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Archives, Global Logistics, Global Trade Daily

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The Transport and Logistics Middle East ceremony awarded LogiPoint the official Logistics Zones Operator of the Year for their unmatched involvement and footprint in the logistics supply chain sector for the region.

According to the release, “By introducing Logistics Parks Modon 1 and Logistics Parks-South Jeddah we hopes to build on the success of the Bonded and Re-export Zone and develop similarly high quality integrated facilities throughout the Kingdom,” (W7 Worldwide).

The company is also applauded due to the remarkable development and operation of what is the largest and first re-export zone. With technology growing more in the economic and trade sectors, LogiPoint has stood the test of time with technology innovations and efforts to team up with stakeholders for a unified mission. Their efforts include an impressive facilities and warehousing in addition to customized alternatives for client needs.

With more innovation and conceptualization on the horizon, LogiTech focuses on integrating international logistics solutions in the mix. With 19 years of success and innovation to account for, LogiTech continues to create strategic planning and implementing standards that put them at the top with record numbers.

About LogiPoint

LogiPoint, which used to be known as Tusdeer but underwent a re-branding exercise last October, will contribute to the Kingdom’s vision of the future and renovate it into an integrated logistics solution provider by achieving global competitive standards, adapting to change creatively and adopting a customer-focused approach in a transparent manner.”

Source: W7 Worldwide 

Archives, Global Trade Daily, U.S. Ports

PCC Reaches Vancouver Destination

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Vancouver welcomes Japanese Pure Car Carrier (PCC) Monoceros Leader last week, bringing with it 2,270 Subaru vehicles for discharge across the Northern U.S. along with Captain D’Lima and the 23-member crew on November 8.

The Monoceros Leader has an impressive dead-weight capacity of 19,159 metric tons, providing the ability to transport up to 7,100 units within its 656 feet of length and capacity.

This is a prime example of what some of the largest PCCs are designed to accomplish within the vessel capabilities around the world, transporting thousands of tons to the market.

The voyage kicked off in October with Captain D’Lima and his crew on a mission to provide additional vehicles to the West Coast ports for Northern U.S. buyers distribution, primarily Port Hueneme, California – the final destination of the maiden voyage.

 

About The Port of Vancouver USA

The Port of Vancouver USA is one of the major ports on the PacificCoast, and its competitive strengths include available land, versatile cargo handling capabilities, vast transportation networks, a skilled labor force and an exceptional level of service to its customers and community. For more information, please visit us at www.portvanusa.com.

Source: www.portvanusa.com

 

Archives, Global Trade Daily, Imports/Exports

City of Dubai Reports Strong Import/Export Numbers for 2018

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For the first half of 2018, chocolate, nuts and milk are among the items that contributed to impressive AED figures recently reported by Dubai Customs in conjunction with Gulfood Manufacturing exhibit this week.  The largest partner was identified as India in regards to foodstuff trade.

“Promoting external trade in support of national economy is a priority for us at Dubai Customs following the wise vision of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister and Ruler of Dubai,” said Nassim Al Mehairi, Manager of Statistics Section at Dubai Customs “We facilitate the business by introducing the latest and best services in clearing cargo to help a better trade flow of food products from and into the country. Dubai has become an essential trade corridor for foodstuffs in the region, owing to its advanced infrastructure and efficient customs services.”

According to the report, “Imports made AED 27.68b, exports touched AED 7.71, and re-exports recorded AED 8.84b” (Dubai Customs).

From most significant to least in specifics, the leader in share was rice at AED 2.43b, milk at AED 2.13b, sugar at AED 2.02b, nuts and chocolate closely next to each other, slightly under AED 1.75b.

The United States came in second to last in front of Oman as Dubai’s sized foodstuff trade partner. Between the combined imports, exports and re-exports, the city of Dubai boasts AED over 44.20b for the first half of 2018.

As reports are finalized for the second half of 2018, industry experts look forward to the results and ending numbers for fiscal year 2018 for Dubai and the next steps taken to leverage this momentum.

