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Yusen, We Have a Problem!: In The News Round-up

Posted By Administration, Thursday, March 9, 2017
Updated: Wednesday, March 8, 2017



by Mark Kopp, Yusen Logistics (Americas) Inc.


Trade Deals
Cancelled? Renegotiated? New? Take your pick. The new administration has been very busy with trade pronouncements. But what do we really know?

Trans-Pacific Partnership (TPP)
This one is pretty clear. The United States will not pursue membership in this 12 nation multilateral agreement. The President signed an executive order to that effect on January 23rd. In a New York Times article of the same day, Australian Trade Minister, Steven Ciobo, stated there were benefits for all parties that were part of the deal and it would be a shame to lose those benefits. On the other hand, James P. Hoffa, General President of the Teamsters Union, said this was "the first step toward fixing 30 years of bad trade policies."1

So it depends on your point of view. As a retailer, any trade deal that opens markets to give retailers access to new sourcing opportunities, should be a good one. Retailers are constantly searching for new sources of quality product at the lowest price. Any elimination of trade barriers or tariff reductions should be viewed as positive from a retail point of view.

Will withdrawing from the TPP help or harm retailers? Only time will tell.

NAFTA – Rumors Abound
This will be an interesting one to watch. During the campaign, the President referred to NAFTA as one of the worst trade deals ever made. Now the rhetoric from the White House is about renegotiating and tweaking. Word on the street is Canada is open to modifications and Mexico will walk out of negotiations if tariff increases are involved.

The program could be modified to include new technologies such as e-commerce. It could also be expanded to include energy, not part of the original program. NAFTA could be scrapped altogether.

There has been talk of a 20% increase on all Mexican made goods, but that could be accomplished by a "border adjustment tax," which would be part of a change in overall corporate tax policy.

What to believe? Look at your supply chain. How will your company be impacted by any changes in NAFTA? Would your company benefit by some "tweaking"? Now is the time to let your Senators and Congress know how your company will be affected. Will your company be hiring or laying off if there are changes to NAFTA? Will your company have to pay more or less? And, most important, how will changes in NAFTA ultimately affect your customers? Let your representatives know where you stand.

U.S. – U.K. Bilateral Trade Agreement
During a recent meeting President Trump and Britain's Prime Minister May announced plans to work on a bilateral trade agreement. However, this may be harder and take longer to complete than it appears. A recent article in POLITICO states it could be months if not years before formal negotiations begin.2 This is largely due to the constraints Britain will be under until it formally leaves the European Union not before 2019.

However long this trade deal may take, expect bilateral negotiations to become the norm under this administration as opposed to the multilateral deals of the past several administrations.

Compliance
This column has often urged readers to examine their compliance procedures. The Department of Justice announced on their website on February 2nd, the conviction of an auto parts executive for obstruction of justice. Along with the $7,500 fine will be a 14 month prison sentence.

Are all of your employees, including those working overseas, up to speed on all anti-corruption and anti-bribery policies? Is everyone aware of the U.S. Foreign Corrupt Practices Act (FCPA)? We have seen an increase in enforcement of these actions over the last few months. Make sure you and your company are in full compliance – unless, of course, you have nothing better to do for the next 14 months.

[1] https://www.nytimes.com/2017/01/23/us/politics/tpp-trump-trade-nafta.html?_r=0
[2] http://www.politico.com/agenda/story/2017/02/us-britain-trade-deal-000306


Mark Kopp is currently the Senior Manager for Import Compliance for Yusen Logistics (Americas) Inc. Mark has over 30 years experience in all aspects of supply chain management and compliance - from product development and buying, cargo management and shipping, customs brokerage, to warehousing, distribution and retail sales. He has managed/directed imports for Kinney Shoe Corporation, Woolworth Corporation, Russ Berrie & Co. and DHL. He has also served on the Footwear Distributors & Retailers of America government customs council, been a member of the Board of Directors for the Toy Shippers Association, and been an instructor at The World Trade Institute in New York. Currently, he is a member of the NY/NJ Freight Forwarders & Brokers Association and serves on the American Apparel & Footwear Association Government Relations Committee. Mark graduated from Franklin & Marshall College in Lancaster, PA with a B.A. in Political Science.

