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The Boohoo’s Trade Ascendency – What Can we Learn?

boohoo

The Boohoo’s Trade Ascendency – What Can we Learn?

The Coronavirus crisis has taken it’s fair share of victims in the world of retail, tolling the death knell for a whole slew of companies including Debenhams, Long Tall Sally, Cath Kidson, Warehouse and Oasis. And yet, recent news tells us all is not lost – Boohoo has stepped in and bought the online businesses of both Warehouse and Oasis for a bargain £5.25m. It’s no surprise that e-commerce based retailers have been less hard-hit than their high-street counterparts, but even so, the majority of e-tailers have reported losses during the crisis. Not so Boohoo. Despite a slight downturn when the crisis hit, sales shot back up in May and they closed the first quarter with a 45% sales increase on the previous year. So what is it that makes Boohoo so special?

Their secret it seems is in their provisioning – the “Test and Repeat” model. Rather than making major forward orders and holding large amounts of stock in their warehouse, they instead purchase small product runs, test them on the site, and then restock quickly the products that work well, discarding those that don’t. This has been vital during the COVID-19 crisis as it allowed Boohoo to switch their product range from party and club styles to loungewear and athleisure within a matter of days, adapting to their audience’s requirements without missing a beat. As the retail sector faces an uncertain future it’s worth considering whether this business model may be the solution for retailers everywhere, whatever their size.

The difficulty is sourcing products quickly enough to make it work. There’s no point in having a successful test-run of a certain product if, when the first batch sells out, your restock order from suppliers in China or India can take up to 2 months to arrive – by this point the bird will have well and truly flown. Boohoo combats this by stocking mainly UK based suppliers, and with imports affected by travel restrictions and breaks in the supply chain, sourcing products locally is, without doubt, the obvious solution (particularly with Brexit on the horizon). Some retailers may balk at the higher prices, but with lower risks and less deadstock, the benefits do seem to outweigh the increased costs.

The Coronavirus crisis has forced an entire industry to stop and think, literally. How can we change the way we work to face the challenges that have taken us all by surprise? Short-order provisioning may be a way for businesses to adapt to this new situation and respond to the rapid changes in consumer demand that are sure to continue over the coming months, however, this is likely to be a step outside of the comfort zone for many retailers who are used to ordering for season months in advance.

The good news is that there are simple options to help with the switch to the “Test and Repeat” model. TradeGala offers ready-to-ship stock from over 50 independent fashion brands covering womenswear, menswear, childrenswear, accessories, gifts and shoes. It’s simple to register and you can go from initial order to receipt of goods in just a few days. Whether or not the recent changes signal the future of the fashion retail industry, as with any business, adaptation is survival. Is your retail business ready for the “new normal”?

business in the UK

Important Things to Know about Doing Business in the UK

Interested in expansion into UK markets? It’s a worthwhile investment. The UK is one of the most prosperous and stable markets in the world, with a high wealth per capita and plenty of opportunities for capital acquisition, especially within London. 

You’d be forgiven for thinking this kind of prosperity was fairly exclusive. Indeed, following Brexit, it would seem that opening up a business in the UK as a foreign national is going to be quite a challenge. But, in fact, it’s quite the opposite.

Starting a business in the UK is really easy for newcomers and foreign nationals. You can establish a Limited Company in Britain without jumping any additional hurdles. You don’t need VISAs, agreements of trade or anything else — and there is no requirement for specific ID or passports. All you need is a company name, at least one director, to provide all necessary documentation (not as intimidating as it sounds) and to follow the process of registering for taxation. The only barrier you may face compared to a British resident is you’ll need to register your business to a UK address; easily done these days through virtual offices. This criterion of requiring an address does not exist to exclude anyone from starting up in Britain. It is merely a gateway to simpler correspondence and domestic accountability — should accountability be necessary.  

It should be noted that accountability is rarely necessary, but when it is, it’s vital. This is because the UK business landscape rests upon a complicated legal structure. Industries form around different regulatory bodies, and standards are upheld by various commissions, depending on your area of business. The nature of the UK business landscape is very protective and favors business stability and longevity. Follow the legal processes correctly and you’ll have a lot of the tools you need to thrive. However, failure to follow the legal structures imposed on your business can result in problems. Regulations are strictly enforced and consequences for non-compliance can be severe.

Education is your best bet. Enter the market aware of all your obligations and legal responsibilities. Legal advice from specialists — those who can ensure you get set up properly and conform to the right guidelines — is often recommended if it is an affordable expense. More than anything, this is to ensure you don’t miss any of the finer details — because your competitors, and customers, will likely be aware of those finer details and take you to task for rule-breaking. 

Standards of education in the UK are very high. Similar to the USA, it is legally required for all students to attend formal education until they are 18. Following basic education, many move on to university as higher education is often subsidized by the government with the rest of the money obtained through widely-available student loan systems. Expectations for levels of education are high, so be prepared to meet the high standards set by domestic learning, and contend with partners and consumers who know what they’re talking about. It’s a good business practice in the UK to assume that your customers know as much about your industry as you do, if not more. 

This fact leads us to the most important lesson you can learn about doing business in the UK. Good business routinely comes down to good business relationships. Every successful entrepreneur and business owner knows that who you know is just as important as what you know. That means no matter where you do business, you need to build healthy alliances and relationships.

In the UK, the key to building great relationships lies in navigating society and culture. The UK business landscape is a powerful environment for building strong, long-lasting, and loyal relationships that can provide pivotal opportunities for growth. But you have to get this right. In general, UK business culture — particularly the modern and adaptive landscape of London and other large cities — is very open to foreigners. The more you travel outside of cities to do business, the more cultural barriers you may find stand in your way, but this often comes not from hostility towards outside opportunities, but a lack of familiarity. Time and effort to establish yourself is what’s important when dealing with business communities with a lack of experience of foreign trade. A slow and tactful approach is always going to play favorably in the UK, no matter where you are trading.

However, with this idea of openness in mind, there are certainly still some cultural lessons to be learned before diving head-first into business within the UK. As we’ve mentioned, you’re building relationships, and the key to any successful relationship is behaving correctly. Loud, obnoxious, and forceful traits are unwelcome in British culture. Pushing for hard sales or getting in people’s faces with ideas might seem like the mark of passion and enthusiasm, but it won’t make you many friends — even in London. Modesty, restraint, and an even temperament are important. You’re looking to play the long-game here, building up stable bridges over time through humility, gradually increased levels of trust, and real-world demonstrations of your expertise and worth. 

In the UK, talk is cheap. 

Once you do start forming those relationships, you’ll have to be careful not to lose them. Bonds in UK business culture are tough to break once established, but the early days make them vulnerable if strife is introduced. Privacy is coveted, as is space. Don’t get too personal, and respect distances people establish. 

While there are ways your behavior can influence the business relationship, there are also ways that the actions of your new British partners could affect you. If you’re not aware of these factors, you may misinterpret them, which can again lead to conflict. We’re talking specifically about humor. Jokes — commonly at the expense of others — are prevalent in the UK. Referred to as “banter”, these are often light-hearted remarks aimed at teasing another individual. The intent is most-always friendly, but if you’re not familiar with the custom, it can appear to be offensive. The levels of “banter” you’ll experience can vary wildly from person to person, but it is a widespread form of social interaction in the UK. Just remember, it’s all in good fun, so laugh along. People who are unable to take a joke are generally looked upon unfavorably. 