Source: Dubai Customs

 

Archives, Global Trade Daily, Special Reports

How Modern Networks are Supporting Humanitarian Aid and Disaster Recovery

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Ensuring how lifesaving medicines and supplies are distributed is challenging, especially when it involves moving supplies in a hurry. Whether overseeing how disaster relief services are distributed in a time of crisis or to secure the medical supply chain to help eliminate counterfeit drugs, locking lock down the global supply chain and achieving transparency has never been more critical.

Traditionally, many U.S. based nonprofits have been penalized by potential donors for having high administrative costs. Thanks, in part, to this increased spending scrutiny, investments in technologies that could be transformational in the fight against poverty and disease have been shelved to keep spending at bay and to avoid doling out the high price tag the technology could cost. Dan Pallotta’s Ted Talk called out the double standard that drives our broken relationship to charities when he urged companies to start rewarding charities for their big goals and big accomplishments even if that comes with big expense. Having worked with hundreds of nonprofit organizations, I have witnessed their Herculean efforts to get the right aid, to the right people, at the right time despite the fact they were saddled with antiquated technology.  Nonprofit organizations, especially those delivering lifesaving aid, need world-class tools as much, if not more, than for-profit organizations.

Coping with Supply Chain Management Challenges

The sheer number of constituents involved in the aid ecosystem – nonprofits, first responders, governments, funders, suppliers, logistics providers, warehouses, food banks, clinics, etc. – each rely on different systems, applications, and formats that make custom integrations necessary for them to collaborate.

For instance, many non-government organizations (NGOs) are working to end AIDS, tuberculosis, and malaria in Africa. However, they all face a number of logistical challenges as they deal with naturally occurring data silos that are scattered across various geographic locations. Also, the scale of these programs is massive. In Ethiopia alone there are more than 435,000 square miles with more than 30M people living in poverty.

In the humanitarian arena, challenges are also amplified by poor infrastructure. When it comes to internet speed, most of Africa ranks at the bottom of the list with Ethiopia coming in at 139 out of 196 countries worldwide. And as one could imagine, the internet access declines the further one  travels into more rural areas.

While distributing international aid is challenging, managing a supply chain moving pharmaceuticals is especially difficult. First, there’s a lot of product to deal with and pharmaceuticals require a hyper focus on expiration dates, medical oversight and, for some products including vaccines, a temperature-controlled supply chain.

Then, there is the growing epidemic of fraudulent and counterfeit products that are entering the supply chain. According to a World Health Organization (WHO) report, substandard and counterfeit drugs cause improper dosing, compromise the effectiveness of medicines and can even lead to overdose and death. The WHO says that one in ten medicines are counterfeit, and 100,000 people in Africa die every year due to counterfeit medicines.

As if the above challenges aren’t bad enough, a disaster can make them exponentially more difficult. Communication problems are magnified, internet access can be lost in affected communities, and new players are introduced. Consequently, needs are changing even more rapidly and time is of the essence.

Humanitarian Aid Reaches a Tipping Point

Nonprofits and the partners they rely on are realizing that the flawed architecture of single enterprise-centric solutions cannot support the highly dynamic and interconnected business environment that is required to deliver aid. Just as cloud-based social networks such as LinkedIn and Facebook have created new approaches to how we manage our personal and business relationships, new network platforms and the resulting communities are changing how business is conducted between the end consumer and all the companies on the network.

Similar to when you change your status or job, your entire network has access to this information in real time, and supply chain networks work the same way. With you and all of your partners on the same page at the same time brings unprecedented value to the humanitarian aid ecosystem.

In a network model, costs are reduced for all parties as the network grows, because they are shared by the members. In addition, these networks operate using a monthly subscription fee versus the traditional large up-front costs. This lowers the barrier to entry, provides a predictable ongoing run rate, and enables all parties to leverage the same platform and infrastructure.

In the network model, the technology is by the community for the community. The community defines best practices and as new features are added, they are shared across the network. The technology is evergreen versus stagnant; constituents stay on the leading edge, rather than having to invest in expensive upgrades.

