New Articles

Are We Witnessing The Demise of the Box?

Protestors demonstrate against trade agreements which would govern shipments of export cargo and import cargo in international trade.

Are We Witnessing The Demise of the Box?

Marc Levinson’s book The Box, published on the fiftieth anniversary of the first container voyage in April 1956, tells the story of how a simple container, made a phenomenon known as globalization possible.

As the title suggests, the box developed by Malcom McLean, founder of a trucking company based in Red Springs, North Carolina, and one of the company’s original drivers, made the world smaller and the world economy bigger by the introduction of intermodal shipping which connected markets globally.

What exactly is globalization?

It seems to have different meanings to different people. It affects not only international commerce but also ideas and governance. As far as trade goes, globalization is a very old story with trade routes dating back to the Roman Empire and the Middle Ages in Europe. But containerization and intermodal transportation brought globalization to new heights and created the global marketplace that we take for granted today.

What has globalization brought us? It has brought economic growth but not everywhere. It has created jobs but it has also displaced workers in certain industries. It brings consumers more choice and lower prices, but some question whether consumers enjoy the benefit of lower prices with currency manipulation. It has given businesses access to foreign markets, but this is no easy feat for small and medium-sized enterprises given crossborder regulatory and other impediments and risk inherent in doing business in emerging countries.

On the positive side, let’s take the example of South Korea. In the four decades since the Korean War, South Korea has been transformed from a developing country to one of Asia’s most vibrant, manufacturing powerhouses that has virtually eradicated poverty, malnutrition, and illiteracy. It has increased its per capita gross domestic product (GDP) more quickly than any of its neighbors since the 1960s, according to McKinsey & Co.

In an article entitled “Globalization: What the West can learn from Asia,” Iiaz Nabi states that “[g]lobalization has been hugely beneficial to Asia. Japan, South Korea, Taiwan, Malaysia, Singapore, Hong Kong, Thailand, and have reaped lasting benefits from worldwide investment flows, knowledge exchanges, and rapid economic growth. And while globalization undoubtedly made the rich even richer, the poor also benefited.”
So how has the anti-globalization movement evolved? Why has the Trans-Pacific Partnership (TPP) become a flash point in the U.S. Presidential election? Why is there such a clamor to close borders to the stuff we buy every day?

Anti-trade sentiment is not new. It has been brewing for some time. Demonstrations protesting globalization date back to 1988 at the annual meetings of the International Monetary Fund (IMF) and have recurred in Paris at the G7 meetings in 1989, at the 50th anniversary of the IMF and the World Bank in Madrid in 1994, and at the World Trade Organization (WTO) Ministerial Conference in Seattle in 1999. It has now become commonplace for protests to occur on the sidelines of meetings of international organizations and other summits.

In 2001, Barry Bosworth and Philip Gordon explained in their Brookings article “Managing a Globalizing World: An Overview” that globalization was so controversial because it creates both winners and losers, referring to the workers in U.S. manufacturing whose jobs were displaced through trade as losers in globalization. They also noted that most countries make only minimal efforts to compensate the losers and pointed to the domestic conflicts long evident in the U.S. in the textile, steel and automobile industries.

Brookings’ Nabi explains that Asia has not suffered from the same political blowback that western developed countries have experienced because Asian governments have invested heavily in human capital by education and health as well as made public investment in infrastructure to attract foreign investment.

Boswell and Gordon also point to the disparities between developed and developing countries, with richer countries reaping the benefits of global trade and investment. As they point out, most economists contend that the poorer countries of the world need more integration into global economy for access to capital and trade and investment necessary to raise living standards. This very disparity between poor and rich countries has created difficulties for the WTO and has arguably led to its lack of success in its Doha Development Round.

Are we ready to examine how to reap the greatest benefits of globalization for all citizens and countries? Are we ready to have an intelligent discussion? Or have we forgotten the lessons of history like the disastrous economic effects of Smoot-Hawley tariffs?

While globalization needs some tweaking, we should take note of one of the major successes of globalization: poverty alleviation. In 201l, Laurence Chandy and Geoffrey Gertz reported in YaleGlobal that the world was in the midst of the fastest period of poverty reduction ever seen. While they acknowledged that the hows and whys of this trend will be debated for years to come, they state that the broader trends of the rise of globalization, the spread of capitalism, and the improving quality of economic governance have enabled the developing world to begin to close the gap between rich and poor countries.

Is the world in 2016 at a tipping point on globalization? Should we throw out the baby with the bath water and stop putting stuff in those boxes that traverse our oceans and travel our highways and rail corridors to our stores and manufacturing facilities?

Evelyn M. Suarez is expressing her personal views as a Washington, D.C.-based international trade lawyer and consultant. She is Founder and Principal of The Suarez Firm and is President of the Association of Women in International Trade (WIIT).

New customs law facilitates shipments of export cargo and import cargo in international trade.