Anything else it’s important to know about doing business in the UK?

To make a cup of tea, first, boil the kettle. Place a tea bag in a mug. Ask how many sugars. Each request, for example, “two sugars” means one teaspoon of sugar. Add the requested amount of sugar. Pour the water in. Leave to brew for a few minutes. Ask if they’d like milk. If yes, add a small amount of milk until the tea goes from dark to pale brown. Stir well. Remove the tea bag with your spoon. Extra points if you use the spoon to crush the teabag against the inside of the mug to squeeze out any remnants of flavor.

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This article was written by Rajesh Velayuthasamy, founder and director of Mint Formations, a company that supports local and foreign nationals to establish a business presence within the UK. 

leadership style

How to Change Your Leadership Style and Adapt to the Changing World

A scholar in Nova Southeastern University by the name of Chien presented executives with a correlation between leadership effectiveness of different leadership styles adopted by executives in international companies. Although this empirical study was primarily designed to investigate global leaders and in this case Taiwan, there are kernels for all executives to learn from. For example, there was a strong positive correlation between the effectiveness of leaders and adopting a transformational leadership style at the highest organizational levels.

Executives began to listen and respond to the plethora of information in the form of articles and books attempting to provide transformational leadership as an adaptable and applicable leadership style to help impact not only the productivity and profitability of the organization but also the competitive advantage. One example is the concept of intellectual stimulation which is another important aspect of transformational leadership. Intellectual stimulation positively impacts the effectiveness of leadership in building learning through facilitating knowledge sharing by all leaders and followers of the organization. Executives require people who are engaged and inspired to meet the demands of day-to-day operations.

Transformational leadership also suggests that executives inspire their followers. Ergo, transformational leadership is a suitable leadership style to analyze leadership in international companies. By adopting a transformational leadership style, executives are able to answer the questions necessary to apply leadership without having to delve through all the leadership styles to find what works well for them and what does not. To prove the correlations between transformational leadership and the effectiveness of leadership in global environments today, I take a further look at new industry researches so that executives can see the correlation and application.

An Industry Task Force on Leadership and Management Skills found relevant information that may help leaders embrace transformational leadership. The task force first critiqued top managers and found them to be inadequate effective leaders. The report illustrates the weaknesses of leaders, such as failing to develop a clear vision for the future of their organization. Similarly, a more recent report on Management Matters illustrated that top managers in the manufacturing sector scored the least in the very important organizational behavior tenet of people management when compared to two other areas of operations- and performance management. This particular report highlighted that companies need to enhance leverage on human assets in order to achieve sustained competitiveness.

In both cases, companies have been ranked low in almost all dimensions of people management. After careful review of these findings for both case studies, the scholars recommend that companies must improve their human resource-related practices with a target of attracting, retaining, and promoting their human resources. This article goes further and suggests that the way for these managers and leaders, and leaders across the globe, to make the effective changes that are posited in the transformational leadership. The recommendations of transformational leadership are to focus on developing a strategic vision for their future strategic initiatives. When transformational leaders can generate a shared and inspiring vision for the future expansion into the global business environment, they will secure a foothold in the ever-expansive global marketplace. Thus, executives that act as transformational leaders are capable to overcome their deficiencies and lead better in our hypercompetitive environment of today.

These industry researches also identify the transformational leadership style as a primary driver of organizational competitiveness. Unfortunately, while the characteristics of transformational leaders are positively associated with the competitiveness of international companies, it is somewhat underutilized in organizations worldwide. This is suspect and alarming because numerous empirical studies have found that there is a direct correlation between transformational leadership and organizational competitiveness. Scholars highlighted transformational leadership as an enabler of organizational competitiveness. Therefore, leaders that may not be utilizing the transformational leadership style which has been posited as a managerial-based competency for organizations operating in today’s innovative business environment can now explore the virtues of using this leadership style to improve competitive advantage.

In conclusion, executives in international companies can now take a new view of managerial decision-making and leading – transformational leadership. Transformational leadership lies at the focal point of executive success. Therefore, I suggest that these executives embrace transformational leadership. This leadership style influences some of the spans of control of executive responsibility. For the scholar’s corner, I place a great deal of emphasis on the literature on transformational leadership as a significant indicator for business success. Scholars see that I expand upon the subject matter of transformational leadership. Through articulating the impacts of transformational leadership on the competitiveness of international companies, I add to the current and extant literature. Organizational competitiveness is essential for business growth and prosperity in today’s global business environments.

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References

[1] Chien, HJ 2001, A comparison of leadership characteristics in public and large and small private organizations in Taiwan, Nova Southeastern University.

[2] Report of the Industry Task Force on Leadership and Management Skills 1995, Renewing Australian’s managers to meet the challenges of the Asia-pacific century.

[3] Management Matters in Australia: Just how productive are we? 2012, Department of Innovation, Industry, Science and Research, Australia.

special 301

“SPECIAL 301”: HOW THE U.S. MONITORS INTELLECTUAL PROPERTY PROTECTIONS IN INTERNATIONAL TRADE

Protecting the ideas behind international trade

Americans following U.S.-China trade relations during the past three years might be familiar with the reference to intellectual property rights (“IPR”) as the basis of the current Administration’s actions to level the trade playing field with China. In 2017, the Administration initiated an investigation into China’s policies, practices and actions that are detrimental to U.S. commercial interests. One of the major complaints is China’s requirement that U.S. companies provide its technologies to Chinese entities in order to do business. This was viewed as forcing U.S. companies to share trade secrets, a form of intellectual property rights.

While the U.S.-China trade issues have dominated recent headlines, the U.S. Government and U.S. industry have been assessing the commercial environment for IPR (patents, trademarks, copyrights, industrial designs, geographical indications, trade secrets) in our trading partners for decades.

A “special” trade provision

The Omnibus Trade and Competitiveness Act of 1988 was signed and went into effect the same year. The Act included a legal provision commonly known as “Special 301” (19 U.S.C. §2242).

The Special 301 provision focuses specifically on IPR and foreign countries whose acts, practices and policies have a detrimental effect on U.S. entities. The law directs the U.S. Government to identify acts, practices and policies that may, for example, prevent IPR owners from obtaining adequate and effective protection for their IPR assets or may be denied fair and equitable market access for their IPR assets in a foreign country.

More specifically, the Special 301 provision instructs the Office of the U.S. Trade Representative (“USTR”) to issue a report every year (19 U.S.C. §2242(h)) that identifies the foreign countries whose IPR acts, practices or policies are the most onerous or egregious.

In so doing, USTR is instructed to consult with other agencies of the government such as the Copyright Office, U.S. Patent and Trademark Office and other appropriate federal government officials and accept inputs from any interested persons (19 U.S.C. §2242(b)(2)). USTR obtains private sector input for its annual report by publishing a notice in the Federal Register that solicits public comment. For example, as part of the 2020 report, USTR published a notice in the December 23, 2019 Federal Register, “Request for Comments and Notice of a Public Hearing Regarding the 2020 Special 301 Review”.

