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Take note: Address Global Trade Issues Early in Your Negotiations to Avoid Liability and Costs (Yes, this applies to you).

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Archives, Global Trade Daily, International Trade

Take note: Address Global Trade Issues Early in Your Negotiations to Avoid Liability and Costs (Yes, this applies to you).

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Premise: Nearly all companies have exposure to international trade laws when doing business. Spotting these risks early when negotiating agreements and transactions will prevent future liability and costs. So, when drafting agreements engaging in mergers or acquisitions, and conducting diligence parties, should be considering a number of important trade risk points that may be sprinkled throughout various business activities.

“Supply chain” is the buzzword right now for a reason, it’s an area where trade liabilities are growing significantly. On top of backups and slowdowns, additional tariffs or duties (import taxes) can make importing from certain locations more expensive than it once was, and more restrictions are being added to this already highly regulated activity. New ESG and human rights restrictions along with an expanding list of prohibited parties make planning a supply chain more challenging than ever. Additionally, if done incorrectly, the penalties associated with customs violations can be quite high, or, in a worst-case scenario, your shipments can also be seized and even destroyed without compensation.

Trade Controls Are Broader Than You Think 

Always screen your transaction for other tangential cross-border issues. If the company is directly or indirectly supplying the U.S. government with goods or services under a procurement agreement, ensure someone has reviewed whether any relevant Buy America criteria are met. Enforcement is on the rise so include proactive requirements for antiboycott compliance and anti-corruption representations in agreements and ensure training is being done as needed for both employees and third parties to decrease the risk of violations. Most trade-related rules and regulations apply to U.S. persons and U.S. companies both directly and indirectly. For example, if a third-party distributor sells your product to a person in Iran without required authorization – you can be liable.

Importing is Getting More Complicated

Before you commit to acquiring, merging with, or working with any business, ensure the security of its supply chain and that it is reporting the correct country of origin, classification codes, and other required information properly. Confirm that it has all relevant IP rights and that there are no infringing marks being used, and determine whether any anti-dumping or countervailing duties might apply to the imported product. If it turns out that additional, high tariffs are due – not only may penalties be imposed, but the government will also demand interest on its unpaid revenue. So, when drafting agreements consider representations from parties to minimize risks of wrong or missing information, changing regulations, and government enforcement cases, limit your liability if possible, and choose INCOTERMS (contract terms that determine which party has responsibly shipped goods at any time during the shipping process) wisely to limit exposure.

Sanctions Apply To all of Your Customer and Supplier Relationships

Like import regulations, U.S. sanctions prohibitions and restrictions are also expanding at a steady rate. To protect yourself and your business in this dynamic and fast-changing environment, ensure that any target companies or business partners already have sanctions compliance programs and are pro-actively complying with economic sanctions and associated mandatory requirements. This is an area in which you want to limit successor and indirect liability, as penalties can be extremely high. You don’t want to learn after the fact that your business partner has been buying inputs from or selling your product to a restricted party in China. So, for your own best interest, take the initiative to educate your partners as needed and get your information and inspection rights regarding the supply chain, indirect sales, and distribution network in writing.

Export Requirements Can Apply in the US Too

Similarly, export laws also carry a specific set of risks and liabilities for exporters. Filing and licensing requirements are complex and the rules apply broadly to all U.S. origin goods and technologies (even online only and SaaS products). Ensure that any target company or potential business partner has determined the correct export classification for its products and technology before you commit to investing, acquiring, or merging. Look out for red flags that products are being transshipped to countries without the proper authorizations. Similarly, if you are going to contract with an agent or distributor, make sure they understand export compliance because your liability does not end when you hand over the product.

Further, export classifications are no longer something companies only need to know if they export physical products to locations outside of the U.S. Export controls is also implicated if you share technology domestically in the U.S. with foreign nationals. and export classification can be a determining factor in whether a CFIUS (Committee on Foreign Investment in the U.S.) filing to the Department of Treasury is required before closing a deal – and this filing requirement may apply regardless of whether the target company exports at all.