How Networks are Supporting Universal Visibility and Transparency

Sophisticated permissions technology is also enabling new found visibility, as advanced networks can partition data and provide the right information to the right person. Now, logistic providers know the exact location of their trucks, program managers can see who received aid, and funders will see their impact quantified.

Networks also provide a single version of truth to all the constituents so the entire humanitarian ecosystem can be on the same page and focus on the recipients changing needs. This is especially important in a disaster, when every moment counts.

The network can also be used to fight the counterfeit problem as the technology can store a library of authentic products by dosage form all the way down to the molecule. At any point in the supply chain products can be validated to ensure they are legitimate using sophisticated scanners. If a counterfeit product is detected, networks provide the ability to track and trace through serialization which greatly helps in the event of recalls and the removal of counterfeit products.

As more organizations join the network, the value of being a participant increases. New companies will find that many of their business partners are already on the network, which reduces time for on-boarding. This enables the humanitarian response to be agile and expand as required, which is especially important in disaster response because you never know when or where the next disaster will strike. Even with no internet access, some sophisticated network providers offer the ability to work offline and then synch up when an internet connection becomes available. In a disaster response scenario or working in developing countries, this is a game changer. Today, nonprofits have the opportunity to leap frog some traditional challenges and investments. For example, they can skip ERP and go straight to a network platform.

Whether working domestically or internationally, networks give humanitarian organizations transformational abilities that can magnify bottom of pyramid impact. By allowing the supply chain to bypass ERP solutions, participants have the ability to create bi-directional supply chains versus the traditional push model. This enables them to better understand what is needed and ultimately help relieve the suffering for those inflicted.

About the Author:

Melis Jones, Global Marketing Director at One Network Enterprises., a provider of the blockchain-and AI-enabled network platform, The Real Time Value Network.  To learn more, visit https://www.onenetwork.com/ or follow them at@onenetwork

Archives, Global Trade Daily, U.S. Ports

RECORD BREAKING NUMBERS REPORTED FOR FLORIDA PORT

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Port Everglades released information this week boasting an impressive 1,108,465 TEUs for fiscal year 2018 – the highest number recorded to-date for the Port.  The Northern Europe shipping activity and increase in overall consumer population are factors being attributed for the substantial numbers.

Chief Executive and Port Director Steve Cernak stated, “We’ve enjoyed a robust growth period and are moving forward with significant investments to maximize the use of our land, cranes and berth space,” in response to the Port’s growth.

In a proactive attempt to leverage this year’s momentum, the Port plans on investing $1 billion over the next five years towards efforts for infrastructure improvements. This is one of the strategy’s the Port plans on utilizing to continue increasing cargo volumes, according to the release.

Port Everglades will also be undergoing additions to the structure including expansion efforts such as, “adding new cargo berths, installing new Super Post-Panamax container gantry cranes, increasing the lift capacity on existing cranes, and deepening and widening the Port’s navigation channels,” (Port Everglades).

The numbers for the Port are as follows:

-Three percent overall year-over-year increase

-Port Everglades handled 15 percent of all Latin America trade

-The Port handled 37 percent of overall trade in the Florida state region

As the Port continues through the next year, industry competitors and experts alike need to consider such strategies and should learn from the initiatives that prove successful time and time again.  We will continue to monitor Port Everglades and report on additional numbers as they are released.

For additional information on Port Everglades and their cargo initiatives, visit porteverglades.net.

Source: Port Everglades

Archives, Features, Global Trade Daily

Our 2018 Picks for the Top 100 Cities for Global Trade

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Each year, Global Trade magazine takes the time to look at U.S. cities to guide our readers to the best places to do business.

We choose these cities based on many factors: what they’ve done, what’s planned, and how global trade has responded to them. As with any list like this, there is always room for interpretation, but we feel that each of these cities, from the country’s largest to some tiny cities, all deserve to a look from anyone interested in doing business in the United States.