Jobs reliant on IP intensive industries (1)

Priorities and watch lists

The annual Special 301 report has evolved over the past 30 years. If USTR designates a country as a “priority foreign country,” USTR is required to enter into negotiations to obtain commitments from that foreign government toward specific actions to eliminate the detrimental act, practice or policy or subject the government to trade sanctions.

The first report in 1989 identified 25 countries, but did not designate any of these 25 countries as a “priority foreign country”. To provide more flexibility, the 1989 report created two additional categories: “priority watch list” and “watch list”. In 2016, the Special 301 law was amended to require USTR to create an action plan for countries placed on the priority watch list (19 U.S.C. §2242(g)).

Last year, USTR declined to designate any priority foreign countries but included China, India, Chile and Indonesia on its priority watch list. USTR is also monitoring the European Union’s practices regarding whether companies like Facebook, Amazon and Google will be liable for copyright violations by third parties on their platforms. Some U.S. industries will testify that Canada should be placed on the priority foreign country list this year for geographical indications that undermine U.S. trademarks, plain packaging regulations, and lack of adequate drug patent protections.

High Costs of IP Theft2

What’s the government looking for?

IPR owners conducting business in foreign markets and confronting challenges regarding the treatment of their IPR assets can learn about the kinds of IPR issues USTR will address by reviewing past Special 301 reports. In the 2019 report, USTR cited a broad spectrum of IPR issues identified as problematic in foreign markets. The issues cited included:

-enforcement and market access issues regarding pharmaceutical and medical devices,

-online and broadcast piracy,

-lack of ex officio authority for customs officials to seize and destroy infringing goods,

-lack of legal authority for customs officials to stop in-transit movement of infringing goods,

-lack of effective policies and procedures to prevent government agencies from using unlicensed software,

-restrictive patentability criteria,

-inadequate legal protection for trade secrets, and

-negative effects on market access due to the adoption of the European Union approach to the protection of geographical indications.

As the list above demonstrates, the IPR-related issues that are addressed as problematic in foreign countries reflects issues identified by private sector enterprises. Those doing business abroad are in the best position to identify what IPR-related deficiencies hamper the ability to do business in a particular foreign market.

“Notorious Markets”

USTR’s reporting has adapted over the years. In recent years, the annual report has been supplemented by a separate “Notorious Markets” report which is prepared and issued separately. The Notorious Markets report “highlights prominent and illustrative examples of online and physical marketplaces that reportedly engage in and facilitate substantial piracy and counterfeiting.” The 2018 Out-of-Cycle Review of Notorious Markets identifies the proliferation of counterfeit goods availability on online marketplaces as a threat to IPR owners. The report also identified an online “cyberlocker” in Poland, demonstrating how the report reflects the changing IPR environment due to technology.

The latest USTR Notorious Markets report provides an example of how USTR works to keep up with emerging and troublesome developments. The report includes a special section that focuses on free trade zones (FTZs) as especially problematic in facilitating trade in IPR-infringing products. The report notes that FTZs are “major facilitators of illegal and criminal activity, including the illicit trade in pirated and counterfeit goods, smuggling, and money laundering.”

Neighborhood watch

The Special 301 legal process is available to U.S. IPR owners and to any American business that owns IP and conducts commercial activity abroad. Becoming familiar with past reports, the Special 301 legal provision and the U.S. Government agencies involved is a good start to take advantage of this provision. As the Special 301 reports document, no foreign country is excepted from the possibility of being named as having detrimental acts, practices or policies.

To be effective, both the annual Special 301 report and the Notorious Markets report require the active involvement of the private sector community. While U.S. embassies can provide input for these reports, the report depends upon U.S. businesses who are the victims of foreign acts, practices and policies to identify these so that the U.S. Government can assess these issues and raise them with foreign governments.

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Tim-Trainer

Tim Trainer was an attorney-advisor at the U.S. Customs Service and U.S. Patent & Trademark Office. He is a past president of the International AntiCounterfeiting Coalition. Tim is now the principal at Global Intellectual Property Strategy Center, P.C., and Galaxy Systems, Inc.

This article originally appeared on TradeVistas.org. Republished with permission.

WTO

Erasing the Global Gains from the WTO Government Procurement Agreement?

Government purchases are a trillion-dollar opportunity for U.S. businesses

Governments buy a wide variety of goods and services from the private sector, from bridges and road construction to power plants and digital infrastructure to office and hospital supplies. In 2018, global government procurement amounted to $11 trillion or 12 percent of global GDP. The U.S. government procurement market alone was $837 billion in 2010.

While most countries have regulations to ensure government procurement is handled in a fair and transparent manner, procurement processes are susceptible to a high incidence of corruption, particularly in the form of undue influence on the bidding outcomes of public contracts.

Enter global procurement trade disciplines

The first agreement on government procurement – called the “Tokyo Round Code on Government Procurement” – was negotiated in 1979 by a small group of countries who wanted to develop a set of harmonized rules governing public procurement that would set a high standard for transparency and openness. That agreement was subsequently renegotiated as the Agreement on Government Procurement (GPA) in 1994 as part of the creation of the World Trade Organization (WTO), and members agreed to further expand the GPA in 2012. As of May of last year, when Australia became the most recent member to join the GPA, 48 countries were party to the Agreement, with 34 countries having observer status (including 10 of those in active negotiations to join the agreement). The GPA now covers $1.7 trillion in government procurement activities from its member countries.

The GPA includes general disciplines to ensure fair, open and transparent procurement processes for products that exceed a dollar threshold specified by the agreement. Additionally, each country has committed to a “schedule” which specifies which of its entities and purchases are subject to the agreement. Countries typically exclude defense and national security purchases from the agreement as well as set-asides for small, minority-owned and veteran-owned businesses. Disputes under the GPA can be raised through the WTO dispute settlement system.
value of global procurement

Some WTO members but not all

The GPA is a so-called “plurilateral” agreement, meaning only a subgroup of WTO member countries are party to it, and therefore the WTO’s most-favored-nation principle does not apply. Rather, the countries that are parties to the agreement grant each other access to their government procurement markets under the terms of the GPA, but that access is not offered to WTO member countries that are not GPA members.

The United States includes similar procurement language from the GPA in its bilateral free trade agreements, like the recently negotiated U.S.-Mexico-Canada Agreement. All told, the United States has procurement agreements with 58 countries, including the GPA countries and countries with which it has separate free trade agreements.

Even for countries that are not GPA members, the rules in the agreement have become the accepted norms for government procurement globally, with most countries aspiring to this level of fairness and transparency, even if they don’t implement the GPA fully.

The relationship between GPA and “Buy American” requirements

Prior to the GPA, Congress enacted a series of domestic content statutes to ensure that public procurement projects funded by U.S. tax dollars benefit U.S. firms and workers. The Buy American Act of 1933 requires federal government procurement of U.S.-origin articles, supplies and material or manufactured products to be produced “substantially all” from domestic inputs. While equipment can have a minimal amount of foreign content to qualify, the allowed amount is extremely low. The act generally also allows a price preference for domestic end products and construction materials.

Buy American requirements may be waived under three circumstances: (1) if a decision is made that it is in the public interest to do so; (2) if the cost of U.S.-made products is unreasonable; or (3) if the products are not available in sufficient quality or quantity from U.S. producers. Since the GPA was negotiated, a fourth circumstance was introduced: Buy American can be waived with respect to procurement bids originating from countries that have provided reciprocal access to their own domestic procurement markets.

