Triennial CITES meeting updates

Geneva, Switzerland is currently hosting the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) which occurs every three years to determine what resolutions to expand, adapt, and strengthen from myriad government submissions. CITES is based on a 1975 treaty that works to encourage international trade while protecting species from extinction.  The discussions set to take place encompass everything from the ivory trade, rhino horn trade and even timber concerns about rosewood used for musical instruments.

Over 34% of the new proposals are in direct response to amphibians and reptiles that have become endangered or threatened because of the exotic pet trade. Some species have seen up to an 80% loss of population due to smuggling. While the proposal to list the Union Island gecko on Appendix I was passed unanimously, other amendments weren’t so well received.

A proposal to list the extinct woolly mammoth on Appendix II was withdrawn before a vote when it became clear that it wouldn’t pass. The idea to list woolly mammoths comes from an attempt to further protect elephants from the ivory trade. Mammoth ivory is virtually indistinguishable from elephant ivory and as climate change begins melting the permafrost, more ivory mammoth tusks are being exported.

The Asian small-clawed otter was listed on Appendix I, which bans all international trade of the adorable critters that are facing decreasing numbers thanks to their popularity on social media and the loss of their wetland habitats in Southeast Asia.

Not all resolutions had a clear yes or no. The saiga antelope was denied a move up to Appendix I banning all trade, but was given an annotation that placed the quota of wild caught saiga at zero which leaves open trading of captive raised saiga.  Other animals given protections include giraffes, which were added to Appendix II that restricts their export to only legally hunted giraffes that aren’t compromising the species’ survival. The black rhino had its quota raised from five to “a number not exceeding half a percent of the country’s total black rhino population.”

We at Edward J. Zarach & Associates understand how important these changes are to many of our readers. As we move forward, we encourage everyone to reach out to our trophy hunting division to discuss your planned hunts or imports and know what pitfalls to avoid with your specific trophy.

Section 301 tariff face-off escalates

USTR clarifies Section 301 duties

Today, in apparent retaliation for the 4th tranche tariffs placed on the remaining $300 billion in Chinese imports by President Trump – some of which will be effective on September 1, 2019 and the rest on December 15, 2019 – China announced they would be placing an additional 5% to 10% in tariffs on $75 billion of US imports on the exact same timetable.

After the announcement by China, President Trump urged American manufacturers to return their businesses back to US soil to avoid these duties and advised a reciprocal action would be coming soon.

Just an hour ago President Trump announced an increase in tariffs against Chinese imports that will become effective on October 1, 2019. According to the United States Trade Representative, the tariffs will increase by 5% on $550 billion worth of Chinese imports.

You can find the USTR statement here. Some important points:

  • The first 3 lists totaling $250 billion in imports dutiable at 25% will increase by 5%. Effective October 1st, the duty on List 1, 2, and 3 goods will be collected at 30%.
  • The last list, split between 4A and 4B, with the effective dates of September 1st and December 15th respectively, which was to be set at a duty of 10% will increase by 5% to 15% with the same September and December effective dates.

We at Edward J. Zarach & Associates are carefully watching this unfold and will continue to bring you the most up to date information as it becomes available.

USTR clarifies 4th list of Section 301 duties.

USTR clarifies Section 301 duties

Two weeks ago, President Trump tweeted out that the trade negotiations between the US and China had faltered and a 4th tranche of tariffs, set at 10% would be applied to the remaining $300 billion of Chinese imports that aren’t covered by the first three sets. On August 13th the USTR announced that certain goods on the list wouldn’t have the September 1st effective date and would be effective on December 15, 2019 to avoid higher prices during peak season.  As of August 15, 2019 we’ve learned that these tariffs will be applied based on the date of entry and not on the date of departure.

“We’re doing this for the Christmas season,” Trump told reporters Tuesday afternoon, according to associated press. “Just in case some of the tariffs would have an impact on U.S. customers.” The list of goods on the extension include many consumer products including electronics, clothing, shoes and some toys, all of which are the backbone of the holiday shopping season. The USTR also declared they’d be removing any products on the list that had health, safety, national security or other concerns.

Though the USTR will be conducting the same exclusion process for List 4 (A&B) so importers can request an exclusion for individual products, the dates for that process have not yet been set. Unfortunately, the bifurcation of the list may be too late as some companies have already started ramping up orders for the holiday season in anticipation of the tariffs that were announced two weeks ago.

