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Category Archives: Import Tariff Duties

tppThe TPP (Trans-Pacific Partnership and Trade Agreement) is at best, difficult to understand. There are a lot of arguments to be made on both sides of the agreement and it can be tough to wade through all of them and read the long associated text in articles for and against. So let me simplify why I am for it.

  1. Increased trade helps create more jobs, including manufacturing jobs that pay more. In our quest to reshore manufacturing, we are trying hard to rebuild manufacturing in the US and the TPP will help. One out of every five jobs in the US can be tied to international trade (about 38 million jobs).
  2. Manufacturing jobs pay better (about 18% better than other jobs). In the US, manufacturing jobs pay between $65K and $85K – squarely in the middle class. And middle class people buy houses, cars, big-screen TVs; they shop at Walmart and send their kids to college. They are the heart and soul of the United States and keep our middle-class economy going strong.
  3. 95% of consumers live outside of the US and with the middle classes growing worldwide, particularly in Asia, our US export markets can be expected to grow. Manufacturing products in America for export put US residents to work, and that is good for all of us.
  4. Trade agreements level the playing field. It’s no secret that foreign governments offer incentives and subsidies to their own manufacturers and exporters. And because the US has such an open-economy, allowing for all kinds of imports, we are seen as a big, red target market for foreign products. Trade agreements put equal rules in place so that all signatories have to play by the same rules and regulations. This will help our exporters and slow or stop unfair imports into the US. We will have legal recourse when the rules aren’t followed.
  5. Small and medium-sized exporters benefit the most because the regulatory hurdles and challenges of foreign countries are standardized or removed. In addition, we see the most reshoring activity happening in small and medium sized companies, so growth in manufacturing is in the US, plus an improved ability to export. The projections say that 98 percent of these companies will benefit from TPP.
  6. Those countries participating in TPP will be required to abide by environmental and labor conditions oversight. While this may not fix the pollution and human rights issues in all participating nations, it is a very strong step in the right direction.

If we sit back and do nothing, surely China will step in with an overriding agreement of their own and it may not be so favorable toward US manufacturers. With TPP passage, we will continue to play a leadership role in Pacific trade.

The bottom line for me is the test of rebuilding the middle class in America through manufacturing. TPP will do that by giving access to export markets for small and medium-sized manufacturers. And that is good for America.

Cof O UkraineIf you are an importer, you know the importance of US Customs regulations regarding Country of Origin markings. The regulations are in place so that US consumers can be informed about the origin of the products they buy. You can find C of O markings on adhesive stickers attached to products, on imported food labels, on soft labels in apparel and on the outside of a shipping carton or crate. But what happens when one country takes over another? How should the rules of origin apply?

Customs and Border Protection support the US government’s political position in this matter with the enforcement of C of O regulations. Take for example, the current and very serious dispute over the Crimean Peninsula between Russia and the Ukraine. The US government has taken a clear stand against Russia and one of the ways is through C of O marking requirements. CBP requires products of Crimea to be marked with Country of Origin: Ukraine. This is a very significant point being made by the US government. Goods coming from the Crimea cannot be labeled “Made in Russia” because the US government does not recognize the Russian government there.

On April 28, 2014, the White House issued a press release announcing the implementation of further sanctions against Russia including export restrictions for high-technology goods, subject to the Export Administration Regulations (EAR), which could contribute to Russia’s military.

The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) also announced that, effective immediately, they will “deny pending applications for licenses to export or re-export any high technology item subject to the EAR to Russia or occupied Crimea that contribute to Russia’s military capabilities.” Existing export licenses meeting these conditions will be subject to revocation.

Supply chain professionals often discover that the real reason for a trade law or country regulations is political, not economic. The laws are enforced to further the agenda of the importing country, in this case the US. For the US and Ukraine, this means supporting the Ukrainian government in their fight to keep Ukraine independent.

Spices have been traded in Istanbul for 2000 years

I spent the holidays on vacation in Venice and Istanbul on a mission to understand more about these two important end points on the Silk Road. Starting around 200 BC and extending 4,000 miles, the Silk Road got its name from the lucrative Chinese silk trade and tea trade in exchange for spices, nuts and jewels from Europe and the Middle East.  In addition, various science and technology innovations were traded along with religious ideas as well as the bubonic plague.    The Silk Road was a significant factor in the development of the great modern civilizations. 