A push for expansion?

The Trump administration is reportedly reviewing the benefits of the WTO’s Government Procurement Agreement. As reported to the WTO, the United States offered more procurement opportunities to foreign firms in 2010 (the last year for which data are available) than the next five largest GPA parties combined, which include the European Union’s 27 members, Japan, South Korea, Norway and Canada. The United States may open as much as 80 percent of federal contracts to foreign suppliers, whereas the European Union, Japan and Korea may open somewhere between 13 and 30 percent of central government contracts to foreign suppliers.

However, a U.S. government review that offered those calculations also points out that lags and inconsistencies in foreign government data reporting, data gaps, and a lack of methodology for reporting on sub-federal procurement, make it difficult to determine GPA benefits with accuracy.

And while foreign suppliers are able to compete for certain U.S. government contracts, the GPA and bilateral free trade agreements enable U.S. companies to compete in the nearly $2 trillion dollar government procurement market in the other signatory countries, an opportunity that would be significantly limited by withdrawal from the GPA. In many cases, such as sales of medical devices and medicines to state-run hospitals, software for government agency use, sales of power equipment, and the construction of hard infrastructure, the GPA offers the primary form of access by U.S. companies to foreign markets.

Worse than losing reciprocity

Ironically, American withdrawal from GPA would also complicate the ability of U.S. companies to sell their products to the U.S. government. Very few U.S. products today are 100 percent American. Supply chains of U.S. companies are increasingly global, meaning that even products manufactured within the United States are likely to have non-U.S. components or materials. Today, U.S. companies selling equipment to the U.S. government containing non-U.S. content from a GPA signatory country are not subject to the Buy American Act. However, if the United States were to withdraw from GPA, Buy American regulations would apply, potentially disqualifying U.S. companies from selling products that contain foreign content to the U.S. government.

Participation in the GPA not only maintains U.S. companies’ ability to compete for foreign contracts, it also gives the U.S. government leverage to negotiate greater market access under better terms by seeking to expand coverage. This may be particularly important as economies grow around the world and begin to spend higher percentages of their budgets on government procurement. Also, the race is on to set technology standards around the world such as 5G. If U.S. companies cannot bid to secure government contracts, they may find themselves on the outside of key growth markets, ceding them to competitors from Europe, Canada, Japan and China.

Another way to improve the WTO

While the global trade rules in the GPA seem like an arcane subject, the agreement has had a profound impact on government procurement practices globally. It opened an enormous government procurement market for the signatory countries – including the United States – and created a set of open and transparent regulations that even non-signatories countries work toward. Working within the agreement to improve and expand coverage would benefit U.S. suppliers not just to compete overseas, but to compete for contracts here at home.

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Orit headshot

Orit Frenkel is the Executive Director of the American Leadership Initiative, which is advancing a new smart power paradigm of American global leadership. She is also the President of Frenkel Strategies, a consulting firm specializing in trade and Asia. Previously she spent 26 years as an executive for GE and before that as a trade negotiator at the Office of the U.S. Trade Representative.

This article originally appeared on TradeVistas.org. Republished with permission.

tax

Responding to an Evolving Global Tax Landscape

Over the last decade, we’ve seen nations start to address the tax challenges arising from the digitalization of their economies. They want to ensure that multinational enterprises conducting significant business in places where they do not have a physical presence be taxed in such jurisdictions. And, like any tax reform proposal, consensus can be hard to reach because there is so much at stake.

Look no further than the digital tax France aimed at Facebook, Google, and other American technology giants. French lawmakers voted to impose a 3% tax on revenues that companies make from providing digital services to French users. The country estimated that the tax would raise more than $500 million, helping fill a budget hole as more commerce moves online.

Italy, Austria, and Turkey also have imposed their own digital services taxes on large tech firms, and several other European nations, including the United Kingdom, the Czech Republic, and Spain, have announced intentions to implement such a tax. These countries are frustrated by failure to reach a consensus on a digital tax across the broader European Union.

The national policies on digital taxes have drawn the ire of many businesses and political leaders at a time of heightened tensions over global trade. After decades of flourishing globalization, the specter of higher taxes threatens to complicate long-standing trade pacts and add complexity to the operations of multinationals.

The French digital tax angered the Trump administration, which threatened to retaliate with tariffs on a range of French goods. The two sides struck a truce last month, where France agreed to suspend the tax.

All the uncertainty isn’t good for tax planning. Businesses must rethink how their operations are being taxed internationally. This will result in strategic conversations that go further than the tax department, affecting the way businesses operate internationally.

Many U.S. multinationals are still coming to grips with Trump’s 2017 tax cuts, which made taxation on global intellectual property much more complex.

In light of these changes, we’ve seen businesses in jurisdictions across the world change their tax strategies to abide by filing laws in their primary country of operations as well as countries they’ve expanded into.

Case by Case: Responding to Evolving Tax Policies

As businesses continue their overseas expansion in 2020 and beyond, it’s imperative to adhere to these policies to ensure compliance with tax filings across multiple jurisdictions. Businesses have made these new policies a priority as they prime themselves to not only respond to tax policy changes, but also anticipate forthcoming changes that may arise in the coming years.

For companies that have already abided by new international tax policies, we are seeing these changes develop in a few different ways.

Take the United States, for instance. Under their hybrid-territorial tax system, companies based in the United States can invest their earnings into lower-tax foreign countries to ultimately see a reduced tax obligation. Digital taxes would serve as a counter to this, taxing American companies for their digital operations within their jurisdictions regardless of lower-tax investments. As such, we see the potential for American companies to adapt their tax filings to retain the lower-tax investment benefits.

Some businesses have had an easier time than others adapting to this policy evolution over the last five years. France, for example, has seen difficulty from foreign companies operating within its jurisdiction as they report to a separate financial tax administration with a completely different set of processes that often aren’t as modern or up-to-date. Now that France has backed down on its digital tax, these difficulties may very well continue.

Moving Forward: What to Expect

But the fight to tax the digital economy isn’t going away. Even some critics have called for a more unified approach, rather than country-by-country legislation.

The Organization for Economic Cooperation and Development is trying to get nearly 140 countries to agree on a plan to modernize tax policies to keep pace with the digital economy. But the slow pace of talks has frustrated many nations, and a global agreement may be years away.

For policies that we’ll see moving forward, we can expect businesses will continue to geographically strategize their tax filings for 1) global tax compliance either in response to, or in anticipation of, updated digital tax policies, and 2) maintaining adequate tax revenues in light of increased taxation as a result of these policies.

What remains to be seen, however, is whether a reciprocating effect will occur – that is, if business adaption to digital tax laws encourage the evolution of said laws to further ensure tax compliance. One thing is certain, however, that the only constant in international tax law is change… and businesses need to be proactive in the way they prepare and respond to these changes.

Businesses should take a holistic approach to ensure their global operations are compliant with all jurisdictions they operate within. Whether that constitutes an internal evaluation of present tax filing processes or a consultation with their professional accounting team to determine the best course of action in light of a potential new policy adoption should be to their discretion and may be dependent on the jurisdictions in question.

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Jason Gerlis is Global Head of Consultancy Solutions for TMF Group in the Americas.