The crux of the issue for us here at Edward J. Zarach & Associates is the planning and timing that goes into the shipments we handle for our clients. We understand how important it is to have foreknowledge of issues that can impact their supply chains and we’re committed to giving you the best information we have. We’ll keep monitoring this situation to counsel on the best way to plan for your 4th quarter. If you have any questions or need help on this at all, please reach out to your Zarach representative for assistance.

Our previous coverage of these issues between the US and China can be found here and here.

CBP Trade Symposium Highlights

Customs and Border Protection this week held their annual Trade Symposium in downtown Chicago. The event draws importers, exporters, attorneys, customs brokers and anyone who does business with the agency in a trade capacity. CBP puts a lot of time and effort into this event every year and the commitment of the agency’s senior leadership to attend and speak and be available was on display. On the first day alone the event featured the acting head of CBP Mark Morgan as well as acting DHS Secretary Kevin McAleenan who was elevated from the position of CBP Commissioner into his current role.

The agency reiterated to the trade they are committed to transparency, collaboration and communication. Given the fluidity with which the agency is responding to threats and new business models like e-Commerce, narcotics and synthetic opioids, agricultural initiatives and enforcing trade remedies like Section 232 and Section 301 investigations, it is no wonder they reiterate the reliance on the private sector to help them in their mission.

Importers know that CBP has opened their Centers of Excellence and Expertise (CEE’s) and that those groups are responsible for the processing and handling of entries of major commodity groups. Africa Bell, the Acting Executive Director of the Office of Trade Transformation, shared that the Base Metals CEE are responsible for the enforcement of the trade remedies of Section 232 steel and aluminum and fully 74% of the total lines for steel and 50% of the lines for aluminum fall under their jurisdiction.

Finally, there was a major takeaway about the evolution of e-Commerce and how it is changing CBP’s business processes. For example, while there were 35 million formal and informal entries filed over the course of a year, in the same period of time there were 625 million small package shipments through e-Commerce, the postal service and other means. Coupled with the increase in de minimus amounts to $800, many retailers are moving their supply chains further upstream into countries like China where they are packaging direct to consumer rather than into distribution centers in the United States. A representative of Zulily, the online clothing retailer, said they scaled up testing the concept in 2016 to shipping 9 million packages direct to buyers in 2018.

There were additional sessions focused on forced labor, illicit trade and changing processes at land border ports of entry. The takeaway is that while CBP’s mission of trade has been diversified greatly over time, there is no less focus on facilitating legitimate trade and importers should continue to take steps for compliance for product safety, security and ensuring accurate sourcing as potential transshipment routes are exploited to evade trade remedy duties.

Exclusion portal to open June 30th

USTR clarifies Section 301 duties

Importers who have been attempting to get their products removed from one of three lists of HTS numbers carrying an additional 25% in duty from China are no strangers to the process of requesting exclusions. However, effective June 30th, the Office of the United States Trade Representative has announced a changed policy for the group of products which were on the third list and were increased from 10% to 25% earlier this year.

The full details of the announcement were published in the June 24th edition of the Federal Register.

Beginning on June 30th at, companies will use an online portal to submit an exclusion request for consideration by the agency. The window for submission is only open between June 30th and September 30th.

Remember, an exclusion request is a public request and for fourteen days after posting, responses as to why the product should not be excluded can be submitted by interested parties. The original submitter of the exclusion will then have seven days to file a response.

Companies wishing to file an exclusion will need to register with the portal when it opens. The data elements that will be required for the exclusion request can be found in .pdf format here with thanks to Susan Kohn Ross of MSK.

If you or your company are interested in requesting an exclusion and would like for Edward J. Zarach & Associates to assemble and submit the request on your behalf, please contact your account representative who will work with you on this process.

CBMA information for 2019

The Craft Beer Modernization and Tax Reform Act of 2017 (CBMA) was passed as part of the Tax Cuts and Jobs Act. It amends the Internal Revenue Code with respect to the tax assessed on of certain imported and domestically produced alcoholic beverages, including beer, wine and distilled spirits.