Update Your Agreements and Compliance Materials

The government is expanding its enforcement initiatives and broadening its scope of review in corporate criminal enforcement cases. Thus, it is worth your time to slow down and do your homework to avoid bigger problems later. Talk to your Colleagues. Identify whether if you are already addressing these issues, and if not, create a plan to work trade reviews into your regular processes and workflows.

Don’t let simple compliance actions slip through the cracks. If you have compliance materials- read them and ensure they are up to date and are useful to protect the company. If not work with someone familiar with the risks and the law to update, retool, or enhance them.

Make your materials practically employable, set a tone at the top that compliance procedures are taken seriously, and ensure your standard agreements include trade provisions to minimize your risk. Once you’re comfortable that you have a solid compliance program or transaction checklist well-tailored to your business activities, complete an internal audit at set intervals to make sure that it’s being used and working.

Addressing trade risks before closing a transaction or signing a contract may save you not only from headaches but from getting to know the U.S. authorities all too well.

____________________________________________________________________

Abbey Baker, counsel at Lowenstein Sandler LLP, works with businesses and entrepreneurs seeking to expand their market position in the global economy while considering national security, trade regulation, and foreign policy concerns.

Doreen M. Edelman is the chair and founder of the Global Trade & Policy practice. She has more than 30 years of experience advising clients on the risks associated with export controls, customs matters and U.S. sanctions in cross-border M&A and investment transactions, and on the compliance requirements pertaining to technology, software, defense articles and services, and commercial goods.

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Archives, Executive Education, Global Trade Daily, Imports/Exports

U.S. Export & Reexport Compliance for Canadian Operations

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January 25 – 27, 2022 | Toronto, ON + Livestream Option Available

The Canadian Institute (CI) and the American Conference Institute (ACI) invites you to attend the 11th Annual Forum on U.S. Export & Re-Export Compliance for Canadian Operations in Toronto, ON on January 25–27, 2022!

Over the last decade, this acclaimed event has gathered senior U.S. and Canadian government officials, as well as legal and compliance experts from aerospace, defense, technology, satellite, space, telecom, energy, logistics, and many more industries. CI/ACI are excited to host this event in-person this year (following all local Covid measures) to give a chance for attendees to network once again in-person. The event will also be live-streamed to give a wider audience a chance to access the expertise and updates shared by CI/ACI’s speaker faculty.

As in past years, the 2022 agenda will focus on the most complex issues posed by the interplay of U.S. and Canadian export/re-export controls, as well as the nuances of applying U.S. requirements to the Canadian context.

HERE ARE YOUR TOP 5 REASONS TO ATTEND:

1. Hear directly from key government decision-makers.

2. Benchmark with leading exporters through audience polling and structured breakout conversations.

3. Stay in the loop on critical development in Canada and the U.S.

4. Gain best practices for navigating compliance risks that are unique to the Canadian context.

5. As the only event of its kind in Canada, this is your best chance to expand your network and brain trust.

Don’t miss the only comprehensive event for the export and re-export compliance community in Canada!

Register now to take advantage of early rates! SAVE 10% with Global Trade Magazine Code: D10-856-856BX01.

Online: https://bit.ly/3kEgKx2

Email: customerservice@canadianinstitute.com

Phone: 1-877-927-7936

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Archives, Global Trade Daily, News

KERRY LOGISTICS OPENS UP MONGOLIA TO U.S. BUSINESSES

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Kerry Logistics is a global logistics services provider with an extensive presence in the USA. In 2019, the firm was ranked the third-largest NVOCC (Non-Vessel-Operating Common Carrier) in terms of Trans-Pacific trade, handling more than 425,000 TEUs.

In December 2020, it announced a new series of multimodal transport solutions to Mongolia, designed to offer an alternate route to a market with untapped potential. 

Specifically, the latest offerings cover road-rail and sea-rail freight for dry and temperature-controlled cargoes between North America, Europe, and landlocked Mongolia via the Freeport of Riga, Latvia. 

