USTR imposing 25% tariff on French cosmetics, etc.

The USTR has decided to impose a 25% tariff on imports from France as retaliation on the Digital Services Taxes that many EU nations are implementing against technology companies like Google, Facebook, and Amazon. Though the companies aren’t located in France, because they serve the population of France, the nation is implementing a 3% tax on their services. The U.S. has threatened to escalate the tariffs if the DSTs go into effect and for a while, early in 2020, both parties were holding off on the tariffs in favor of negotiation; sadly, that negotiation fell apart when U.S. Treasury Sec. Steve Mnuchin suspended international tax negotiations.

After an investigation by the USTR, it was determined that the DST discriminated against U.S. companies because it’s both retroactive and implemented on revenue and not income. Because of this determination, the USTR recommended up to a 100% tax on a list of products worth $2.4 billion; only 25% taxes were added on $1.3 billion with wine and cheeses left off the list. The current tariffs include cosmetics, soap, and handbags, but aren’t going into effect until January 1, 2021, so parties have a 180 negotiation period to work towards a mutually beneficial solution.

It bears repeating that beyond this issue with French imports the USTR is also investigating nine other E.U. nations that are considering adding Digital Services Taxes to their trade program, but products and levels of retaliation haven’t been released, so this will be a developing story that we will touch on more in the coming months to keep you updated and informed on the negotiations.

Below, you can find a full list of the 21 HTS numbers that are impacted by these tariffs, so you can investigate your cargo and determine if the products you import are implicated. If you have questions or comments and want to work to find new suppliers, new trade lanes, or just be ready to send comments on these products if the USTR opens a discussion, we encourage you to reach out to your Edward J. Zarach representative for more information and guidance.

Impacted HTS Numbers:

  • 3304.10.00 (lip makeup preparations)
  • 3304.20.00 (eye makeup preparations)
  • 3304.30.00  (manicure or pedicure preparations)
  • 3304.91.00 (beauty or makeup powders, whether or not compressed)
  • 3304.99.50 (beauty or makeup preparations and preparations for the care of the skin, excluding medicaments but including sunscreen or sun tan preparations, not elsewhere specified or included)
  • 3401.11.10 (castile soap in the form of bars, cakes, or molded pieces or shapes)
  • 3401.11.50 (soap, not elsewhere specified or included; organic surface-active products used as soap, in bars, cakes, pieces, soap-impregnated paper, wadding, felt, for toilet use)
  • 3401.19.00 (soap; organic surface-active products used as soap, in bars, cakes, pieces; soap-impregnated paper, wadding, felt, not for toilet use)
  • 3401.20.00 (soap, not in the form of bars, cakes, molded pieces, or shapes)
  • 3401.30.10 (organic surface-active products for washing skin, in liquid or cream, containing any aromatic/mod aromatic surface-active agent, put up for retail)
  • 3401.30.50 (organic surface-active products and preparations for washing the skin, in liquid or cream form, put up for retail sale, not elsewhere specified or included)
  • 4202.21.30 (handbags, with or without shoulder strap or without handle, with outer surface of reptile leather)
  • 4202.21.60 (handbags, with or without shoulder strap or without handle, with outer surface of leather, composition or patent leather, not elsewhere specified or included, not over $20 each)
  • 4202.21.90 (handbags, with or without shoulder strap or without handle, with outer surface of leather, composition or patent leather, not elsewhere specified or included, over $20 each)
  • 4202.22.15 (handbags, with or without shoulder straps or without handle, with outer surface of sheeting of plastics)
  • 4202.22.40 (handbags with or without shoulder strap or without handle, with outer surface of textile materials, wholly or in part of braid, not elsewhere specified or included)
  • 4202.22.45 (handbags with or without shoulder strap or without handle, with outer surface of cotton, not of pile or tufted construction or braid)
  • 4202.22.60 (handbags with or without shoulder strap or without handle, outer surface of vegetable fibers, excluding cotton, not of pile or tufted construction or braid)
  • 4202.22.70 (handbags with or without shoulder strap or without handle, with outer surface containing 85 percent or more of silk, not braided)
  • 4202.22.81 (handbags with or without shoulder strap or without handle, with outer surface of manmade fiber materials)
  • 4202.22.89 (handbags with or without shoulder strap or without handle, with outer surface of textile materials, not elsewhere specified or included)

USTR allows comments on Section 301 duties on European Union

The United States Trade Representative (USTR) is requesting comments on further Section 301 duties against the EU under the WTO Airbus decision, which cleared the way for $7.5 billion in retaliatory tariffs because the EU illegally granted Airbus subsidies. Currently, the USTR is reviewing the tariffs on three different groups of products to determine if the tariffs should be continued and/or increased; if the tariffs should be added to products that were initially considered but weren’t added; and new products that are being considered for duties under this action. Comments are due before July 26, 2020, via the online portal.