The CBMA is unlike any other tax reduction program in that it’s controlled overseas and seemingly backwards. To receive the reduction the importer must go to the manufacturer for a certification that states the importer is entitled to the reduction on a set number of barrels/bottles, etc., for the stated year (2018 or 2019). Importers need to reach out to their manufacturers to be supplied this document in a timely manner helping to avoid any lapses.   A working template is available for the manufacturers that they can renew yearly. We recommend educating your manufactures about what they need to provide for this program. Requirements are detailed here for your use.

This certification can dramatically decrease the tax due on imports. In one case, we’ve seen importers receive $20,000 back on one importation. This Program is now being considered for 2020 calendar year. We encourage all importers to reach out to their suppliers to take advantage of this reduction and to make sure we get a yearly copy of the CBMA Assignment Certification to use when we process your cargo. Please feel free to reach out to us if you need assistance on this. The CBMA is unlike any other tax reduction program in that it’s controlled overseas and seemingly backwards. To receive the reduction the importer must go to the manufacturer for a certification that states the importer is entitled to the reduction on a set number of barrels/bottles, etc., for the stated year (2018 or 2019). Importers need to reach out to their manufacturers to be supplied this document in a timely manner helping to avoid any lapses.   A working template is available for the manufacturers that they can renew yearly. We recommend educating your manufactures about what they need to provide for this program. Requirements are detailed here for your use.

CBP clarifies what China origin merchandise requires increase from 10% to 25%.

Federal Register notice indicates date of export from May 10th onwards.

Customs and Border Protection today clarified the details of the USTR’s Federal Register notice regarding the increase from 10% to 25% on the third annex (list) of HTS numbers from the Section 301 finding against China.

The FT notice states that the duty is Effective with respect to goods (i) entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on May 10, 2019, AND (ii) exported to the United States on or after May 10, 2019.

The duty will be collected on air and ocean shipments which are exported from China beginning tomorrow. Goods which have already been exported and are in transit by air or sea from today’s date forward are not subject to the increase.

This is a key differentiator. However, as of today, per CBP on a trade call, we received this bit of disturbing news: ACE is not programed to support this so ALL entries with a consumption date of May 10th will be getting applied the new rate of 25% regardless of the date of export.

An announcement will be issued shortly with a new tariff number to resolve this issue but there was no indication of when we will be receiving this new tariff number. Depending on when the new tariff number becomes available and if the entry is still “In Trade Control” (prior to payment of duties) the entry can be updated with the new tariff number allowing the Section 301 rate to return to 10%. If this process becomes available after the Entry is triggered onto Statement it will require a Post Summary Correction (PSC) to obtain refunds of the duties paid at 25% where the date of export is prior to May 10, 2019.

Zarach attends WCA

The WCA Conference is a behemoth. Known as the largest and most powerful industry networking event of the year, the first time you walk in is an overwhelming callithump of people and excitement. Having the event in Singapore, one of the cleanest, safest and most beautiful cities in the world, only adds more heat to the fire of possibility burning among attendees.  WCA offers a chance to meet with new and existing partners from around the world in one central place. What would normally be weeks of travel and expenses courting these opportunities one at a time, is here in a single place to hold meetings and network.

This year I attended WCA to discuss new partnerships to work with our new location in Doral, Florida to serve the greater Miami area and commodities from South America. As we work with cargo bound for Amazon warehouses, our new location will offer a large amount of cooler space to handle cut flowers, seafood and other temperature sensitive commodities. Because Miami is a hub for dangerous goods cargo, live animals and perishables, we find ourselves strategically placed to serve new partners who need a US representative. We expect to be open in the first half of 2019 in our space.

The chatter among attendees, even though it’s an international event, was still centered on the US President and trade deals that are being worked or renegotiated. “What Will Donald Trump Do?” is the question on everyone’s minds. Thankfully, for the bulk of attendees it appears that the market is stronger than any individual forces. The growth and development of more strategic international partnerships is the best way to manage the cycles of growth and recession in our industry.

The WCA Conference isn’t the only meeting that offers a way to nurture these relationships. I attended the Global Ocean Agency Lines (GOAL) conference in Las Vegas, NV with CJ Coral from our Chicago office and Louis DeMarco from our NY office. The GOAL conference allowed us to meet with our longtime partners to discuss shared business and talk regulations that impact our cargo. It’s a great time to share market insights from across the country and share the best practices we’ve established.

