On March 8, 2018, President Trump issued Executive actions relating to the adjusting of imports of steel and aluminum into the United States. These actions were issued under the authority of Section 232 of the Trade Expansion Act of 1962, which allows for the president to unilaterally adjust tariffs upward when he deems it a national security issue. These tariff adjustments for additional import duties for steel mill and aluminum articles went into effect March 23, 2018. Subsequent to that initial action, several additional executive actions have been issued by the President resulting in steel duties of 25 percent and aluminum duties of 10 percent. As of June 1, 2018, all steel products originating in all countries of origin except Argentina, Australia, Brazil, and South Korea will be affected by the President’s executive actions. Those countries have agreed to quotas which as of this date have already been filled. Also, as of June 1, 2018 all countries of origin except Argentina and Australia will be affected by the President’s executive actions relating to aluminum imports. Again, those countries have agreed to quotas which as of this date have already been filled.

In a separate investigation, on March 22, 2018 the Office of the United States Trade Representative, Executive Office of the President issued findings into China’s acts, policies and practices related to the transfer of intellectual property and innovation under section 301 of The Trade Act of 1974.

To summarize the 215-page investigative report, Section IV.D of the report stated the following:

“China has engaged in acts, policies, and practices that are unreasonable, and that burden U.S. commerce. The market-distorting acts, policies, and practices of the Chinese government in technology-focused sectors impose significant costs and risks on U.S. industry. They undermine the ability of U.S technology companies to innovate and adapt, and threaten the long-term competitiveness of U.S. industry”.

As a result of the findings, over the next several months the President compiled a list of Chinese imports subject to additional duties:

• List # 1 listed 870 imported items from China-additional duty of 25 %
• List # 2 listed 302 imported items from China- additional duty of 25 %
• List # 3 listed 6,387 imported items from China- additional duty of 10 % or 25 %

These additional duties imposed on Chinese imports are, in effect, meant to level the playing field for U.S. manufacturers. However, in many cases there are exceptions, and the “one size fits all” fix to leveling the playing field is in some ways too simplistic a solution. The good news in all this is that there are exclusions that can be filed within the comment period stated in the Federal Register Notice.

If your company imports products from China, and you think you may be impacted by these additional duties, you must move quickly. For items on “List # 3” the period to file a comment has been extended to September 6, 2018. All 6,387 items on the list will be significantly impacted by higher rates of duty that you, the importer will have to pay.

For more information contact Glenn at: [email protected] or call Glenn at 603-957-8247.

Don’t Miss the Filing Deadline!

If your company imports material from China, chances are you imported product is on the latest round of China tariff increases.  Foreign Trade Zone Solutions LLC can assist you in filing a timely and successful claim.  Contact us at:  [email protected] or by calling 603-957-8247.

See below a list of products affected:

• Meat: pork; beef intestine; rabbit meat; venison; frog legs
• Fish and seafood: live fish including ornamental fish, trout, eels, tuna, and carp; chilled or frozen meat of various types of trout, salmon, halibut, plaice, sole, albacore, tuna, herring, mackerel, cobia, swordfish, pollack, whiting, catfish, rays, and more; various types of salted or smoked fish; other seafood including various types of lobsters, crabs, shrimps, prawns, oysters, scallops, mussels, clams, squid, octopus, conchs, abalone, sea cucumbers, and sea urchins.
• Non-meat animal products such as eggs and dairy: Whey products; butter; various types of eggs including chicken; honey; hair of animals including human, hog, horse and badger; animal intestines, bladders; feathers; bones including shells, beaks, corals, hooves, antlers, and more.
• Vegetables: onions; garlic; cauliflower and broccoli; cabbage; carrots; turnips; radishes; beats; cucumbers; peas of various types; beans; lentils; celery; mushrooms; peppers of various types; squash; okra; sweet corn; potatoes; sweet potatoes and yams; some types of tomatoes; spinach; Brussels sprouts.
• Fruit and Nuts: Coconuts; cashews; almonds; hazelnuts; walnuts; chestnuts; pistachios; macadamia nuts; pecans; dates; figs; pineapples; guavas; oranges; mandarins; clementines; raisins; grapes; apples; pears; quinces; peaches; berries including strawberries, raspberries, cranberries, blueberries and others; bananas; a variety of dried fruits; peels of various fruits.
• Cereals: wheat, including durum wheat; barley; oats; corn; various types of rice; grain sorghum; buckwheat; quinoa; and more.
• Mill products: flours including those form wheat, corn, buckwheat, rice, rye, other cereals, potatoes, and bananas; groats and meal of various types including wheat, corn, oats, and rice; malt; starches of wheat, corn, potato, and more
• Oil seeds: soybeans; seeds of sunflower, flax seed, sesame, mustard, poppy and more; planting seeds for certain crops; cocoas and mint leaves; and seaweeds.
• Sugars and candies: cane sugar; candies with no cocoa
• Breads and Pasta: uncooked pasta; various breads, pastries, cakes, and biscuits.
• Prepared vegetables and fruits: various vegetables and fruits previously listen in their prepared or preserved forms; various fruit jams including strawberry, pineapple, apricot, and more; peanut butter; various fruit juices including orange, pineapple, lime, grape, apple, and more.
• Other food items: soy sauce; condiments and seasonings; protein concentrates.
• Beverages and vinegars: water, including mineral water; fruit or vegetable juices and juice mixes; beer from malt; wine, including rice wine; ethyl alcohol; vinegars
• Food processing waste and animal feed: brans from processing; oil cakes; dog or cat food; animal feed
• Tobacco products: various types and preparations of tobacco; tobacco refuse; cigars; cigarettes; smoking tobacco
• Salts and minerals: salt/sodium chloride; sulfur; graphite; quartz; types of clays; chalk; slate; marble; granite; sandstone; dolomite; gypsum; some plasters; some types of cement; mica; Epsom salts
• Ores, slag, and ash: ores of iron, copper, nickel, cobalt, aluminum, lead, zinc, tin, chromium, tungsten, uranium, titanium, silver, other precious metals, and others; slag, various types of ash.
• Mineral fuels and oils: coal; lignite; peat; coke; tars; various types of light oil; various types of kerosene; petroleum oils; liquefied fuels including natural gas, propane, butane, ethylene, and petroleum; oil shale and tar sands
• Inorganic Chemicals: chemicals such as chlorine, sulfur; carbon, nitrogen, oxygen, and silicon; acids including sulfuric, nitric, and more; various types of fluorides, chlorides, sulfates, nitrates, carbonates, and more. (See full list below.)
• Organic chemicals: (See full list below.)
• Fertilizers: animal or vegetable fertilizers; urea; ammonium sulfate; sodium nitrate; and more.
• Tanning and drying extracts, dyes, and paints
• Essential oils, perfumes: perfume; lip or eye make up preparations; manicure or pedicure products; shampoo; hairspray; bath salts.
• Soaps and cleaning products: various types of soap; leather and textile treatments; polishes for shoes and furniture.
• Glues, adhesives, and enzymes
• Cigarette lighter fluid
• Photographic goods: various types of photo plates; instant film; various types of film in rolls; various types of motion picture film.
• Various chemical products: pesticides; herbicides; fungicides
• Plastics: vinyl flooring and other plastic floor and wall coverings; sausage casings; bags; gloves including baseball gloves; rain jackets; machinery belts.
• Rubber: latex; rods, tubes, and other products; conveyor belts; various types of transmission belts; various types of pneumatic tires; gloves; gaskets; dock fenders.
• Raw hides and leather: animal skins including cow, buffalo, sheep, goats, reptile; various types of leather made from cow, buffalo, sheep, goats, reptile; leather trunks and suitcases; leather handbags; CD cases; gloves including ski, ice hockey, and typical use; belts; fur clothing, incluidng artificial fur.
• Wood: fuel wood; charcoal; various types of wood including oak, beech, maple, ash and cherry; moldings; rods; particleboard; various types of plywood; doors; corks and stoppers; wicker and bamboo baskets.
• Wood pulp products
• Paper: Newsprint; writing paper; vegetable parchment; carbon paper; self-adhesive paper; cigarette paper; envelopes; tablecloths; handkerchiefs; folders.
• Silk
• Wool or animal hair products: cashmere; yarns; tapestries and upholstery.
• Cotton: fibers; thread; yarn; denim; satin.
• Flax: yarn; fabrics
• Man-made textiles: polypropylene; rayon; nylon; polyester
• Other textile products, rope, twine: hammocks; fish nets; carpets;
• Fabrics: corduroy; gauze; terry towel; lace; badges; embroidery
• Headgear: caps; hairnets; wool hats; safety headgear like hard hats; head bands.
• Stone, plaster, cement, asbestos: stone for art; marble slabs; roofing slate; millstones; sandpaper; floor or wall tiles; cement bricks.
• Ceramics: fire bricks; pipes; tiles; porcelain and china.
• Glass and glassware: balls; rods; drawn or blown glass; float glass; tempered safety glass; mirrors; carboys, bottles, jars, pots, flasks, and other containers; microscope slides; woven fiberglass
• Precious stones and pearls: diamonds; silver and products made of silver; gold and products made of gold; platinum; palladium.
• Iron and steel and products derived from the metals: drums; tubes; pipes; doors; windows; screws; horseshoes;
• Copper: plates; cables; tubes; pipes; springs
• Nickel: bars; rods; wires
• Aluminum: powder; cable; wire; screws.
• Various metal products, tools, cutlery: industrial items made from lead, zinc, tin, and more; saw blades; bolt cutters; hammers; wrenches; crow bars.
• Machinery, both industrial and retail: steam turbines; engines; fuel-injection pumps; air compressors; air conditioning machines; refrigerators; cream separators; hydraulic jacks; escalators; manure spreaders; copiers; automatic beverage-vending machines
• Electronics: vacuum cleaners; hair clippers; spark plugs; generators; bicycle lights; electric amps; television cameras; various types of TVs; video projectors.
• Vehicles and parts: axles; driving shafts; gear boxes; radiators.
• Parachutes
• Ships and boats: sailboats; motorboats; canoes; yachts.
• Instruments for scientific or medical purposes: microscopes; cameras for non-art purposes; gauges for pressure, electrical currents, and more.
• Clocks and watches
• Furniture, bedding, mattresses: car seats; wood chairs; furniture designed for offices, kitchens, and more; mattresses; chandeliers; lamps.
• Assorted items: buttons; stamps; paintings; collections of zoological, botanical, mineralogical, anatomical, historical, archaeological interest; antiques of an age exceeding one hundred years