In October 2019, the US first imposed the Section 301 tariffs against EU products such as airplanes and aircraft, agriculture, and cheese. The new items being looked at include wines, pork products, and olives; some of which were initially suggested but not taxed in the first set of Section 301s. The full text of the USTR notice on the review with comprehensive data on the items being considered can be found here.

The curious issue with the retaliatory tariffs is that there is a parallel case before the WTO regarding the U.S. giving the same sort of illegal subsidies to Boeing, which expected a decision this summer but has been put off due to COVID-19. It should be clear while we discuss these tariffs, we’re looking forward to a similar response from the EU when the WTO Boeing decision is finalized. The situation has been going back and forth between the US and EU since 2004, when The US and EU filed WTO complaints against each other for unfair subsidies. Reuters has a great timeline overview of the escalation and decisions in this case; find it here.

Because this is an on-going situation, we’ll continue to monitor this story as more information becomes available. We encourage leaving comments via the online portal if you’re products are being impacted by these tariffs, or if you have other issues you’d like to have considered. If you have questions regarding this action or would like to look into how this impacts your business, contact your Edward J. Zarach & Associates representative today.

Zarach’s XLERATE is your solution!

As news of the third quarter blanked sailings continues to come in and we hear more information about air capacity tightening with rates climbing, your team at Edward J. Zarach & Associates has a possible solution for your cargo needs in our XLERATE LCL import service. XLERATE offers an express CFS to CFS service from China with a fixed-day arrival that allows you to control your final mile delivery while offering an expedited and reliable LCL ocean service with a simplified rate format. We have the fastest transit time in the market for ocean freight to Los Angeles with expedited transfers to bonded warehouse locations across the United States.

Blanked sailings are intentionally skipped port stops to decrease the supply of space and bolster rates in ocean freight to maintain levels necessary to continue to operate. With demand lower after the COVID-19 outbreak and consumer spending reductions from shut downs, ocean freight is being blanked by many major carriers based on the forecasted demand in the third quarter. This practice causes delays for cargo that is headed to a destination that’s been blanked and prevents repositioning of empty containers where equipment is scarce.

Our LCL import XLERATE service offers an expedited service, faster than standard ocean, cheaper than air freight, with a price* that includes:

  • Ocean Freight from Origin Port to Los Angeles
  • Pier Pass, Chassis, Clean Truck , Chassis Split
  • All Los Angeles Warehouse/ CFS Fees
  • In Bond (IT) Fees
  • All express trucking rate including fuel surcharge from Los Angeles to destination city
  • All Destination Warehouse/CFS charges 
  • Includes cost of pallet for cargo loaded lose in Shanghai.
  • Destination CFS charges included

Our XLERATE service includes nine destinations in the USA from Shenzhen, Guangzhou, Xiamen, Qingdao, or Shanghai:

  • Los Angeles
  • Dallas
  • Memphis
  • Houston
  • Chicago
  • Atlanta
  • Newark
  • Orlando               
  • Tampa
  • Miami

If you’re looking for the best, fastest service for LCL import cargo, you can discuss the rates and options Edward J. Zarach & Associates has in our XLERATE service by contacting your representative or emailing insidesales@intlfreight.net.

* Rate per kilo excludes: Customs Entry, Import Duty, HMF, MPF or other charges payable to US Customs, Delivery from destination city warehouse to final delivery address & Insurance

Out with the old NAFTA, in with the new USMCA

The USMCA will be effective on July 1st and CBP has finally issued instructions for implementation to help guide importers on the updated rules. USCBP will also be offering a help center to offer guidance, clarification, and documentation for those in need to facilitate the smooth implementation of the treaty, which we outlined last month in our blog. Below, you can find the updates that will most likely impact our clients, but it’s by no means comprehensive.

Businesses may be impacted by the changes and will need to review company policies, standard operating procedures, documentation, and make corrections and updates as applicable to become current with the new USMCA requirements.  Keep in mind that updates to the documentation requirements and the rules of origin changes, there may be company policies and procedures that need to be brought current to encapsulate the new rules on required documentation that must be available for reporting.  Considering the importance of these changes and updates, we heartily recommend thorough training for staff and management.