Very few people actually traversed the entire Silk Road.  Mostly it was made up of agents and merchants who bought and sold goods along the way.  At major points, great bazaars opened to facilitate a meeting place for traders.

Istanbul is a city that spans the continents of Asia and Europe and was the end of the overland Silk Road.  Merchants took their goods to the Grand Bazaar where they also traded ideas and innovations.  Walking through the Istanbul Spice Market and Grand Bazaar you can just imagine what it must have been like centuries ago packed with merchants bargaining with one another.  The influences of both Asia and Europe are evident here in the architecture of places like the Blue Mosque and the Hagia Sofia representing Islam and Orthodox Christianity.  And of course in the history of its name: Constantinople and Istanbul.

Venice became a major trade port in the Middle Ages when the Chinese Treasure Fleet (at least 100 years ahead in the mathematics needed for navigation) sailed in, ladened with treasures from China.  In Venice you can see the influence of Asian architecture in the mosaics installed in the Basilica of San Marco.  In the Doge’s Palace the famous maps show the Americas and Australia long before Columbus “discovered” the new world.  Plenty of evidence indicates that the Chinese heavily influenced Venetian map making in the 1300s and early 1400’s.  Just imagine what the Europeans and Chinese thought of one another.

I tried to imagine what it was like in these two cities in the Middle Ages.  With a little site seeing at the Spice Market and a walk through San Marco, it wasn’t hard to do.

The Association of South East Asian Nations (ASEAN) Single Windows Project is a USAID-funded initiative to facilitate trade between the 10 member states.  This includes developing standard documents and processes across the member states of Singapore, Indonesia, Malaysia, Philippines, Thailand, Laos, Vietnam, Myanmar, Brunei and Cambodia.

I was invited to lead a Business Process Design Workshop for this group in Singapore in August.  What an honor it was to participate in this event with policy makers and customs officials from the member states.  There were 2-3 delegates from each country plus representatives from the ASEAN Secretariat in attendance.

I started off the day with a lecture about Business Process Design and then introduced a toolkit to assist in developing or revising processes.  The challenge was to use examples that were relevant to import/export and logistics as well as those things that are specific to ASEAN regional trade.  As a consultant and coach, I also like to add colorful examples to drive home the points I want to make.  I chose some images such as an elephant to enrich my stories.

Lecturing and coaching in a very diverse cross-cultural meeting was one of the more difficult things I have ever done….and also one of the most rewarding and enriching.  I hope they invite me back for more.

There is a lot of discussion in Congress, the domestic Press and the international Press about the Chinese RMB (yuan) appreciation against the dollar and other world currencies.  China is being pressured to take action by the US Government, WTO and IMF. 

But Chinese Prime Minister  Wen Jiabao  and others in the Chinese government are fighting back.  If the RMB is re-valued, they say, it will cause full scale recession in China.  In America and other Western importing countries, it would cause an automatic rise in prices for imported Chinese goods by 5-15%.  If China goes into recession, the whole world will suffer.  The cost of goods to American consumers would increase, theoretically causing us to buy less, thus ordering less from China…and so on.  It’s a vicious cycle that hurts both US consumers and the Chinese economy.  There’s a new world financial order and China can tip the delicate balance if the RMB suddenly increases in value.

But our American politicians on both sides of the aisle argue that millions of jobs will return to the US because it will no longer be cheaper to manufacture in China.  HA!  No way!

Consider the lowly industrial spring.  As I discussed in my recent interview on NPR Morning Edition http://www.npr.org/player/v2/mediaPlayer.html?action=1&t=1&islist=false&id=130258250&m=130260491  even if the price of Chinese-made goods increases by 5% or 10% or 20%, it is still much cheaper to produce goods in China.  The biggest effect will be increases in costs to low-end US consumers.  Consider Wal-Mart.  When low-end goods increase in cost, the Wal-Mart shopper, (probably the least able to afford an increase) gets the brunt of the increased price.  It will cause low-income American citizens to suffer…and it will put low-paid Chinese factory workers out of their jobs as demand decreases.

The same is true if the US Government slaps import tariff increases on Chinese goods.  The effect will be shoved off onto consumers who must now buy the same goods at higher prices.  Again, not a brilliant idea with so many people struggling in this economy.

This is a serious no-win strategy.  I agree the RMB should be re-valued gently over time to create a more level global playing field.  But making revaluation happen rapidly will cause big, ugly repercussions.