THE NATIONAL ECONOMY AND TRENDS

The economy of the U.S. is stronger than it has been in decades. Record low unemployment, rising wages and high consumer and business confidence are all contributing to huge growth in the economy. The fundamentals of the economy are strong and don’t appear to be weakening soon.

Many businesses and industries that had abandoned the U.S. for cheaper shores are returning due to changes in tariffs and economic realities. Notable is the return of the steel industry, which was all but dead in the U.S. but now appears to be making a quiet resurgence.

On the horizon are areas for concern, depending on whom you ask.

The current administration succeeded with renegotiating some trade agreements, as evidenced by the creation of USMCA to replace NAFTA, but trade with China is still a huge question mark. China’s government doesn’t appear to respond to strong-arm tactics, and they have a large enough economy they may be willing to battle with the U.S. administration.

Some economists predict a mild recession in 2109, but most offer different reasons for this. Without a consensus, it’s hard to believe these predictions will come to fruition.

 

THE BEST CITIES FOR GLOBAL TRADE

Each category of this list allows business leaders to look at locations in which to open or relocate a business.

Multi-Category Winners

These cities deserve mention in several categories. Most times, these are America’s largest cities and are obvious candidates for many categories….

 

New York City(Export/Financial Hub)

New York City is an obvious choice for several categories. As the heart of the global financial community, with Wall Street and most of the world’s largest banks, New York is arguably the global financial center. The Port of New York and New Jersey is still the second busiest in the world. The Big Apple is the launching point for millions of global businesses.

 

Seattle(Export/Skilled Workforce/Financial Hub)

Seattle has been a global trade leader for over a generation. With its well-protected port, and as the home of such businesses as Amazon and Microsoft, skilled workers and financial services have flocked to the city. Few cities in the world offer the global trade access that Seattle does without massive populations.

 

Chicago(Export/Intermodal)

The Windy City has been the entry point to and exit point from the heart of the United States. It is still the ideal location to import and export goods. Its intermodal strengths include a massive highway system, river barges and rail that allow the movement of goods within the country with ease. The St. Lawrence Seaway provides access for ships of every size to go into and out of the Great Lakes.

 

Detroit(Export/Financial Hub/NAFTA/USMCA/Business Incentives)

Despite a legendary crash of the auto industry and bleak images of a downtown in shambles, the Motor City is still an economic powerhouse. With easy access to the Great Lakes and Canada, Detroit is an excellent place to do business with America’s second largest trade partner, Canada. The economy in Detroit has led to business incentives that rival or best anything being provided by the Southern states.

 

Miami , Florida(Export/Skilled Workforce)

More than pristine beaches, Miami and its high-tech port are an excellent location for import/export. There is also an abundance of skilled workers who have arrived in the city, many of them immigrants bringing an intimate knowledge of other nation’s economies and markets.

 

Dallas(Export/Intermodal)

The Big D is a place with a Texas-sized economy and the assets to keep it that way. The intermodal assets in the city make it an ideal location to bring goods in via air or the nearby Gulf ports and ship it to the booming South and into the Mountain states.

 

San Francisco(Financial Hub/Cities to Watch)

San Francisco has been a financial hub since the Gold Rush, and it continues to show its prowess by attracting financial business from Silicon Valley and the large, but hidden, economy of Northern California. The Golden Gate City makes our list of cities to watch as it is going through a growth spurt and, if the city leaders adapt well, will solidify San Francisco’s place among such cities as Hong Kong, Singapore and Los Angeles as a Ring of Fire powerhouse.

 

Charlotte, North Carolina(Financial Hub/Start-Relocate a Business)

There are few cities like Charlotte. Maintaining much of its old Southern Charm, this city has modernized overnight and is attracting some of the best businesses and minds in the country. The quality of life, the vibrant economy and the entrepreneurial spirit of the city make it an ideal place to start or relocate a business. The financial sector makes Charlotte a quiet giant, home to billion-dollar deals and a large investment community.