Updated de minimis thresholds:

  • USA – $800 USD
  • Canada – $150 CAD for customs and $40 CAD for taxes
  • Mexico – $117 USD for customs and $50 USD for taxes

Sunset Clause

  • The full term on the USMCA will be 16 years.
  • After 6 years USMCA can be renegotiated, canceled or readopted

Automobiles

Enhanced Regional Value Content for

Total car – 75%

  • Core parts – 75%
  • Principal parts – 70%
  • Complementary parts – 65%

Labor requiring $16 per hour average pay

  • Automobiles – 40%
  • Light Trucks – 45%

Certificate of origin rules

  • formal certification document  isn’t required to come from Importers
  • Commercial invoices are valid documentation of the certificate of origin
  • Documentation can be created by either importers, exporters, or producers of the

Finally, importers should closely monitor for new guidance from your friends at Edward J. Zarach & Associates.  The process of passing and implementing USMCA has proved to be ever-changing, and further updates and clarification are likely to be necessary so you should reach out to us with your questions and concerns.

USMCA implementation on July 1

The USMCA was ratified on March 13, 2020, and will go into effect on July 1, 2020. On Monday it was announced that a USMCA center would be opening in Washington, DC to assist companies with the implementation. The new agreement, which will replace the current North American Free Trade Agreement (NAFTA) with updated protections for labor, intellectual property, agriculture, and e-commerce.

The center will include experts from U.S. Customs and Border Protection along with virtual representatives from Canada and Mexico to assist public and private sector businesses with the implementation of the treaty. Officials expect the center to provide guidance, answer questions, explain issues, disseminate information and documentation, and create a single point of contact to streamline assistance.

While the new agreement does include critical modernization of labor standards, intellectual property, and pharmaceutical regulations it also covers e-commerce and digital property rights that weren’t an international issue when NAFTA was first negotiated. The automotive industry will face some strict rules regarding both labor practices and the percentage of North America parts that must be included in each vehicle; leading the industry to request an extension due to the economic impact of the Coronavirus pandemic that’s currently plaguing the country. An initial 30-day extension was granted, moving the date from June 1st to July 1st.

The USCMA will have a term of sixteen years, after which the agreement can be renewed, renegotiated, or withdrawn from but will be eligible for a review after six years. CBP expects the USCMA center to be a sufficient resource for questions and assistance on the newer parts of the agreement, as the bulk of the treaty ($1.2 billion in goods and products) will remain unchanged. If you have goods that are going to be impacted but the updated treaty, you can rest assured your Edward J. Zarach & Associates representative will have the guidance and information you need to ensure a smooth transition. We do recommend that you contact us to begin planning for the changes as soon as possible.

Mother’s Day reinvigorates florists

Social distancing has made the springtime holidays all the more important and more difficult as families remain separated for their health and safety. Because they can’t be together on Mother’s Day, many have started sending gifts and flowers to show their love. While Easter and Passover flowers were lackluster due to people concentrating on buying only essential items, cut fresh flower sales were up from $2.01 billion in 2019 to $2.10 billion in 2020 for Mother’s Day. Mother’s day is the second most popular holiday for flowers after Valentine’s Day, and third in actual dollars sold behind Valentine’s Day and Christmas holidays. One-quarter of all flowers sold per year are sold for Mother’s Day and 80% of those flowers are fresh-cut blooms.

With many states having varying degrees of shelter-in-place laws currently in effect or recently ended, florists have had to be creative with their sales. Some have turned to drive-through service while others opened just in time, though in a reduced capacity, to serve the needs of shoppers. However they’ve decided to serve the community, florists are getting a huge bump at a time it’s desperately needed. Summer is a slow time for floral sales and the wedding season has been almost non-existent this spring, leading Amsterdam to dispose of 140 million Dutch tulips that couldn’t be shipped or sold. Unlike the earlier holidays, many florists found themselves sold out of flowers before Mother’s Day.

The post-coronavirus world already looks different. As we start to determine how to re-open safely and get back to what will become our new normal, it’s encouraging to see flower sales climbing for myriad reasons. The social-distancing measures that many families are living through left few options for celebrating holidays other than sending flowers in the case of Mother’s Day. We’re starting to move on from classifying things as essential or non-essential and working out ways for all industry to ramp up based on demand and safety.

If you’re looking for someone to handle your fresh flower shipments, we at Edward J. Zarach & Associates have your covered. We’re able to handle your delicate perishable cargo in a timely and safe manner.

Andy Patti – Zarach Employee Spotlight

Andy Patti joined Edward J. Zarach & Associates in January of 2020 as the Boston Branch Manager after a career spanning over 25 years in large logistics companies.  He is proud to bring a corporate level of efficiency and expertise to a smaller company where his ideas can be heard and implemented from the top down as support and autonomy work in equal measure to ensure team success.  Beginning his career in 1992 in the Customs brokerage department with A.J. Fritz, he spent four years learning the ins and outs of logistics.  A strong foundation that carries with him to the present day.   After a brief year in Florida and working in the finance arena, he returned to Boston to resume a career in logistics spending a year with AEI before joining MSAS as the Import Operations Supervisor for eight years.  From MSAS he joined UTi to further expand his skillset in both Operations management and Sales, mentored in part by the Branch Manager who noticed Andy’s unique skills working with clients.