William Ma, group managing director of Kerry Logistics Network, commented: “The new services greatly enhance the freight cost-efficiency and variety of solutions to Mongolia for our customers. To access the landlocked Mongolia, our strong rail freight capability in Central and East Asia gives us an invaluable advantage.” 

Kerry Logistics has a firm foothold in the U.S. from which it can help exporters to reach the Mongolian market. For example, it operates more than half a million square feet of warehouses in Southern California, Northern California, and Florida, facilities that employ more than 290 staff members. 

As well as opening opportunities in previously difficult to reach Mongolia, Kerry Logistics provides global coverage with offices in Canada, Mexico, India, the Middle East, South America, Australia, New Zealand, Europe and Asia.

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Archives, Global Trade Daily, International Trade

U.S. Business Says “Make America Integrate Again”

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In December 1791, United States Treasury Secretary Alexander Hamilton submitted his Report on Manufactures to Congress. In it, he made the case for transitioning the country’s economy from a primarily agrarian model to an industrial one that would level the trading playing field with Europe. An important part of his proposal was to introduce tariffs that would deter imports of products that could compete with the nascent U.S. manufacturing sector. Less than two years later, the Yellow Fever epidemic struck the United States. Hamilton and his wife fell ill and recovered.

And hopefully, that’s where any parallels with the present-day end.

The first half of the 18th century saw one of the most active periods of protectionist tariffs in the history of the United States, largely as a response to interrelated economic and military wars that the country was engaged in at the time with trans-Atlantic continental powers. As we emerge from the COVID-19 pandemic in 2021, it would likely be premature to claim that the U.S. has resolved its trade conflicts across both oceans. Some argue that the new administration will be unlikely to ease trade policies (and tariffs) against China, in particular. However, there is a view that a policy of more open engagement with other overseas partners – particularly historic allies – will lead to less protectionism in the coming months and years. And that this can aid the economic recovery that the country urgently needs to pursue as we address the damage inflicted by the pandemic across many areas of our economy

That view is certainly supported by a significant number of U.S. business leaders. In a survey of 500 senior business executives recently conducted by DHL and Vanson Bourne, nearly 9 out of 10 (89%) said that their organizations’ economic recovery will rely upon robust international flows of trade over the next 12 months. 81% of the same group = each representing companies with at least USD 1 billion of sales –  also believe that their organizations’ profitability would increase if the U.S. were to move away from some of the protectionist trade policies of recent years.

The DHL Global Connectedness Index (GCI), produced by researchers from NYU Stern’s School of Business, has since 2011 provided a clear illustration of the correlation between more global connections and prosperity. The GCI researchers have argued that countries could achieve GDP increases of up to 5% by implementing policies that increased the flow of trade, capital, people and information. While the U.S., by virtue of the size of its economy and population, has a low level of international trade flows relative to its domestic economy, it enjoys some of the broadest trade relationships globally, ranking second in this dimension of the GCI. North America is the top region globally in terms of information and capital flows, which is a testament in large part to the global reach of both Wall Street and Silicon Valley. As the survey respondents assert, by unleashing even more of its trade potential, and perhaps even copying aspects of the “free-flowing” model that it has applied to establish itself as a global leader in capital and information, the U.S. has an opportunity to unlock economic growth and bolster its post-COVID recovery.

There are some low-hanging fruits already in place. Closer to home, the USMCA has already laid some of the foundations for international cooperation. Modified to reflect a new digital economy, the agreement will undoubtedly support U.S. businesses that are looking to trade with Canada and Mexico, particularly online. We at DHL have seen first-hand the increasingly prominent role that e-commerce has played in the economy throughout the pandemic, and while this has been fueled by social distancing and lockdowns, we see it simply as a rapid acceleration of a trend that was already in play. COVID has brought e-commerce forward – both for B2C and B2B businesses – by 7-10 years within just one year. Much of our consumption will remain online even as things return to “normal.” North America was a top-three priority market for 78% of respondents in our survey, and U.S. companies will likely see outsized online demand from our neighboring markets over the coming years.