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Tags:  Foreign Corrupt Practices Act  NAFTA  Trans Pacific Partnership  US UK Bilateral Trade Agreement 

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Obama Administration Continues to Push Congress to Implement the Trans Pacific Partnership Agreement by the End of 2016

Posted By Administration, Thursday, September 8, 2016
Updated: Wednesday, September 7, 2016


by Melissa Proctor, Polsinelli, P.C.


The Trans Pacific Partnership agreement ("TPP"), which includes the United States and eleven other countries in the Asia Pacific region (i.e., Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and, Vietnam.), is the largest regional free trade and investment agreement that has ever been negotiated. In February of this year, the United States and the various signatory countries signed the agreement, and have two (2) years in which to implement it into their local laws. Once the TPP is fully implemented and goes into effect, what would such an agreement mean for U.S. retailers, distributors, and manufacturers? The TPP would eliminate import tariffs on more than 18,000 goods, many of which are currently subject to high duty rates, and could provide U.S. companies with significant duty savings on imports of qualifying raw materials and goods into the United States. U.S. exporters may also find their duty-free goods to be in greater demand by foreign buyers located in TPP signatory countries. The Obama Administration has also hailed the TPP as a means for supporting higher paying jobs in the United States, growing the U.S. economy, and countering China's economic expansion.

During a press conference in early August, President Obama said that it is his wish for Congress to pass TPP implementing legislation before he leaves office, and on August 12, 2016, the U.S. Trade Representation sent the President's draft Statement of Administration Action to Congress. The Statement of Administration Action describes the White House's interpretation of the U.S. obligations under the TPP and the proposed executive actions that would be required for its implementation into U.S. law. During this time, the Administration and Congress may begin consultations, as well as hold committee hearings on the TPP. The submission of the draft to Congress initiates the 30-day time period after which a TPP implementing bill and the final Statement of Administration Action may be submitted to Congress for consideration.

However, on August 25, 2016, Senate Majority Leader Mitch McConnell said during a Kentucky State Farm Bureau breakfast in Louisville, Kentucky that the Senate will not vote on the TPP before Obama leaves office. Rather, he noted that the TPP may be passed after additional changes have been made to the agreement when the new Administration takes office in 2017. Nevertheless, given the recent submission of the draft Statement of Administration Act to Congress, it appears that the Obama Administration will continue to push implementation of the TPP by the end of 2016 despite the current political climate in Congress and rhetoric of both political parties' presidential candidates. Even after the TPP's implementation into U.S. law, the agreement itself will enter into force only after at least six of the signatory countries (that represent a minimum of 85% of the GDP of all of the participants) have implemented the agreement into their local laws. Thus, it may be some time before the TPP will go into force.

If the TPP is implemented into U.S. law and ultimately takes effect, U.S. retailers, manufacturers and distributors will need to know how to make the most of the agreement and should start planning accordingly. As noted above, customs duties on more than 18,000 products imported into the United States and other signatory countries will be eliminated under the TPP; however, only goods that "originate" in a TPP member country will be afforded preferential tariff treatment. There are three ways in which a good may qualify for TPP treatment – the goods must be:

  1. wholly obtained or produced entirely in the TPP territory;
  2. produced entirely from TPP-originating materials; or,
  3. in full compliance with product-specific rules of origin.

The agreement also provides a de minimis rule that will allow imported products containing non-originating materials to qualify for the TPP – even if they don't otherwise satisfy the agreement's product-specific rules of origin. Originating goods must also be shipped directly from one member country to another without passing through the territory of a non-party in order to qualify for the TPP.