Newly Enacted Customs Law Lends Helping Hand

On February 24, 2016, President Obama signed the “Trade Facilitation and Trade Enforcement Act of 2015.” This is the first major customs legislation since the 1993 Customs Modernization Act.

The law updates U.S. customs laws to facilitate legitimate trade and strengthens trade enforcement. On the trade enforcement side of the equation it includes provisions to investigate evasion of antidumping and countervailing duty orders and to enhance U.S. Customs and Border Protection’s (CBP) ability to combat counterfeit imports and to protect intellectual property rights. It also has provisions to address concerns about potentially disreputable importers of record. The law statutorily establishes CBP within the Department of Homeland Security and authorizes the Centers for Excellence and Expertise (CEEs). It provides support for CBP’s automation systems, the Automated Commercial Environment (ACE) and the International Trade Data System (ITDS).

The law encourages CBP to consolidate the two CBP partnership programs, the Customs-Trade Partnership Against Terrorism (C-TPAT) and the Importer Self-Assessment (ISA) program and to provide participants with “commercially significant and measurable trade benefits.” The benefit specifically mentioned in the law is preclearance of merchandise for those importers that show the highest levels of compliance. The law amends the drawback statute and contains a number of miscellaneous customs provisions, including a raised de minimis for very low value shipments that can be entered without the payment of duties. It also expresses a sense of Congress expressing a commitment to reinstituting the miscellaneous tariff bill legislative process.

Title V, referred to as the “Small Business Trade Enhancement Act of 2015” or the “State Trade Coordination Act,” may provide an important boost to state and local international trade economic development programs. In particular, the law authorizes grants for state trade expansion programs at $30 million a year through fiscal year 2020. It makes matching-fund awards to states to assist small businesses enter and succeed in the global marketplace. The grants to the states are for programs that support eligible small business concerns that wish to export by helping them with: participation in foreign trade missions; a subscription to services provided by the U.S. Department of Commerce; the payment of website fees; the design of marketing media; trade show exhibition; participation in training workshops; reverse trade missions; and procurement of consultancy services (after consultation with the U.S. Department of Commerce to avoid duplication).

This type of assistance can be very helpful to small businesses who do not have the financial resources for marketing and consultancy services useful critical to successful engagement in foreign markets.

The law seeks to improve coordination between the federal government and the states and local governments on export promotion and export financing and to reduce duplication of effort and overlapping functions. It establishes a working group selected by the Secretary of the U.S. Department of Commerce of representatives from state trade agencies representing regionally diverse areas.

The law also directs the Secretary of Commerce, in coordination with representatives of state trade promotion agencies, to develop a comprehensive plan to integrate resources and strategies of state trade promotion agencies into the overall federal trade promotion program.

The law directs a federal working group to identify a diverse group of small businesses, representatives of small businesses, or a combination thereof, to provide the working group the views of small businesses in the manufacturing, services, and agriculture industries on the potential effects of a trade agreement for which the president has provided notification of the president’s intent to enter into negotiations. These provisions are aimed at ensuring that small businesses are not harmed by and are able to take advantage of new trade agreements.

In sum, the new customs law contains measures to help SMEs and state export promotion efforts which should not be overlooked.

Evelyn Suarez is a customs and international trade lawyer in Washington, DC, with a special focus on import regulation as well as on anti-corruption and trade policy issues.

New IMO regulation requiring shippers to verify weight of containers add to responsibilities for shipments of export cargo and shipments of import cargo in international trade

Shippers Take Heed: IMO Will Require Verification of Packed Container Weights

The International Maritime Organization (IMO) has adopted an important new requirement affecting shippers. The IMO amended the Safety of Life at Sea Convention (SOLAS) to require shippers to verify weights of packed containers, regardless of who packed the container.

The measure is intended to address a problem with shippers providing incorrect container weights. This had led to casualties such as the one involving the containership MSC Napoli in January 2007 off the coast of the United Kingdom.

Vessel operators do not have the capability to weigh containers that are being loaded, and proper vessel stowage planning requires the verification of accurate container weights before vessel loading. Thus, verification of actual container weight must be obtained on-shore, and provided to the vessel operator and the port terminal facility prior to the vessel loading process.

There were earlier attempts to encourage shippers by guidelines and best practices to voluntarily provide correct container weights but these efforts, according to the World Shipping Council, “had no discernible effect on reducing the incidences of shippers’ providing incorrect container weights…”

In November 2014, the IMO adopted SOLAS amendments to address safety problems at sea and on shore related to container shipments with incorrect weight declarations. Since the U.S. did not take a reservation to the amendment, the requirement is also U.S. law. The U.S. Coast Guard is the responsible U.S. agency for enforcement of the new requirement.

There are two permissible methods for weighting. Method 1 requires weighing the container after it has been packed. Method 2 requires weighing all of the cargo and the contents of the container and adding those weights to the container’s tare weight as indicated on the door end of the container. Estimating weight is not permitted. Either the shipper (or a third party selected by the shipper) must weigh the packed container or weigh its contents.