His career continued to progress upward with senior sales appointments including trade lane development and Global account sales roles where he was ultimately recruited by Jim Crane to join Crane Worldwide as Global Sales Manager working with multinational accounts.  After that, Andy was ready to take the next step in his career with a great opportunity to become the Branch manager with Jas Forwarding where he enjoyed over 6 years of success growing his team and branch.   Through mutual industry contacts, he met Richard Kenyon, who recruited him to join Zarach, by offering the opportunities of a large company with the atmosphere and culture of a smaller family owned business.

“When you work for larger companies, the corporate giants present a number of challenges and obstacles you need to navigate and overcome to sustain succeed.  In a smaller company there’s flexibility and direct communication from the top down that enables you to achieve goals and makes it easier to deliver outstanding service upon which our clients depend on.   We have a voice here and you can see the impact daily.    you can see where your ideas and plans are put directly into action and everyone has a stake in future growth.  That kind of support and teamwork is immeasurable.   People tend to be more motivated when they feel valued and allowed to bring innovative ideas forward to help drive the company toward meeting its goals”

The strength of a great team is well known to Andy. As a longtime coach for his son’s basketball and baseball teams he has managed and developed young players at various skill levels from recreation to elite AAU levels. Andy enjoys being a leader, mentoring others and teaching life lessons as well as the core values he instills in his players.  Those are the same values he brings to work every day.  The team building and leadership skills and positive approach in collaborating and empowering others to make major contributions and to reach assigned goals are paramount to success.  Andy’s primary goals are to develop a team first mindset, a strong work ethic and create more efficient processes to deliver the best possible experience for our valued clients.

“We can do a great job 99 out of 100 times, but when mishaps and challenges occur it’s the proactive way which we respond that our clients will remember most.  We strive for excellence, of course, but how we respond and handle difficult situations when the unexpected happens will win the client’s trust and confidence. That is why a successful foundation and dedicated team must be created and is key to long term success.  We value our client relationships and appreciate the trust and responsibility they have placed upon us.”

When Andy is not working with his Zarach team or coaching youth sports, he enjoys spending quality time with his wife of 24 years, two daughters and son.  He has learned that life balance is so important and making lasting memories with his family are the foundation for a happy life.  It is that type of vision and value system that he is bringing to fruition at Edward J. Zarach & Associates.

Richard Kenyon – Zarach Employee Spotlight

Richard Kenyon came to Edward J. Zarach & Associates in September of 2019 from a lifetime spent in logistics. Growing up in Manchester, UK Richard planned to enter the army after college, but he took a summer job at a freight forwarder and realized that he’d found his passion. Through the following years, Richard specialized in almost every aspect of operations and sales, including working in warehouses, driving trucks to collect freight, importing cargo into a non-EU United Kingdom, and sales and operations branch management. This intense level of cross training bestowed on him a breadth of knowledge that gives him a competitive edge as a leader in this industry.

“I don’t ask anyone to do anything I haven’t done or that I would not be prepared to do myself.  Doing it all was paramount to me when I was learning. As a manager, I try to identify any issues that can impede the success of our people and find a creative solution to facilitate their growth. When you have an intimate knowledge of the tasks you can better support your people. Our business is our people; they are who I invest myself into”

His people first philosophy fits well within the Edward J. Zarach & Associates structure, a work family approach with some seasoned corporate efficiency and training mixed in. Large global corporations have resources for their staff that can be lacking in a smaller, private company. At Edward J. Zarach & Associates, he can deliver those resources while ensuring each client receives the personal service that sets Zarach apart.

“Our people need to have measurable goals and engaged leadership. When you provide proper support and your staff is fulfilled at the office, your clients sense a team member’s smile and feel that level of care and they come back. This business is not a hit and run mission and isn’t about one or two shipments; it thrives on the long relationships that are built by trust, honesty, and enthusiasm. A motivated staff is why clients return year after year.”

Richard met Ed Zarach through industry events while working as General Manager of an east coast neutral consolidator and they struck up a friendship based on their team values and work ethic. Arriving in the United States with $500 in his pocket and a single suitcase, Richard first worked in Los Angeles in operations to learn about selling to a US market and the differences from sales in the UK. This attention to detail and his willingness to keep honing his skills helped him understand the market and find success in almost every logistics facet. His passion for the work is evident in his successes.