USMCA

A Vote on USMCA is a Vote for Predictability

For all their legal nuance, trade agreements are written to make commerce more predictable. The rules are meant to increase business confidence, boost investment and spur job creation. It’s time for Congress to show bipartisan support for a more predictable North American market, and pass the United States-Mexico-Canada Agreement (USMCA).

USMCA is a much-needed upgrade of the North American Free Trade Agreement (NAFTA), a text that was largely copied over from the US-Canada bilateral trade agreement signed in 1988. To say that NAFTA is outdated is an understatement. Canada and Mexico have concluded trade deals with other countries that do things NAFTA could have never anticipated 25 years ago. USMCA is needed just to keep up.

Three chapters of USMCA deserve far more attention than they’ve received.

First, the chapter on health and safety standards is a must for US agriculture. The biggest threat to our ranchers and farmers is a lack of science-based import regimes abroad, not tariffs.

Tariffs are a tax on trade, whereas health and safety standards, applied in a non-scientific or in a discriminatory way, can act as a ban trade. US agricultural exporters have long demanded more science-based approaches to what are called sanitary and phytosanitary standards, and USMCA delivers on this. USMCA also puts forward a number of consultative mechanisms that will help prevent certain market access problems from arising in the first place.

US agriculture needs Chapter 9 of the USMCA.

Second, the chapter on technical barriers to trade is essential for US manufacturers. It covers the regulatory measures that impact over 90 percent of goods exports from the United States. This is fertile ground for protectionism. Governments can easily use regulatory measures, or ways of assessing conformity with them, that shield domestic producers from import competition. In fact, they can completely shut down trade with a few strokes of the legislative pen.

In USMCA, American manufacturers have more of a voice in the regulatory process in Canada and Mexico concerning their exports. Importantly, USMCA also calls on the three countries to recognize that, in setting technical specifications, performance, and not the provenance of the regulation, is what should matter. This is a longstanding US demand, and USMCA represents a tangible win for US exporters in this regard.

American manufacturing needs Chapter 10 of USMCA.

Third, the chapter on intellectual property is upgraded to reflect the needs of a building a creative economy. The list of international agreements that inform USMCA is striking; many didn’t exist in 1994, never mind in 1988. Copyright protections are modernized, as are those for biologics, a type of drug that could not have been imagined when NAFTA was negotiated. Whereas patents, alone, could help stimulate investment in small molecule drugs, they aren’t enough for the living systems that define biologics. USMCA brings Canada and Mexico closer to the US standard, and in this regard increases protection of American IP abroad.

Other IP provisions will assist a variety of America’s creative industries, from film to fashion to iPhones. These modernized rules, along with consultative mechanisms to ensure a level playing field, will provide the kind of protections that inventors need to bring their ideas to market. This is a win.

America’s creative industries need Chapter 20 of USMCA.

Still, there are some who, while recognizing the benefits of USMCA, worry that the deal cannot effectively enforce labor and environmental standards. They shouldn’t be. The provisions are as good as anything in the EU-Mexico trade agreement, for example, and Europe is renowned for having high expectations on both fronts, both domestically and internationally.

Polls show that, regardless of party, American voters are more supportive of free trade now than ever before. Democrats, Independents and Republicans converge around 80 percent in favor. Polls also show that USMCA has bipartisan backing.

The United States is part of a North American market that thrives on predictability. It’s time for Congress to unite behind USMCA and deliver predictability.

_________________________________________________________

Marc L. Busch is the Karl F. Landegger Professor of International Business Diplomacy at Georgetown University’s School of Foreign Service.

tax haven

How to Move to a Tax Haven

 In today’s hyper-competitive global market with rising costs and increasing challenges, saving on taxes can make or break a business and can mean the difference between a secure financial future or just “getting by.”

Increased tax burdens and unfavorable tax laws have left many individuals (perhaps even yourself) seeking what are known as “Tax Havens.”  As the name so blatantly suggests, “tax havens” are those countries or places with extremely low “effective” tax rates that foreign investors can take advantage of.

Seeking the citizenship of any of the tax havens can significantly reduce one’s tax burdens. However, in the process, moving to or partially residing in the country is often required; this might be seen as a downside for many investors who don’t wish to leave their home country. However, this is not always the case as there are many citizenship by investment programs that don’t have a minimum residency requirement. 

Below, we’ll help you explore several tax havens and understand how will they benefit you and your family in the process of tax planning. 

Which Tax Haven Countries can Business Owners Move to?

Business owners are often hit hard by heavily taxed countries, making tax havens an attractive option. If executed correctly, there are a number of legally viable ways, such as offshore accounts and shell companies, that business owners can reduce tax their liabilities. 

For example, investing through a company or trust that has been organized in a tax haven is perfectly legal as long as all compliance and regulatory requirements are met. Yet not all countries are a good fit for business owners.

Popular Tax Havens Often Cited Include: Luxembourg, The Cayman Islands, Isle of Man, Jersey (the island NOT the city), Ireland, Mauritius, Bermuda, Switzerland, Monaco, and the Bahamas 

Although the aforementioned countries tend to get most of the spotlight when it comes to tax havens, they are by no means the only options. In fact, a number of other countries provide measurable tax benefits while also providing other opportunities such as second citizenship and passports that allow investors to enjoy greater freedom of travel, especially for those from Middle Eastern countries where travel restrictions may be an issue.

What are MENA Tax Havens? 

MENA Tax Havens refer to those countries or locations that are open to accommodate the needs of those from Middle East and North African regions. The term MENA covers a vast geography stretching from Morocco to Iran and includes all Maghreb and Mashriq countries. The term is also synonymous or may alternatively be referred to as the “Greater Middle East”.

Popular MENA Tax Havens Include

Saint Kitts & Nevis

Since 2008 there has been a global crackdown on offshore finance and the secrecy that is often associated with tax havens. Political pressure and threats of sanctions from major world powers have forced many countries to open up their books, but not this little dual-island nation.

Investors in Saint Kitts and Nevis can unlock countless business opportunities by being able to open offshore bank accounts and companies while maintaining absolute anonymity and privacy of ownership. Furthermore, Saint Kitts and Nevis’ tax climate imposes 0% tax on global income, inheritance and gifts which makes the island a perfect investment destination for tax planning.

Also, it is worth mentioning that Saint Kitts and Nevis is an island with magnificent nature and climate that draws thousands of tourists each year. Dotted with golden beaches and ringed tropical volcanoes, Saint Kitts and Nevis is an attractive option for citizenship by investment. 

Saint Lucia

A premier destination for those seeking offshore banking and financial products. The diversity of its financial offerings and incentives has made St. Lucia an attractive option for many businesses and wealthy individuals. Options include offshore bank accounts, trusts, corporations and more.

Best of all, the island touts the “absolute” confidentiality of client details and the security of all companies formed in the jurisdiction. As an added benefit, the islands have a long-standing, good reputation and have never been blacklisted or placed under international scrutiny from foreign governments to disclose details of its operations.

In addition to anonymity, the island promotes an easy incorporation process, low yearly fees, flexible share structures, no minimum share capital requirement, ZERO or low tax (1% if elected), absence of tax treaties, English Common Law System, and more.

Antigua & Barbuda

The Caribbean is known for its lucrative tax havens, and Antigua is no exception. Antigua, the largest of the Leeward Islands and its neighboring island Barbuda are often favored among businesses looking to legally reduce tax liabilities. 

