J. Zarach & Associates, we are monitoring the language and negotiations that are happening through a number of trade publications. When definitive guidance is announced, we will publish more information as well as links to the source material and suggestions for whatever remediating steps can be taken, if any, to blunt the impact of this decision.

How the ELD Mandate impacts trucking capacity

In December, the Electronic Logging Device (ELD) mandate took effect and carriers everywhere are working toward compliance. This rule helps save time by reducing paperwork, keeping dispatch up to date on driver statuses and allows for a better calculation of hours of service among drivers. But it’s not just trucks that are being impacted by the mandate, as containers loading and unloading are dependent on drivers; intermodal capacity is also affected.

In markets like Chicago, rough winter weather, highway closures and unseasonably high off-peak cargo volumes work in tandem with the ELD mandate to create a capacity crisis that overseas shippers aren’t exactly sympathetic toward. The ELD mandate is a United States issue, and as rates continue to climb up 7-10% in some regions, the long term pricing contracts that started last year are unyielding to trucking issues.

US port volumes are steadily rising as more imports arrive on our coasts to be unloaded and sent to distribution centers around the country, especially in areas like the Southeast US. As larger vessels call the ports, more containers need to be moved to destinations that are longer distances than those on the west coast or north east, and without the drivers ability to return to the ports on the same day, capacity plummets.  These trips were once a single day shot at 600-800 miles round trip, but with the ELD’s rules, an average trip only covers about 550 miles.

It stands to reason that as the adjustment period pains the supply chain, some companies are looking to cut corners, often by using sprinter vans and other smaller trucks that are immune to the mandate. Unfortunately these bandages aren’t feasible for large, heavy or container cargo and innovation will need to step in and further level the playing field. As the number of truck drivers have dwindled in the last decade, the experimentation with driverless trucks has taken off to a point we rarely go a month without a new article about the innovations being made to offset a lack of drivers and a climbing cost for transportation. The once far fetched notion of a freeway filled with automated trucks that finish up at a highway truck point so live local drivers can complete the city and final mile drives to the destination may not be so far off.

We live in increasingly interesting times and as drones, automated vehicles and ships become more commonplace, there seems no limit to what the future holds and the speed with which it arrives to our industry.

In-bond changes coming November 27th.

There are significant changes coming next week to the in-bond requirement for Customs and Border Protection. We’ve listed them all out below, but the one that we want to call your attention to is this:

In-bond applications will require the six digit Harmonized Tariff Schedule of the United States as a data element.

In-bond refers to the transportation of US Customs sealed goods from one location in a US Customs territory to another. Customs will be amending this process on November 27, 2017.  To ensure carriers and other members of the trade community are ready for the change, Customs added a 90-day flexible enforcement provision and scheduled outreach programs. The amendments enhance Customs ability to monitor in-bond goods movement to ensure proper disposition. Customs simplified the in-bond process requiring carriers to automate their processes and electronically submit data, creating uniformity by standardizing time limits to transit times and reporting functions, and adding clarity to terms by refining the language used,

Electronic Filing Requirement

In-Bond Applications

Elimination of the paper in-bond application (CBP Form 7512) by requiring ocean, truck and air carriers to file the in-bond application electronically.   

Diversion

Diverting in-bond merchandise from its intended destination port to another port requires the carriers electronically request and receive permission from Customs in advance of changing the destination of the in-bond shipment.

Rule Changes

In-Bond Transit Time

All modes of transportation, except pipeline and barge, are being given a 30 day maximum transit time.  Barge shipments are allowed a 60-day maximum.  

Two Day Reporting Requirement

Within two days of entering the port of destination or port of exportation, the arrival and location of the in-bond merchandise must be reported by the carrier.  All provisions in part 18 have a two-day reporting requirement.  

Additional Data Requirements on In-Bond Applications

In-bond applications will require the six-digit Harmonized Tariff Schedule of the United States as a data element.

Reporting Quantity of In Bond Freight

Customs uses language from the regulations on inward manifests and truck pre-advises to require the reporting unit be ‘‘the quantity of the smallest external packing unit.’’  

Divided Shipments

Split shipments are broken out from their previous location in the diversion section into a separate paragraph as an acknowledgment that it happens outside the scope of diversions as well.