“As a kid growing up in Manchester, I had a more narrow view of the world but freight forwarding opened that up. There’s no other industry where you can meet and work alongside such diversity. As a young person I was drawn to that global community and it felt important to have a global impact on people, instead of just the local one. You can do the most good when you have the most reach.”

When he’s not at the office, Richard enjoys spending time with his wife, whom he met when she was a sales rep for Hapag Lloyd and called on his company in Los Angeles, and his twin daughters. He’s an unabashed fan of Manchester United football club and even in his time off enjoys traveling and experiencing new cultures.

White House issues Executive Order, CBP issues CSMS messages clarifying 90-day duty postponement for importers.

For the past several weeks there have been multiple, on-again, off-again stories in the news about whether or not the White House would provide relief to importers from estimated duties, taxes and fees during the COVID-19 crisis. 

Late Sunday – and quite unexpectedly given the last public statements from the Administration – the White House issued an Executive Order providing 90-day duty postponement to importers. 

At first blush, this sounds great. But the devil is in the details and in this case, it applies to a select group of entries which meet certain conditions.
 


  1. 90-day postponement is not available for entries that include ADD/CVD, Section 201, 232 or 301 trade remedy duties. 
  2. The CSMS message says this relief is for importers suffering “significant financial hardship,” one condition of which is defined as 2020 gross receipts 60% less than the comparable March and April period in 2019. While documentation must not be filed, the agency “may also conduct a review of the documentation at a future date to ensure compliance with the requirements.”
  3. This deferral applies to entries paid by single check, daily statement or Periodic Monthly Statement.
  4. Duty already paid cannot be postponed.
  5. Importers whose entries are paid on period monthly statement have until 11:59 PM ET Monday, April 20th (read: tonight) to have the payment date changed.

From the CSMS message on timing:

Estimated duties, taxes, and fees paid on single pay basis or Daily Statement may be postponed up to 90 days from the payment due date.

Example:

  • Original Due Date: April 30, 2020; 90-Day Postponement: July 29, 2020

Estimated duties and fees paid via Periodic Monthly Statement (PMS) may be postponed up to three months as defined by the 15th working day of the month.

Example:

  • Original due date: April 21, 2020; 3 month postponement: July 22, 2020
  • Original due date: May 21, 2020; 3 month postponement: August 21, 2020

The deadline to change the Periodic Monthly Statement is Monday, April 20th at 11:59 PM ET. That’s TONIGHT.

If your company is eligible and wishes for us to utilize this postponement, contact your Edward J. Zarach & Associates representative IMMEDIATELY.

Small signs point to recovery

As much as we are seeing bad news and difficult stories, there are positive signs that recovery is beginning in China and should follow across the supply-chain as more disruption is settled and cargo begins moving. For the first time since early February, China saw an increase in exports to the US beginning the second week of March. While there are still impediments to the complete recovery, repositioning efforts, air freight solutions and time can work together to keep cargo moving steadily where everyone needs it most.

After almost a month, the second week of March saw an increase in shipments by 45% according to customs information. International loaded rail saw a jump of 64%, a solid indicator that more cargo is finally moving in the US as these containers are loaded directly from ships onto trains, which is a faster economic measure of the state of US imports. While pandemic social behavior, including hoarding and store-emptying panic buying has caused a lull in supplies, there’s been a boost in domestic trucking as shippers race to get store shelves stocked to keep communities safe during “shelter-in-place” and other quarantine restrictions.

Because equipment scarcity is a big problem for ocean freight shippers, MSC has deployed MSC MIA, a 23,000 TEU vessel instead of smaller ships to pick up cargo from Asia and empty containers to be repositioned where they’re needed. Though the larger vessels can lead to increased wait times for truckers, the extra cargo will improve the shipping timeline as more containers can be filled and returned. Air freight capacity will be supplemented by passenger airlines that deploy aircraft with no passengers, only belly cargo. Belly space is a critical part of air capacity and as travel restrictions remain in place the all freight airlines can’t keep up with demand.

We’re thrilled to be reporting a light at the end of the tunnel. While we can’t predict the future, signs point to a slow, steady recovery for our industry. We at Edward J. Zarach & Associates are still working to ensure your cargo is moving the fastest and most efficient way possible. We pay close attention to how the numbers look to keep you abreast of the coming logistics issues and hopefully we can help you plan for unforeseen circumstances far enough in advance to prevent delays. If you’d like to talk about some creative solutions to your cargo concerns, reach out to your Zarach representative today for a chat. We hope it’s okay that we meet by video, just for now.