Antigua is a vibrant tourist destination, celebrated for its immaculate beaches and tropical weather. What many individuals may not realize, however, is that Antigua has developed a strong reputation for being a favorable tax haven. Local services include international business incorporation, the formation of trusts, offshore banking and more. Regulated by the Antigua Financial Services (AFSR), the island boasts a very favorable tax regime with a fifty-year local tax exemption on capital gains tax, estate tax, inheritance tax, and local income tax for revenue earned outside of Antigua.

Grenada

Over 2 million years ago the little island of Grenada was actually an underwater volcano. Today, the nation, comprised of around 340+ square kilometers and inhabited by an estimated 110,000 people, is known as the “island of spice”, with exports ranging from nutmeg and mace to ginger, cloves, and cinnamon.

Although tourism is the leading industry for Grenada, the nation is also known for being a favored tax haven among savvy business owner. Grenada is favored for its corporate privacy and Citizenship by Investment Program, providing numerous tax benefits. Furthermore, the country offers no withholding tax, no transfer tax, no tax on capital gains, no inheritance or estate tax, and a 20 years’ tax exemption for offshore companies among other benefits.

Other Prospective MENA Tax Havens

Other prospective tax havens worth mentioning include Malta (although it isn’t straightforward) , Dominica, Cyprus, Portugal, and Greece.

Personal Tax Benefit of Making the Move 

The appeal of making the move to a tax haven isn’t only due to corporate benefits. Individuals invest in a tax haven in order to reduce personal tax liability on interest, personal income, inheritance, capital gains and more. Those wealthy enough stand to save millions of dollars by leveraging these legal loopholes and incentives.

Corporate Tax Considerations

Although the primary focus of most corporations is to save on taxes by reducing tax liability, there are a number of other considerations that must be taken into account. For example, what is the process like? Does your corporation qualify? What types of fees are involved? Is residency required? What will the ongoing costs of maintaining your corporation’s status in the haven look like and what will this cost you? Are there any regulatory, political or socioeconomic dangers or risks in the region? 

These are just a few points to consider before taking the plunge.

How Will Making the Move Affect US Citizenship?

Generally speaking, US citizens and permanent residents are taxed by the IRS regardless of where they are physically residing. While the Foreign Earned Income Exclusion does offer a bit of relief, anyone earning over $105,900 in active income per year won’t be able to avoid taxation. 

Moving to another country will not impact US Citizenship. However, those seeking to pay zero or close to zero taxes may find it useful to obtain second citizenship in any tax haven of their choice while also renouncing their US citizenship.

Bear in mind that the USA is the only country that enforces taxation based solely on the citizenship of the individual in question.

Closing Thoughts on Moving to a Tax Haven

There are many misconceptions regarding what it means to move to a tax haven, however, with the help of professional services that deal with these transitions you can largely avoid all of the potential pitfalls while reaping the many rewards.

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Rasha Seikaly, an IMC member, is Bluemina’s Head of Marketing. Bluemina provides families, individuals, and investors with the best and most expedited Citizenship and Residency by investment programs

foreign trade zones

FOREIGN TRADE ZONES, PORTS AND ECONOMIC DEVELOPMENT FORCES CREATE AMERICAN SUCCESS STORIES

The U.S. Foreign Trade Zones Board’s Annual Report to Congress is bullish on FTZs, finding that after several years of decline in zone activity largely related to a downturn in the petroleum sector, strong increases in all major categories were logged in 2017, the last year for which data are available.

Foreign trade zones provide economic incentives to companies importing or exporting international goods. Duty-free treatment is accorded to items that are re-exported, and duty payment is deferred on items sold in the U.S. market, thus offsetting customs advantages available to overseas producers who compete with producers on American soil.

Businesses can use FTZ space a variety of ways, including warehousing and distribution of non-ferrous metals for sale on the London Metal Exchange, warehousing spirits and alcohol and storing vehicles before they are sold in the domestic marketplace.

The value of merchandise received at America’s FTZs increased by 9.6 percent in 2017, to $669.2 billion, according to the report that was presented to Congress this past December. Merchandise received at warehouse/distribution operations increased by 15.5 percent, to $259.1 billion, while that received at production operations increased by 6.2 percent, to $410.1 billion.

Foreign-status inputs to FTZs increased by 11.2 percent, to $250.6 billion, and the value of FTZ imports accounted for 10.6 percent of all goods imported into the U.S. in 2017. The majority of merchandise admitted to FTZs (63 percent) is of domestic origin. The value of exports from America’s FTZs increased by 15.1 percent in 2017, to $87.1 billion, which represents 5.6 percent of the value of all goods exported from the U.S. Exports from FTZ production facilities accounted for two-thirds of all exports from FTZs. Employment at America’s 191 active FTZs increased by approximately 7 percent in 2017, to a new record of 450,000 workers at 3,200 firms that used FTZs during the year.

“The FTZ Board’s latest report confirms that the program continues to be a vital component of America’s trade policy,” says Erik O. Autor, president of the National Association of Foreign-Trade Zones (NAFTZ), which boasts 650+ members. “The competitive advantage for companies operating in an FTZ has enabled them to boost exports and employment, continuing their strong recovery from the recession.”

The Trade Partnership, a Washington, D.C.-based trade research firm, in February provided case studies on the success of FTZs as part of an NAFTZ-commissioned report. “This study measures, both quantitatively and qualitatively, the economic effects of FTZs on the communities in which the zones operate, which we refer to as Zone Economic Communities (ZECs),” states The Trade Partnership introduction to the research, which examined the economic impacts of FTZs in community employment, wages and value added. 

The study concluded the economic impacts of the U.S. FTZ program on communities in which FTZs are located are positive,” The Trade Partnership President Laura M. Baughman said during NAFTZ’s annual Legislative Summit in Washington on Feb. 12. “Many companies have the option to operate inside or outside the United States,” she noted. “They will make that decision based in part on the relative costs of doing business in the United States or abroad. To the extent the Foreign-Trade Zones program can provide positive financial reasons for a U.S. location, it should merit the support of U.S. policymakers.”

“We are very pleased that The Trade Partnership’s analysis has concluded that the U.S. Foreign-Trade Zones program has demonstrable positive economic impacts on the communities in which FTZs are located,” says NAFTZ Board of Directors Chairwoman Eva Tomlinson, who is also director of FTZ Solutions for UPS Trade Management Services Inc. “These real community impacts are in addition to the value that U.S. firms realize from using the FTZ program.” 

The survey included some individual success stories that follow:

FTZ-38 

(Spartanburg, South Carolina; Inland Port Greer; Port of Charleston) 

BMW broke ground on its first American automobile factory in 1992 in Greer, South Carolina, and the first cars rolled off the line in 1994. Before the German automaker’s arrival, Spartanburg was a ghost town of former textile plants and roughly 60,000 lost manufacturing jobs. BMW’s investment in South Carolina changed all that. Today, BMW employs more than 10,000 workers and produces around 400,000 vehicles annually, more than 70 percent for export to 140 global markets (with China the largest foreign destination, followed by Germany). Inputs imported by BMW duty-free under the FTZ program supplement inputs from 235 U.S. suppliers, 40 of whom are in South Carolina.