Bonded Carrier Definition Changed

Change to the explanation of Bonded Carrier clarifies that the bonded carrier is the one who obligates their bond for the transportation and delivery of merchandise.

Transfers from One Conveyance to Another

Initially called transhipments, Customs changed the term to transfers to add clarity to the section.  Also, carriers are not required to report each time in-bond merchandise changes conveyances.  Reporting is only required when the liability for the merchandise is attributable to a new bond.  

Seals – Transportation of In-Bond Freight with Regular Freight

Customs is removing the requirements to obtain permission to break and replace a seal. Seal replacement recordkeeping requirements are in Section 163.

Other Changes

  • Elimination of the term “ultimate destination” to avoid conflict with export regulations.  
  • A sentence in the section on maximum in-bond transit times will exclude pipeline goods.  
  • Clarity on Customs purview over the granting of extensions to maximum transit times.

 

Ocean Carrier Preparedness

Submitting amended data elements

APL                         NYK

HAMBURGSUD                 CMA

MSC                         ZIM

HAPAGLOYD                     HYUNDAI

Pending amended data elements

COSCO                     PIL

MAERSK                     KLINE

 

If you have any questions or concerns about the upcoming changes, please feel free to reach out to your contact at Edward J Zarach & Associates, Customs Brokers & International Freight Forwarders.

Why it’s bad for your health to evade antidumping duties.

Stress is no longer the silent killer it once was. Today, many people are aware of how stress affects the human body.  Prolonged exposure to stress can result in heart attacks, strokes, high blood pressure, obesity, ulcers, depression, and many other unhealthy manifestations such as drug and alcohol abuse can arise from prolonged exposure to stress. Importers reducing costs by evading AD or CVD duties are vulnerable to suffering from one or more stress-related illnesses. When a material omission or false declaration decreases the amount of money due it is called evasion.  Evasion cases are subject to enforcement by US Customs (“CBP”).

Background

In 2015, the Enforce and Protect Act (“EAPA”)  was enacted giving CBP broad authority to investigate, enforce and punish cases of evasion of AD & CVD duty.  The EAPA implemented a fixed timeline based on events and utilized on every allegation.  The schedule commences with the receipt of an evasion allegation.  Within 15 days of receipt, CBP is required to decide to investigate the complaint. If CBP wants to continue the claim, the next major event is on day 90 and is also performed by CBP.  An importer who knowingly evaded an AD order and has received notification of an investigation should begin to work on collecting evidence supporting the accuracy of the declared origin, valuation, and classification.  Individuals involved in the proceeding should look for ways to reduce stress during the ten months of EAPA action.  Something portable that would make it easy to pack on the vendor site visits and trips to obtain the documents necessary to prove the accuracy of the data submitted to CBP upon entry.

Day 90

CBP must determine the reasonableness of the suspicion and issue the interim notice. Upon publication of the interim measures, the evading importer receives information on entries that potentially contain goods subject to investigation. The good news is that the scope of entries is limited to one year from the date of initiation.  The bad news is that future entries of “like products” necessitates submission as “Live” entries to obtain the Customs release. Live” entries have cash deposits attached to the paperwork.  The evading importer reads the Interim report and roughly calculates the cash on hand needed, the increase in the cost of the goods and the approximate sales price increase based on the increased costs. The evading importer’s head begins to throb, acid indigestion transforms to acid reflux, and a tightening in the neck & shoulders becomes noticeable.  Only seven more months to go.

Days 200, 230 and 245

Requires participants to submit evidence to support their positions. Between Day 90 and Day 200 the stress is causing the evading importer to take handfull of pills to keep the pain, localized in the head and jaw.  The face even hurts from grinding teeth the night before. The combination of medicines made the acid reflux spike requiring a prescription to neutralize the stomach acid.

Day 200

This marks the last day for the parties to submit factual information voluntarily. Day 230 is the deadline for submission of written arguments.  No later than Day 245 can responses to the written arguments be provided.  Completion for most cases is required no later than day 300 except “extraordinarily complex cases” which get an extension to conclude by day 360.

In the Final Determination

CBP reported evidence that the importer did participate in evasion. CBP will suspend liquidation of entries from November 5, 2016, one year before the initiation of this investigation and ALL unliquidated entries no matter the date.  In addition to adjusting historical shipments, CBP will apply the country-wide AD rate to all cargo of like merchandise, no matter the origin.  In the future, all entries of products similar to those described in the final determination must be submitted ass “Live” entries and therefore require a check for the correct amount be attached to the entry pack for CBP release.