Claims for duty-free treatment on imports of TPP-originating will be made at the time the qualifying goods are entered into a signatory country and the importer must have in its possession a certification signed by the producer or exporter of the goods attesting that the merchandise is in fact TPP-originating. There will be no specified form that must be used for these certifications; however, they must contain certain data elements relating to the producer, exporter, importer and the products themselves. In addition, both importers and exporters utilizing the TPP must maintain records (i.e., certifications and supporting documentation substantiating that the products qualify for TPP treatment) for a period of five (5) years from the date of importation or date of execution of the certification. At this stage, it is still too early to predict when the proposed agreement will actually go into effect. However, it is a good idea for companies to begin thinking about how the TPP may impact their operations and whether it could be used for greater duty and cost savings (for themselves or for their foreign buyers) in the future.


Melissa Proctor is a Shareholder with Polsinelli, P.C. With significant experience in the customs laws and regulations, export controls, economic sanctions, and international trade, Melissa is committed to understanding companies' operations and providing assistance geared toward helping them reach their specific business and operational goals. She may be reached at (602) 650-2002 or via e-mail at mproctor@polsinelli.com.

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Tags:  TPP  Trans Pacific Partnership 

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Another Step Closer to Implementation: The Current Status of the Trans Pacific Partnership and Its Implications for Manufacturers, Retailers and Distributors

Posted By Administration, Thursday, December 10, 2015
Updated: Wednesday, December 9, 2015

by Melissa Proctor, Polsinelli, P.C.


The Trans Pacific Partnership agreement ("TPP"), the largest comprehensive regional free trade and investment agreement that has ever been negotiated, is slated to be signed by twelve countries in the Asia Pacific region that represent roughly 40% of the world's economy. The Obama Administration has touted the TPP as a means for boosting U.S. exports, supporting higher paying jobs in the United States, growing the U.S. economy, and countering China's economic expansion. The full text of the agreement was made available to the public on November 5th.

What does all of this mean for retailers, distributors, and manufacturers? For starters, the TPP will eliminate import tariffs on more than 18,000 goods, many of which are currently subject to high duty rates. Although it may be quite a while before the TPP goes into force, companies are advised to take stock of the agreement, assess its potential impact on future sourcing decisions and international sales strategies, and contemplating the rollout of processes for making import claims under the TPP as well as responding to requests for TPP certifications from overseas customers. This article provides a brief overview of the current status of the TPP, the TPP's rules of origin and the requirements for making and supporting valid claims for preferential tariff treatment.

1. Current Status of the TPP and Its Entry into Force
For the past five years, the following countries have been actively negotiating the TPP: United States; Australia; Brunei; Canada; Chile; Japan; Malaysia; Mexico; New Zealand; Peru; Singapore; and, Vietnam. Negotiations officially concluded on October 4, 2015, and the signatory countries are slated to formally sign the agreement in New Zealand on February 4, 2016. Thereafter, the signatory countries' respective legislative bodies will have a maximum period of two (2) years in which to implement the TPP into their respective local laws.

With respect to implementation of the TPP in the United States, Section 106(a)(1)(A) of the Trade Priorities Act (Pub.L. 114-26) requires the President to notify Congress of his intent to enter into an international agreement, such as the TPP. President Obama provided that notification to Congress on November 5, 2015. The Trade Priorities Act also requires the President to sign the international agreement no later than ninety (90) days after providing notification to Congress, which will be February 3, 2016. On November 17, 2015, the U.S. International Trade Commission ("ITC") announced the commencement of an investigation on the likely economic impact of the TPP on the United States. Such ITC investigations are part of the international agreement implementation process and the ITC generally issues its reports to Congress when the implementing legislation is about to be voted upon. In the case of the ITC's investigation of the TPP, the impact analysis report is expected to be released on or around May 18, 2016. It is likely that Congress will delay its vote on the TPP implementing legislation until after the ITC's report has been released. Further, in light of the upcoming Presidential election at the end of 2016, there will likely be additional delays in the implementation of the TPP in the United States.

It should also be noted that the TPP will enter into force only after at least six of the signatory companies (that represent a minimum of 85% of the GDP of all of the participants) have implemented the agreement into their local laws. Thus, the TPP may not go into force until sometime in 2017 or later.