“As a consequence of this investment, BMW directly and indirectly adds $6.3 billion annually to South Carolina’s economy and leads to the employment of 36,285 people there,” says the German automaker. “The overall footprint in the U.S. is even larger, with value added by BMW of $15.77 billion and employment of 120,855. In each case, this includes both the direct contribution of BMW and the contribution via purchases of BMW and its employees that would not exist if BMW were not established in the United States.”

Earlier this year, BMW Manufacturing, citing Commerce Department data, said it led the U.S. in automotive exports by value for the fifth consecutive year. More than $8.4 billion in cars and SUVs were assembled in Spartanburg before passing through the Port of Charleston in 2018.

FTZ-154

(Baton Rouge, Louisiana; Greater Baton Rouge Port; Port of South Louisiana)

ExxonMobil is a leading example of a company making use of FTZs to import crude petroleum and process it into downstream products, mainly for domestic use in the U.S. but also for export. The oil company has three FTZ subzones in operation, two in Texas (Baytown and Beaumont) and one in Louisiana, where within FTZ-154, ExxonMobil operates a main refinery complex, a petrochemical plant, a tank farm storage facility and a plastics plant in East Baton Rouge Parish, a lubricants plant and a tank farm in West Baton Rouge Parish and the Sorrento Salt Dome in Ascension Parish. The company employs more than 6,600 employees and contractors in the Baton Rouge area, with payroll totaling $491 million.

Despite the exemptions from state and local ad valorem taxes made possible by the FTZ, ExxonMobil’s activities in the Baton Rouge generate millions in annual state and local tax revenue, from property taxes ($33.2 million in East Baton Rouge alone in 2015), to direct sales taxes ($26.3 million in East Baton Rouge), to other state and local taxes (more than $100 million, after credits and rebates). According to a 2017 study, one out of every eight jobs in the Baton Rouge area can be traced back to ExxonMobil. 

FTZ-26

(Newnan, Georgia; Georgia Ports Authority; Port of Savannah)

Yamaha Motor Manufacturing Corp. of America (YMMC), which has corporate offices in Cypress, California, and Kennesaw and Marietta, Georgia, decided in 2011 to take advantage of more efficient production that would result from a centralized location, including one that benefits from the efficiencies offered by the FTZprogram. Thus began the transfer of nearly all YMMC mid- and large-engine ATV production from overseas facilities to Newnan, Georgia. Yamaha directly employs about 3,400 workers in the U.S., but more than 2,000 of them are in Georgia alone, with approximately 1,600 within FTZ-26.

Newnan’s factories spend over $170 million annually at more than 100 U.S. parts suppliers, 30 percent of which are located in Georgia. By 2018, Yamaha had invested more than $354 million in its Newnan facility, with that spending rippling through the local community and beyond. Meanwhile, savings YMMC reaps within FTZ-26 have been fed back into the local community, including Yamaha-sponsored environmental projects for schools, youth character-building initiatives, scholarships for high school students and support for local teachers. 

FTZ-86

(Tacoma, Washington; Northwest Seaport Alliance; Port of Tacoma)

Helly Hansen imports from Asia specialty water-resistant cold weather apparel and footwear for professionals working in extreme environments. The Helly Hansen brand had a strong presence in Canada when its Norwegian owners looked to expand beyond the Great White North to all of North America. Savings afforded by the U.S. Foreign-Trade Zone program tipped the scales in favor of making Auburn, Washington, which is within the Port of Seattle’s FTZ-5, the location for Helly Hansen’s U.S. warehouse in 2011.

Four years later, growth spurred the need to open a bigger warehouse and a location was found within the Port of Tacoma’s FTZ-86, where all operations consolidated. About 55 percent of Helly Hansen’s imports into Tacoma are re-exported to Canada, and the company pays no duties on those products. It does pay U.S. import duties on products destined for the U.S. market, when they exit the FTZ for U.S. sale, but while products wait at the warehouse, the company saves money from deferred duty (the value of tighter cash flow and reduced interest costs) and reduced processing fees. The Canadian Tire Corp. purchased Helly Hansen in 2018, and the company now employs 103 people in Tacoma, up from about 50 in Auburn in 2011. Indirectly, the company supports jobs at the port processing 400-500 containers a year, containers that would otherwise go directly to Canada. 

FTZ-18 and FTZ-45

(San Jose, California; Port of Oakland; Portland, Oregon; Port of Portland)

Fremont, California-based Lam Research Corp., a global supplier of innovative wafer fabrication equipment and services to semiconductor manufacturers around the world, creates, assembles, repairs and distributes equipment within San Jose’s FTZ-18 (since 2010) and Portland’s FTZ-45 (since 2016). Around 6,000 employees work in zone-based activities. Components and materials sourced from abroad are admitted free of duty under the FTZ program; those duties would otherwise range from zero to 10.7 percent. Lam estimates that program benefit alone saves the company a significant amount of its import costs. But the FTZ has also helped Lam manage fluctuations in supply chain and international trade. The company has poured zone savings into research and development throughout the U.S.

FTZ-25

(Oakland Park, Florida; Port Everglades)

ProdecoTech, which makes electric bicycles that retail for $1,000 to $5,000 each, was founded in 2008. It would not now employ about 100 people in Oakland Park, Florida, were it not for the FTZ program. ProdecoTech bikes used to be finished abroad, but that changed in 2015, when the company began taking components imported from China, Japan, Taiwan, Korea, Vietnam and elsewhere in the U.S. to assemble the rides in Oakland Park.

Thank the benefits from being within FTZ-25, which allowed ProdecoTech to avoid paying import duties that can range up to 10 percent. Keeping final assembly stateside as opposed to overseas is now saving the company about 4 percent per bike. And that has allowed ProdecoTech to sell goods 30 percent below what its competition charges. Because American workers are doing the assembly, ProdecoTech has a tighter rein on quality control. 

FTZ-272

(Bethlehem, Pennsylvania; Port of Philadelphia)

Piramal Critical Care Inc. was a U.S. pharmaceutical manufacturer that could no longer compete paying tariffs on imported inputs while its foreign competitors shipped finished products here duty free. That put a target on the jobs of 95 employees in Bethlehem, Pennsylvania, where they manufactured and distributed inhalation anesthetics from chemicals and other materials sourced from abroad, primarily India.

After toying with eliminating 70 high-skilled positions and moving production abroad, Piramal launched a Hail Mary by applying for FTZ benefits in 2012. The application was approved, and it has saved Piramal hundreds of thousands of dollars annually in duties. Not only was the company able to stay in Bethlehem, it went on to add even more jobs, modernize its facility and increase capacity three-fold. Piramal today employs about 120 workers and exports to more than 100 countries. 

FTZ-176

(Rockford, Illinois; Port of Rockford)

UniCarriers Americas, which was previously known as Nissan Forklift Corp., sought approval to manufacture rider-type forklift trucks in Rockford, Illinois’ FTZ-176 in 2005. Imported components, which accounted for about 48 percent of the finished forklift truck’s value, were charged duties as high as 9 percent. After contending FTZ benefits would improve UniCarriers’ competitiveness in export markets, the company won approval in 2006. That has gone on to save UniCarriers about $2 million a year, according to the company, which adds employee time spent on handling and filing documents daily for U.S. Customs and Border Protection was eliminated. That’s a win-win when you consider a booming U.S. economy and e-commerce have created strong demand for forklift trucks.