Perhaps most significantly, U.S. business leaders also recognized in the survey the value of leadership and engagement on global issues not directly related to their next 10k earnings report. An overwhelming majority of business leaders – 96% – see it as important for the U.S. to reconnect with its allies on climate change and specifically to reengage on the Paris Climate Accord. This clearly reflects that business leaders have kept longer-term challenges such as guaranteeing the longevity of the planet for future generations in view, despite the short-term challenges posed by the pandemic and a more inward-looking policy agenda.

The case for more free trade and the desire for closer integration with the international community are clearly evident from our research. While international trade will undoubtedly be competing with many other policy issues on the agenda of the new U.S. administration, the U.S. business community has signaled that the COVID-19 pandemic has created both an imperative for action on trade and an opportunity for this country to once again reassert its leadership both economically and morally on the world stage.

section 321
Archives, Global Trade Daily, Imports/Exports

How Your Business Can Benefit from Importing Under Section 321

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Import taxes often have a huge impact on businesses, especially U.S. e-commerce companies that rely heavily on goods made overseas. Many of these companies are drastically lowering their import costs by taking advantage of a little-known U.S. customs statute, Section 321. Let’s look at how these businesses are benefiting.

Section 321 Cuts the Costs of Chinese Imports

What you’re importing and where you’re importing from can considerably affect the duty rates you have to pay. While this applies to lots of countries around the world, China is a central focus for many U.S. businesses. In 2020, Chinese exports to the United States topped a whopping $430 billion! And shipping directly from China to the U.S. can often cost around 20% in import taxes.

The high price of bringing goods from China to the United States was exacerbated by recent trade tensions between the U.S. and China, respectively the world’s largest consumer of goods and the world’s largest manufacturer of goods. Over half of the overall trade between the U.S. and China has been negatively impacted. The affected U.S. businesses report that the increased tariffs have considerably raised their operating costs, and many of these companies turned to Section 321 and Canadian fulfillment companies for economic relief.

How Does Section 321 Work?

Section 321 allows for the duty-free importation of qualifying goods into the United States that are valued at $800 or less. But most companies buy from China and other countries in much higher quantities at much higher dollar values. A problem, right? There’s a simple workaround to that: bring the goods to Canada, where import tariffs are much lower than they are in the United States.

A company can, for example, buy a shipment of Section 321-eligible goods valued at, say, $8,000 from China, and have them sent to Canada. Then they can have those goods brought to the U.S. in ten separate $800 shipments, on ten separate days, without paying about $1,600 in total U.S. tariffs they would otherwise incur if they imported in bulk directly from China to the United States.

Who Handles Section 321 Goods on the Canadian Side?

That’s where a Canadian fulfillment company comes in. Using a “pick-n-pack” process, Canadian fulfillment companies receive bulk shipments at a Canadian warehousing facility that’s usually strategically located close to the U.S. border. The “picking” part includes pulling items from large shipments and readying them for smaller orders that often go to multiple locations. The “packing” gathers these items according to customer needs and requirements.

From receiving the goods to final delivery confirmation, a good fulfillment company will have the ability to handle and electronically track every shipment. A good fulfillment company is also skilled in “kitting,” taking items from multiple SKUs and bundling them together under one SKU for a more economical and streamlined shipping process.

Section 321 is a Speedy Solution

Can anybody bring goods into the U.S. under Section 321? Technically, yes, but not everyone can do it with the same speed and efficiency as fulfillment companies. The detailed documentation that U.S. customs requires has to be perfect and delivered before the shipment gets to the border if you want to get the goods through smoothly. How? Fulfillment companies enjoy participation in the Section 321 Data Pilot Program, allowing them to submit the needed documentation electronically to ensure their clearance is ready before the shipment arrives at the border crossing.

And the closer to the border the better. Many Canadian fulfillment companies are close enough to the U.S. border to guarantee same-day fulfillment, bringing products into the United States that are then handed off to U.S. carriers including FedEx, UPS, and DHL for swift delivery to their ultimate destinations.