Last week I wrote about free trade and the issues that sometimes complicate so called “Free Trade” agreements.  This week, I’ll comment and focus on three very critical pieces that can either make or break any “Free Trade” agreement.

The first issue I’ll focus on is environmental rules and regulations.   On December 2, 1970 under President Nixon, the United States created the Environmental Protection Agency, (EPA).  The agency is responsible for protecting health and the environment through the writing and enforcing of environmental laws and regulations passed by the U.S. Congress.  Developing nations around the world have similar environmental rules and regulations.  However, quite often economic growth becomes more of a priority and those environmental rules and regulations take a back seat.  Not so here in the United States.  The EPA, since its inception has expanded its jurisdiction to include the Clean Air Act, Clean Water Act, Toxic Substances Control Act, Chemical Safety Information, Site Security and Fuels Regulatory Relief Act, Federal Food and Drug Act and the Occupational Safety and Health Act.  While most people would agree that it’s necessary to keep our environment clean, the reality is that it can become an additional financial burden for some U.S. companies to do business in the U.S.

The second issue causing headwinds for U.S. businesses is U.S. Labor Law.  The National Labor Relations Act of 1935 was created, in part to set the rules between employees and employers and to correct the “inequality of bargaining power.”  Since 1935 labor laws have broadened to include other such regulations as child labor laws, prison labor law, workplace safety & health laws, workers’ compensation, The Family and Medical Leave Act, Veterans’ Preference, safety & health, the Equal Employment Opportunity Commission and many more.  Again, while many people would agree that these regulations may be necessary, in many instances they have become an additional financial burden on American businesses.  Many of our global competitors do not have the same regulatory burden as U.S businesses and thus the U.S. is put at a clear disadvantage.

The third and final piece of this complicated puzzle is what some perceive as currency manipulation on the part of some of our competitors.  If all other areas of a “Free Trade” agreement between countries are equal, one trading partner could begin to gain an advantage simply by devaluing their currency and as a result causing that country’s currency to be significantly cheaper and more attractive to foreign investment.