The GOAL conference is a much more intimate gathering than WCA. With a total of approximately 200 attendees from 70-80 companies, it’s a small group with a more micro view of the industry. The hottest topic we discussed was trucking congestion and solutions we can implement to avert delays. We spent time organizing ways to pool trucking resources as more cargo arrives at ports and needs to be distributed with fewer truckers available.

Professional networks and the events they offer are important tools in making connections in our industry. Having an organization that facilitates partnerships, payments, insurance, opens up trade lanes, and mediates disputes takes some of the risk out of new partnerships. They bring the value of confidence to opportunities.

Looming tariff increases cause major congestion

On March 1st, the 25% tariffs on $200 billion in Chinese goods will go into effect if a negotiation isn’t reached by the two countries. Doesn’t it feel like we’ve said that so many times already? The looming increase has been the talk of trade since they were announced and then delayed before the implementation date of January 1st. In an effort to avoid those tariffs, importers have been busy front loading cargo, bringing inventory into the US before it’s needed to then be warehoused until it can move to sellers across the country. The steady influx of cargo into warehouses and eventually on the road will complicate an already congested transportation situation in major cities around the country.

Congestion issues in traffic have been exacerbated by a shortage of drivers, the re-invigoration of the polar vortex that dropped snow and frigid temperatures on the Midwest US – where a chassis shortage was already slowing container traffic in major hubs. The overloaded traffic and now as warehouses are bursting at the seams leaves the world watching the negotiations as they play out between the US and china. Will cargo stop flowing because no deal is reached? Or will the US and China come to agreeable terms so the urgency of imports can fade into a more temperate climate?

Sticking points to the agreement include intellectual property, cyber theft and the trade imbalance between the two nations. Those are real issues that require careful negotiation because the nations are irrevocably betwixt to each other and facilitating healthy trade is beneficial to both though the path to get there is painful and uncomfortable for everyone who makes a living in trade and logistics. We at Edward J. Zarach & Associates are working hard to keep cargo moving as smoothly as possible during this tumult. If you have questions or concerns about cargo coming from China, we encourage you to reach out to your representative and discuss options.

Importers should continue to plan for 25% from China on January 1, 2019

USTR clarifies Section 301 duties

Sometimes, there is news we wish we didn’t have to share, but this is one of those instances.

As all US importers buying from China are aware, the US determined that for national security reasons, select goods of Chinese origin were targeted for additional duties under a Section 301 investigation.

There have been three lists, or “annexes” published with proposed and adjudicated tariff numbers.

The first annex can be found here.

The second annex here.

The third and final annex, here.

The only difference in the three lists is that the first two were immediately subject to 25% additional duty above the duty rate published in the Harmonized Tariff. The third and most recent list has been subject to 10% duty, with an announced increase to 25% on January 1, 2019.

At the end of the President’s visit to Argentina for the G20 meetings, the US and China met for a working dinner. Coming out of that meeting, it appeared that the January 1st deadline was going to be postponed for ninety days to give both sides to work through some additional issues and perhaps find resolution to the disagreements. The US said that China committed to purchase agricultural and energy products, reduce the duty on cars and take up the issue of IPR enforcement and theft of secrets which caused the investigation in the first place.

However, two-plus weeks on from the dinner, there has neither been an announcement from the US Trade Representative, nor anything published in the Federal Register delaying the increase to 25%.

In the first days after the meeting, there was even confusion and disagreement among the US delegation back here in America about what had been agreed to. Coupled with the detaining of the CFO of Huawei, a major Chinese telecom in Canada over alleged Iran sanctions violations and the apparent retaliation by China against two Canadian citizens, any progress or promises made at the dinner are quickly fading from view.

While we continue to encourage importers to speak with their elected representatives about the impact is is having on the people who work and live in their respective districts, we are also advising that importers who thought relief was coming in the new year should be thinking otherwise. Further, they should keep their fingers crossed that the administration doesn’t move forward on threats to put duty on all Chinese imports.

We will continue to monitor developments through all of our resources and advise clients immediately if and when the delay is officially published. Until then, arrangements should be made for an additional 15% on that list of products for items imported on or after January 1, 2019.