Final Determination

By the time the final determination is available; the importer evader has lost 20 pounds, is suffering from sleep deprivation, is beginning to have issues in his esophagus due to the acid reflux and has chronic back and head pain.  He is now taking several prescription medicines for the various aches, pains, and stomach issues.  A light bulb moment occurs as the fog lifts after the conclusion of the whirlwind claim.  (A) The price to the importer was only slightly offset by the duty evaded and (B) the cost of staff resources used defending the action was also higher than the savings garnered from the evasion of AD and CVD taxes.  Going forward to avoid this situation you should seek out professional guidance.

Navigating the North Korean Sanctions

Monday morning, October 9, 2017, President Trump expresses his growing lack of patience with North Korea tweeting, “Policy didn’t work.” Later that day, the UN seized four vessels including the Petrel 8 registered in Comoros, Hao Fan 6 in Saint Kitts and Nevis, and Tong San 2 in North Korea. Although US sanctions against North Korea are nothing new, the latest sanctions and escalating tension may impact US importers in unexpected ways.
Commodity-specific sanctions are what most importers in the US are familiar with, and they are therefore not surprised by the prohibitions on oil, coal, and seafood. The new rules enacted by the US in August, however, include a strict prohibition on the use of North Korean labor. Chinese production of textiles, wood flooring, and seafood uses this newly prohibited labor pool. Seafood importers are therefore impacted in two ways. First, by sanctions on North Korea seafood products, and next by prohibitions on the use of North Korean labor which is often used in Chinese seafood products.

Recently, the Associated Press tracked packages of snow crab, salmon fillets, squid rings and other seafood products which employed North Korean labor imported to distributors within the US. These distributors included Sea-Trek Enterprises in Rhode Island, and The Fishin’ Company in Pennsylvania. Companies that supply retailers, food service companies, supermarkets, and export seafood to Europe, Australia, Asia, Central America and the
Caribbean.

To ensure you are not inadvertently caught up in sanctions violation, monitor the OFAC sanctions lists for suppliers or customers. Make sure this check is performed routinely to ensure a surprise appearance by your supply chain on one of the prohibited list. Next, request certification from members of your supply chain that they do not employ North Korean labor. If you import goods from Hunchun in China, be extremely cautious since over 3000 North Koreans are working in this region. Attempt to find alternate sources for your products to ensure no interruptions occur within your supply chain, Last if you have any questions or concerns, contact your Edward J. Zarach & Associates partner for additional ways to protect you and your business from this or potential new threats out of North Korea.

Hurricane Irma impacts floral supply chain

The battering onslaught of an active hurricane season has begun impacting the $30 billion per year floral industry. Hurricane Irma not only affected the distribution lines via Florida and the Southeast US but also interrupted air freight shipments from Ecuador and Colombia. Not only are fresh blooms being stalled, but greenery and filler plants are also expected to slow down and increase in cost as they are grown in Florida and distributed nationally.

While the decreased access to the supply of fresh cut flowers can cause prices to rise, many florists are turning to local growers to offset the problems. It’s one small benefit of the time of year, as predictable weather issues have given florists concerns in years past, so local growers are already preparing even before storms hit. According to the owner of Every Bloomin’ Thing in Iowa City, Maja Hunt “We always have a little room to do something different. This time of year we source a lot of local flowers. That’s one nice thing, getting stuff locally.”

Other florists are finding luck by substituting flowers they cannot import with available blooms that are similar. “We may not have this dark pink rose,” says Jim Relles of Relles Florists in Sacramento, CA. “But we’re going to have another shade that’s going to be very similar and we’ll just substitute. And we explain that to our customers. And most people, in a time of crisis, 99 percent of the consumers understand.”

As the damage and delays from Irma begin to subside, the floral trade begins to pick up its pace. The demand for supplies into the area offers an initial trip into south Florida, where drivers are then loaded with the flowers that have once again begun arriving from South America. We at Edward J. Zarach understand that these issues are of vital importance to our customers and we hope to offer more information and options for the times when cargo is impacted by unforeseen issues. We work to provide constant updates to critical shipments and prevent delays for each and every shipment.