It’s been famously said that the only two certainties in life are death and taxes. But that may not be entirely true. At least not the second part if you’re taking advantage of Canadian fulfillment and Section 321.

Archives, Commentary, Global Trade Daily

What Transportation Professionals Need to Know About the U.S.-Mexico Border Situation

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On March 27, U.S. Customs and Border Protection issued a notice detailing the re-assignment of over 750 officers from various ports of entry along the U.S.-Mexico border to help process people crossing the border. This past weekend, rhetoric increased significantly regarding the potential of closing the border completely. While this threat is not new, it certainly feels different this time around, and specifically raises questions for those involved in regular cross border freight movements. With the news that Secretary Nielsen is cutting short a trip to Europe, what can supply chain professionals anticipate regarding cross-border operations?

Fluid announcements

We have seen over the course of this administration that policy is often refined and revised from the first announcement or tweet to the final policy implementation. It is clear that the White House has received tremendous feedback from businesses regarding the impacts of border delays and closures across the country. It appears that some type of new policy is being seriously considered at the border, but as of today the final details are still to be determined.

Scenario planning

While we may not know if and how policy may change and impact freight for a few days or weeks, we can scenario plan for a reasonable number of outcomes. Some of those may be:

-A temporary total closure that aims to extract policy goals much like the government shutdown in January

-A partial closure at the border based on type of vehicle, product, or mode

-A partial closure at the border based on port of entry or days of the week to reassign more resources to processing people

-Continued uncertainty as policy making is delayed

Supply chain strategies

In addition, supply chain professionals can consider the following strategies to mitigate U.S.-Mexico border delays in an uncertain atmosphere:

Look for opportunities to convert modes of services

With possible closures effecting ports of entry along the U.S. southern border, additional planning will be needed. Work with your account managers and transportation service providers to review time critical and urgent freight shipments. Access a broad network of transportation modes to mitigate against the risk of closures by leveraging air and rail services to make sure your freight keeps moving.

Utilize warehouses and secured carrier yards as drop points

Should your freight get stuck at the border due to the closure, make sure your transportation service provider has secure trailer yards and warehouses to temporarily store your shipment. If the freight can be delayed prior to dispatch, consider holding the shipment at your facility to diminish unplanned demurrages and delay in transit.

Get your customs documents in order

Work with both your U.S. and Mexican customs broker to pre-validate all customs documents prior to dispatching your shipment. Additional delays can be avoided once the ports of entry open by making sure all paperwork is correct and ready to be transmitted immediately to customs. This includes verifying all commercial invoices, certificates of origins, POAs, Bills of Lading, and special import/export permits.

Actively communicate with your procurement team

Make sure that all internal team members and external customers understand the current volatility and are validating purchase orders before being shipped to or from the border. Should port of entries close, and commercial traffic disrupted, freight arriving to the border without prior preparation could experience significant clearance delays.

Resources to monitor the situation

C.H. Robinson will be issuing a client advisory daily on the U.S.-Mexico border situation with both on the ground updates regarding port delays and operational impacts, as well as policy updates from Washington, D.C.

3pls, Archives, Global Logistics, Global Trade Daily, International Trade, News

Livingston International Launches New Cross-Border Trade App

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Toronto, Canada – Truck drivers delivering commercial shipments across the Canada-U.S. border have a new ally to reduce their wait time at Customs: the Livingston International Tracker app.

The app is specifically designed for carriers, giving drivers the information they need on the clearance status of their shipments as quickly as possible.

Both the U.S. Pre-Arrival Processing System (PAPS) and the Canadian Pre-Arrival Review System (PARS) are optimized for mobile on Livingston’s Tracker app, keeping drivers informed of their shipment’s status no matter where they are.

Livingston’s Speed Scanner functionality enables truck drivers to use a simple barcode scan to check shipment status, with no need to type in barcodes.

For shipments without a barcode, the driver simply keys in the shipment information to find the shipment status. There is no longer a need to phone a dispatcher and wait for them to check the status.

The app also features “set and forget” functionality for shipments entering Canada, so truckers can get PARS shipment alerts with the click of a button.