2. The TPP Rules of Origin and Direct Shipment Rule
As noted above, duties on more than 18,000 products will be eliminated under the TPP. However, only goods that are considered "originating" in a TPP member country will be afforded preferential tariff treatment. There are three ways in which a good may be eligible for preferential treatment under the TPP:

  • It is wholly obtained or produced entirely in the territory of one or more of the parties
  • It is produced entirely from TPP-originating materials
  • It satisfies the product-specific rules set forth in Annex 3-D to the agreement (e.g., regional value content rules, tariff-shift rules, etc.)

The agreement also provides a de minimis rule that will allow products containing non-originating materials to qualify for the TPP – where the product-specific rule of origin cannot be satisfied. Those goods will still be afforded preferential treatment if the value of all of the non-originating materials does not exceed 10% of the value of the finished good.

In addition to satisfying the TPP rules of origin, originating goods will only be eligible for preferential trade benefits if they have been transported directly from one member country to another without passing through the territory of a non-party. However, originating goods that transit a third country may still retain their TPP eligibility provided that: (a) they do not undergo any operation in the third country other than unloading, reloading, separation from a bulk shipment, storing, labeling or marking, or any other operation necessary to preserve them in good condition or to transport them to the importing TPP country; and, (b) they remain under the control of the customs authorities in the non-party's territory.

3. Making TPP Claims
Once the agreement goes into force, companies in TPP member countries may claim preferential tariff treatment on imports of qualifying goods. TPP claims may be made at the time of entry provided that the importer has the required certification statement. In addition, companies may submit retroactive claims for qualifying goods post-importation in order to obtain duty refunds – this scenario is likely where the required certification statement and supporting eligibility records were not available at the time of entry.

As noted above, importers are to make claims for preferential tariff treatment under the TPP based on a written certification of origin attesting to the fact that the goods in question satisfy the applicable rules of origin. The certifications are not required to be submitted to the importing country's customs authorities at the time of entry; rather, they must merely be in the possession of the importer when a claim is made. The certifications may be prepared by the exporter, producer or even the importer itself. The certification may apply to a single shipment or to multiple shipments made over the course of a 12-month period. Certifications may be submitted in English, but the importing country may also require that a translation into its local language be provided as well. There is no specified format for the certification or form that must be used. Rather, the certification must merely be in writing and contain the following data elements:

  • Names and addresses of the Importer, Exporter or Producer
  • Certifier's name, address, telephone number and e-mail address
  • Description and Harmonized System Tariff Classification of the goods
  • Invoice number (if known and if the certification of origin covers a single shipment)
  • Origin Criterion
  • Blanket Period covered by the certification
  • Signature and date of the certifier

As with other free trade agreement that are currently in force, it is likely that many of the importing TPP member countries will provide suggested templates or recommended formats for the certifications, though they will not be legally required to be utilized. Further, the certification must contain the following statement:

I certify that the goods described in this document qualify as originating and the information contained in this document is true and accurate. I assume responsibility for proving such representations and agree to maintain and present upon request or to make available during a verification visit, documentation necessary to support this certification.

Importers making TPP claims will be required to maintain documentation relating to their imports (including the certification of origin and additional documentary evidence that substantiates the goods' eligibility) for a period of five years from the date of importation. Similarly, exporters or producers that issue certifications to their customers must also maintain records for five years from the date the certifications were issued (as well as all records that demonstrate TPP eligibility).

At this stage of the TPP process, it is still too early to predict when the agreement will actually go into effect. However, it is a good idea for companies to begin thinking about how the TPP may impact their operations and whether it could be used for greater duty and cost savings in the future. Companies are urged to review the agreement, assess whether their goods or raw materials may qualify, monitor developments relating to the ITC's investigation and release of the draft U.S. implementing legislation down the road.


Melissa Proctor is a Shareholder with Polsinelli, P.C. With significant experience in the customs laws and regulations, export controls, economic sanctions, and international trade, Melissa is committed to understanding companies' operations and providing assistance geared toward helping them reach their specific business and operational goals. She may be reached at (602) 650-2002 or via e-mail at mproctor@polsinelli.com.

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Tags:  Exports  Imports  TPP  Trans Pacific Partnership 

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