Generally, the party packing the container cannot use the weight somebody else provided. In order to comply with the requirement, the shipper’s weight verification must be signed, meaning a specific person representing the shipper is named and identified as having verified the accuracy of the weight calculation on behalf of the shipper. The carrier may rely on the shipper’s signed weight verification to be accurate. The carrier does not need to be a verifier of the shipper’s weight verification.

Terminal operators will also need to have in place procedures to deal with containers that do not have signed shipper weight verifications. Terminal operators can remedy these failures by weighing the packed container at the port. If the marine terminal does not have equipment to weigh containers and provide a verified weights, alternative means must be found to obtain the verified container weight. Otherwise, the packed container cannot be loaded. Procedures will have to be developed by marine terminals and carriers to deal with situations where no shipper verified weight is provided.

Vessel operators and terminal operators are required to use verified container weights in vessel stowage plans. They are prohibited from loading a packed container aboard a vessel for export without this information. A shipper’s failure to comply with the new requirement will thus be extremely disruptive to maritime operations adding to the problem of congestion which has plagued ports.

There are many issues that remain to be addressed, such as how the new law will be administered and enforced. Nonetheless, shippers, freight forwarders, shipping lines, and container terminals are urged to begin discussions on implementation of the new IMO regulation. The stakeholders should not let this requirement, which becomes legally binding on July 1, 2016, come as a surprise.

 

Evelyn Suarez is a customs and international trade lawyer in Washington, DC, with a special focus on import regulation as well as on anti-corruption and trade policy issues.

WTO's Trade Facilitation Agreement is all about eliminating corruption at the border in connection with international trade shipments of export cargo and shipments of import cargo that are transported by air, ocean, rail, or truck,

Does Trade Facilitation Matter in the Fight against Corruption?

What does the World Trade Organization’s (WTO) Trade Facilitation Agreement (TFA) have to do with corruption? It has everything to do with good governance and addressing the demand side of corruption at the border.

But in order to understand the relationship one must understand what trade facilitation is and how it addresses public corruption at customs.

The WTO defines trade facilitation as “the simplification and harmonization of international trade procedures” covering the “activities, practices and formalities involved in collecting, presenting, communicating and processing data required for the movement of goods in international trade.”

The main features of the TFA include: required publication of regulations and fees; appeal-and-comment rights when new regulations are introduced; mandatory internet availability of documents and payment options; special procedures for expedited release of air cargo and perishable goods; support for the use of express delivery and air cargo; and requirements for clear procedures to deal with cargo holdups and releases. The TFA also provides for aid to developing countries to implementing the accord’s provisions.

TFA provides a blueprint for customs modernization. Successful implementation will lie in the detailed work that lies ahead.

In spite of the touted benefits, the WTO member countries has been slow to ratify the TFA. Two-thirds of the WTO membership, or 108 members, must ratify TFA before it is implemented. The U.S. and the WTO are encouraging countries to take action before the Tenth WTO Ministerial in December in Nairobi, Kenya.

The Organization for Economic Cooperation and Development estimates that the customs reforms effected by TFA implementation would lower the total trade cost of shipping goods by 10 to 15 percent depending upon the country. Some expect implementation of TFA’s measures to boost global trade by an estimated $1 trillion and global GDP by nearly five percent. “It makes it easier for businesses big and small to participate in trade around the world,” stated the Office of the United States Trade Representative, “and to support jobs through that trade.”

Various aspects of the agreement, such as transparency, automated entry and payment of duties, can serve powerful measures to address corruption at customs. Corruption at the border is undoubtedly a significant impediment to trade and investment in the developing world. Corruption at ports is such a serious problem that the maritime industry has organized a collective action effort called the Maritime Anti-Corruption Network (“MACN”) which seeks to “work toward its vision of a maritime industry free of corruption that enables fair trade to the benefit of society at large.” It goes without question that TFA implementation would aid in this effort.

TFA implementation will also be a test of good governance. Countries will have to make the decision of whether they actually want to avail themselves of the donor assistance for capacity building to modernize their border processes. This can be seen as a test of whether a country is really willing to address corruption at customs. A country’s willingness or unwillingness to adopt measures facilitating trade and reducing the opportunities for corruption at the border may be a powerful indicator of a culture of corruption—more so than any index of perception of corruption.

For companies doing business abroad, especially in emerging countries, a country that undertakes these reforms may be a better bet for business. And hopefully, the countries that take advantage of the assistance will succeed in establishing their places in the global value chain. TFA implementation should be an important tool in addressing the demand side of corruption and making the implementing country a more attractive and less risky place to do business.

 

Evelyn Suarez is a customs and international trade lawyer in Washington, DC, with a special focus on import regulation and anti-corruption and trade policy issues.