For even more speed and convenience, carriers can also opt for SMS and/or e-mail shipment updates.

The Tracker app is available for download on iOS, Android and Blackberry. Livingston has also updated their tracking web pages so they are fully optimized for mobile.

In addition to offering Customs clearance and trade compliance services, Livingston International also offers trade consulting, global trade management and international freight forwarding.

Livingston employs over 3,200 staff at 125 key border points, sea ports, airports and other strategic locations across North America, Europe and Asia.

12/10/2014

Archives, Global Trade Daily, News

New Rules Tie Up US, Mexico Border Crossing

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Los Angeles, CA – The recent decision by Mexican Customs to drastically trim the hours of operation at the critical Santa Teresa, New Mexico, port of entry “will help streamline the flow of international trade,” Mexican Customs officials have said, despite the fact that the move has created major gridlock.

Mexico’s Tax Administration began reducing hours in all its customs offices along the US border on July 4 in a move they said would “help them to better utilize staff, technology and infrastructure for the processing of merchandise.”

But Mexican citizens returning to Mexico with used vehicles purchased in the US through Santa Teresa say the new hours have them waiting in lines that stretch for a long as a mile for hours or even overnight to get across the border.

Drivers must hand over the vehicle title to US Customs and Border Protection for authentication at least 72 hours prior to export to prevent trafficking of stolen vehicles.

After that, the vehicle has to be exported within seven days. The increased congestion has been compounded by the fact that commercial cargo-carrying trucks going south have to share the same highway.

Inexpensive used and even damaged cars and trucks from the US and Canada are popular with Mexican consumers.

According to the Mexican Association of Automotive Dealerships, an estimated 7.5 million vehicles have been imported to Mexico since a NAFTA provision led to the border being open to vehicles in 2005. More than 226,000 were imported through May of this year, according to US Customs.

Santa Teresa, reports the Albuquerque Journal,  is the only port of entry with a lane for processing vehicles and is thus considered one of the busiest ports of entry on the US-Mexico border.

Meanwhile, Customs and Border Protection officials said none of the same gridlock has been reported in ports of entry in California, Texas or Arizona.

Mexican Customs officials were not available for comment.

08/01/2014

Archives, Global Trade Daily, News

New Six-Lane Trade Bridge to Link US, Canada

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Detroit, MI – A new US-Canadian authority will oversee the construction, operation and maintenance of a proposed six-lane bridge between Detroit and Windsor, Ontario.

The Windsor Detroit Bridge Authority is a non-profit “Crown Corporation” that will report to Ottawa as it manages the project for the New International Trade Crossing.

The authority “will be in charge of preparing the sites and managing the procurement process to select a private-sector partner that will carry out the work, according to Canadian Transport Minister Lisa Raitt.

The agency will also be responsible for setting and collecting tolls, she said.

“The new bridge is needed for growing trade and for growing traffic at Canada’s busiest US commercial border crossing,” said Raitt, adding the project is expected to create thousands of jobs in the coming years.

The next step, she said, involves securing funding for a US Customs facility, along with acquiring land on the US side.

“The project will provide an essential new alternative crossing for Canada’s Continental Gateway and trade corridor,” according to a Canadian government website.

The project, it said, includes a new six-lane bridge across the Detroit River between Windsor, Ontario and Detroit, Michigan, associated border inspection plazas, and connections to the freeway systems in Ontario and Michigan.”

The bridge is scheduled to open in 2020 and is reportedly being funded by the Canadian government, which has earmarked $2 billion to the project.

According to observers, the total cost of the project could reach as much as $4 billion that would include work on freeway interchanges, Canadian and US Customs plazas, and additional infrastructure work.

The final permit for the project was issued last month after a US court rejected a request for an injunction filed by the private company that owns the existing Ambassador Bridge that links Detroit with Windsor.

Another panel, the Canada-Michigan International Authority, is also being formed to approve key steps in the public-private partnership and the purchase of the required land in Michigan, Riatt said.

07/31/2014