Fortunately, UniCarriers has redirected some duty savings into adding space and employees as well as funding training for a workforce operating ever more sophisticated new equipment. Whereas many manufacturers are replacing workers with robots, UniCarriers is retraining and redeploying employees to work and train alongside automation, according to CEO and President James J. Radous III. He cites figures that show UniCarriers has increased its automation capabilities by 50 percent while doubling its number of employees from about 300 to 600 over the past five years. 

The preceding were the success stories cited in The Trade Partnership report, but there are also other foreign trade zone success stories out there that include the following:

FTZ-84

(Houston, Texas; Port Houston)

FTZ-84 was on a roll in 2017, adding 13 companies, which is no surprise when you consider the Houston region’s rapid growth. As a result, more large importers and exporters are taking the advantage of the financial benefits of using FTZ-84.

One company reaping such benefits is Houston-based Dixie Cullen Interests, which specializes in steel, machinery and other industrial materials. “We are excited about the opportunity that it has opened up for us,” says Dixie Cullen’s President Catherine James. “And we know that Port Houston is where we need to be.” That’s especially true when you consider Port Houston, which owns or operates eight terminals, has committed to invest $1 billion-plus during the next several years in expansion and improvement projects. About two-thirds of all containers in the U.S. Gulf move through Houston, whose port is one of the world’s largest.

FTZ-87

(Lake Charles, Louisiana; Southwest Louisiana Economic Development Alliance; Port of Lake Charles)

The five parish area bordered by Southeast Texas and the Gulf of Mexico is anchored by Sulphur and Lake Charles, where companies from the U.S., Europe, Africa and Asia have staked claims in industrial growth expansion totaling $97 billion.

An extensive rail network makes its way through Southwest Louisiana with Union Pacific and Kansas City Southern servicing the area. Interstates 10 and 210 service a combined 100,000 motorists a day and complete routes between America’s Pacific and Atlantic Coast. And Lake Charles Regional Airport is served by United Airlines, whose hub is in Houston, and American Airlines with its Dallas/Fort Worth hub. But the region has more going for it than simply location, according to George Swift, CEO and president of the Southwest Louisiana Economic Development Alliance. “Our people and companies are making history,” he says. “Each day that passes, companies from across the globe are calling to learn about development and expansion possibilities while others call about the tens of thousands of temporary and permanent jobs that are going to be generated by industrial expansion.”

FTZ-74

(Baltimore, Maryland; Baltimore Development Corp.; Port of Baltimore)

FTZ-74 is one of the most active and largest zones in the United States, which is fitting considering the Port of Baltimore is among America’s 10 busiest ports. With merchandise such as cars, paper and steel, total FTZ-74 international revenue rose from $44 million in 2016 to more than $396 million in 2017, a whopping 800 percent increase! The total value of shipments through Baltimore’s FTZ was more than $19.9 billion in ’17. That only figures to rise as Maryland recently approved a contract to complete the fill-in of a wet basin at the Helen Delich Bentley Port of Baltimore’s Fairfield Marine Terminal.

That project will create more land to help handle the port’s surging auto and roll on/roll off (farm and construction machinery) cargo. Among those as pleased as a Baltimore Bang cocktail over this development is Maryland Governor Larry Hogan. “The Port of Baltimore is the number one auto port in the nation and continues to break cargo records every month,” Hogan says. “Our administration is committed to furthering this growth and strongly supports our great port and its thousands of hardworking men and women handling the millions of tons of cargo coming in throughout the year.”

FTZ-196

(Fort Worth, Texas; AllianceTexas; Dallas/Fort Worth International Airport)

Known as the Alliance Foreign-Trade Zone, FTZ-196 in North Fort Worth sees more action than any other general purpose FTZ in the country. AllianceTexas is a 17,000-acre, master-planned community anchored by the world’s first industrial airport. Also within its boundaries are the Alliance Global Logistics Hub, Circle T Ranch, Heritage, Alliance Town Center, Saratoga and Monterra Village projects. A total of 265 companies that have created more than 30,000 jobs. Among them are Cinram, Hyundai, LEGO, Motorola, GENCO ATC, Callaway Golf and Alliance Operating Services.

Since its inception, AllianceTexas has generated a $40.65 billion economic impact for the North Texas region. Steve Boecking, vice president of Hillwood Properties, the Perot company that developed the Alliance brand, says of the $4 billion in annual FTZ-196 imports: “Regional efforts to strengthen international relationships and to build new global trade partnerships have also resulted in an increased volume of foreign goods being shipped through North Texas.” 

THE POWER OF POSITIVITY

The National Association of Foreign Trade Zones study found the following positive economic measures when examining each of 251 Zone Economic Communities (ZECs) to determine the impact of foreign trade zones:

-Employment, wages and value-added increased in the broader zone community following the establishment of an FTZ. Those gains are the greatest in the early years for employment and wages, and throughout the period for value added. This increased economic activity is also evident once a decision is made to form an FTZ.

-The establishment of an FTZ caused a positive increase in employment growth in the surrounding ZEC (up 0.2 percentage points), wage growth (up 0.4 percentage points), and value-added growth (up 0.3 percentage points), typically eight years and later, after establishment of the FTZ. The impacts begin sooner, in years six and later, for wages and value added in small- and medium sized ZECs.

-Company access to FTZ benefits had a substantial ripple effects through the companies’ supply chains, which are typically located nearby. 

Downloaded the complete report at www.naftz.org.

Dubai Customs Reports Free Zone Trade Growth

The latest reports released by Dubai Customs reveals an impressive 23 percent growth in free zone trade for 2018, reaching a total of AED532 billion. Total non-oil trade for 2018 was reported at AED1.3 trillion, confirming the strong position Dubai is steadily maintaining as an international and regional trade hub leader.

“The current growth of Dubai’s non-oil foreign trade is an indication that we are on the right path of revenue diversification in alignment with the values and standards outlined in the 50-Year Charter. The Dubai Silk Road Strategy supports decades of successful investment in developing the emirate’s infrastructure,” said His Highness Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai and Chairman of The Executive Council.

“In line with the vision of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, we are committed to develop our government services so that we can become a world-class model for future governments based on knowledge, innovation and advanced AI applications. We are currently developing a virtual commercial zone, the first of its kind in the region, which will allow investors to open bank accounts and grant e-residencies according to the highest standards of international laws and regulations,” he added.

Additionally, airborne trade saw an increase of 3.2 percent, sea trade was reported with a 3.4 percent increase, and land trade was reported at AED205 billion. Advanced communication technologies, such as phones were reported as the top commodity in Dubai, and China and India remained the region’s largest trading partners.

Dubai’s non-oil foreign trade is flexible and agile enough to overcome different global economic crunches. Despite a number of challenges that world trade has been through in the last decade, Dubai’s trade grew 72% from 2009 and 2018, and the volume of goods in this period grew 44%. This again reflects Dubai’s ability to attract global trade and investments and to keep up with changes, especially the rise of Asia and China as a global export hub. Dubai is a very important link in this global activity. Our international network of ports and free zones in different countries coupled with Dubai’s leading airline network have helped the emirate in its journey towards more success and progress,” concluded Sultan bin Sulayem, DP World Group Chairman & CEO and Chairman of Ports, Customs and Free Zone Corporation.