As you can see, it’s not always one issue such as tariffs that make up a “Free Trade” agreement.  These agreements can be complicated.  In the end, it’s always about trusting the other trading partners and whether or not they’re holding up to their end of the agreement.

When we think of free trade we typically think in terms of a trade pact with low barriers and tariffs enacted and ratified between two or more countries in an equitable manner which will benefit each signatory country.  Or, we may think of the World Trade Organization, (WTO) and all the participating nations of the world which belong to the WTO.

The WTO states on their website, that they “provide a forum for negotiating agreements aimed at reducing obstacles to international trade and ensuring a level playing field for all, thus contributing to economic growth and development”.  Keeping this in mind, let’s take a look at China for a moment.  China has been a member of the WTO since December 2001. Despite having the world’s second-largest economy, China is considered a “developing” country.  The WTO in trade agreements gives developing countries, “special rights or extra leniency—special and differential treatment”.  In exchange for entry into the WTO, China agreed to change its policy regarding foreign investors and implement the WTO requirement to abide by the   Agreement on Trade-Related Aspects of Intellectual Property Rights, (IPR).  This provision is a legal agreement between all the member nations of the WTO, obligating each county to respect each other’s Intellectual Property Rights.

Fast forward to March 22, 2018, and the release of the U.S. Trade Representatives “Findings of the Investigation into China’s Act, Policies, and Practices related to Technology Transfer”.  The report states that “prior to 2001, China often explicitly mandated technology transfer, requiring the transfer of technology as a quid pro-quo for market access. After joining the WTO, China committed not to condition the approval of investment or importation on technology transfer.   Since then, according to numerous sources, China’s technology transfer policies and practices have become more implicit, often carried out through oral instructions and “behind closed doors.”  According to the report, “China continues to restrict foreign investment while selectively granting market access to foreign investors in exchange for commitments to transfer technology”.  China’s foreign ownership restrictions, joint venture requirements, foreign equity limitations, licensing and approvals process all contribute to pressure foreign investors to transfer their technology prior to conducting business in China.

You make the call.  Is China’s information technology transfer practice consistent with the spirit of the requirements outlined by the WTO?

Next week I’ll look at other ways which the Chinese as well as other countries around the world make the so called “level playing field” not so level.

The Steps Your Company Can Take to Minimize the Impact

Look closely at the window sticker of a new vehicle and you may see a list of the larger foreign components (engine, transmission, etc.), and their country of origin. This is not unusual, as most manufacturing companies in the United States use a number of different components when producing or assembling a finished product. For example, an automobile assembled in the U.S. can have as much as 30%-40 % of its vehicle consist of foreign manufactured parts. Unfortunately, many of these components have significantly high import duties associated with their importation. Fortunately, there is a process that many companies can put in place to avoid paying these high tariff rates; they have employed a not well-known government statute known as the Foreign Trade Zone Act, (FTZ).  

What is the Foreign Trade Zone Act?

The Foreign Trade Zone Act was established by Congress in 1934 during the great depression. It was intended to be used as an incentive for U.S. manufacturers to continue manufacturing in the U.S. and not move manufacturing operations overseas.

How do Foreign Trade Zone Procedures work?

Foreign material that is moved into a Foreign Trade Zone is never dutiable, (tariffs never assessed) until it leaves the Foreign Trade Zone and is entered into the “Customs Territory”. The Foreign Trade zone can be identified simply as your manufacturing facility. In some instances, the component foreign material is exported from the Foreign Trade Zone and never enters the “Customs Territory” and therefore a tariff is never collected by U.S. Customs. When Anti-Dumping, (ADD) or Countervailing duties (CVD) are implemented by the U.S. government, (as President Trump has recently imposed on some imported steel and aluminum) a Foreign Trade Zone may be established to avoid those ADD’s/CVD’s only for those component parts that ultimately leave the FTZ and are exported outside the territory of the U.S.

According to the 2016 annual FTZ Report to Congress, some 3,300 businesses that employed more than 42,000 people leveraged the value and benefits of Foreign Trade Zones. In short, if your company can utilize the benefits of a Foreign Trade Zone by eliminating the ability of the government to collect tariffs on imported material, it’s something to seriously consider.

For further information on Foreign Trade Zone’s or for a free consultation to determine if your business would benefit from establishing an FTZ, please contact us at [email protected] or visit our website at https://foreigntradezonesolutions.com/.