 

Minneapolis/St. Paul(Financial Hub/Skilled Workforce/Business Incentives)

The Twin Cities have been and are home to many of the nation’s largest financial institutions. It maintains its place as one of the best educated cities in the country with great colleges and universities and a quality of life that keeps people there. The region’s economic developers are committed with loans and grants to help businesses grow and thrive in the area.

 

Durham, North Carolina(Financial Hub/Start-Relocate a Business)

At one point of the Research Triangle, Durham, North Carolina, is on our list of places to start or relocate a business. With abundant workers, from unskilled to highly skilled, arriving to the region every day, it’s an ideal place to put most types of business. The financial sector in Durham is growing as the surrounding states are welcoming large global businesses with staffs that need local financial services.

 

Memphis, Tennessee(Intermodal/Business Incentives)

The Mississippi River flows past this city, known for its music life. The river along with a well-established intermodal system make Memphis a perfect spot from which to import and export. Bringing business to the city is made easier by incentives that often lead the nation in their boldness. Memphis sits at the heart of the South, centrally located to move goods and people up and down the entire country.

 

El Paso, Texas(Export/NAFTA/USMCA)

There might not be a better city to trade with Mexico and South and Central America than El Paso. Right on the Mexican border, with one of the best intermodal systems in the region, El Paso makes it easy to do business with America’s southern neighbors.

 

Austin, Texas(Start-Relocate a Business/Skilled Workforce/Quality of Life)

In a state famous for its rugged individualism, Austin is a place built on community growth and shared wisdom. This has attracted tens of thousands of skilled workers and created a capitol city that is friendly to residents and new businesses. Altogether, this makes Austin one of the coolest cities from which to launch one’s global empire.

 

Cheyenne, Wyoming(Start-Relocate a Business/Small Market)

With just 64,000 residents, Cheyenne is a small city that has a lot going for it. Wyoming is leading the nation in business climate, according to the Tax Foundation. This, combined with a commitment to small and medium-sized businesses, makes Cheyenne a great place to start or relocate a business. Still small enough to have that small-town feel, Cheyenne has a full-sized business climate.

 

Bismarck, North Dakota(Start-Relocate a Business/NAFTA/USMCA/Small Market)

Along the Canadian border there is a business boom that is quietly eclipsing the country. North Dakota’s oil rich economy is creating a perfect environment for starting or relocating a business, particularly if you’re looking to do business with Canada. North Dakota’s capitol city is small (72,500 souls) but is moving up the ranks of business-friendly cities.

 

Sioux Falls, South Dakota(Start-Relocate a Business/Business Incentives)

Sioux Falls, like Bismarck, is enjoying a statewide boom in energy. One of this small city’s biggest assets is the incentive efforts that are made to welcome and grow businesses. The leadership is very creative with assistance to bring jobs to town. Starting or relocating a business in the city is a powerful way to take advantage a great small city in a state that offers outstanding tax rates.

 

Texarkana, Texas(Business Incentives/City to Watch)

By far the smallest city on our multi-category list, Texarkana has a unique history that makes it a city to watch. In the Panhandle, it is on the Arkansas border and very near the Louisiana and Oklahoma borders. Once home to the U.S. military’s largest weapons depot, this city has rail lines to spare and buildings that were literally built to withstand a bomb (or decades of business). The leadership offers amazing incentives and works with businesses to get them what they need. A tiny Texas giant, this is a city poised to lead the nation in growth.

 

Des Moines, Iowa(Quality of Life/City to Watch)

There are many nice cities, but Des Moines stands out. The moderate climate and Midwestern charm make it a great city to live in. The business climate continues to improve, making this gateway to the Plains a perfect place for any concern looking to bridge the distance between Chicago and the East and the energy of the Upper Plains states.

 

San Diego, California(NAFTA/USMCA/Skilled Workforce)

The largest city on the Mexico border, San Diego is the perfect place to do business with its southern neighbor and the nations farther south. Its climate and abundant activities attract more and more skilled workers every year. Easy access to the whole state of California, with 13 percent of the total U.S. population, makes San Diego a great place for business.

 

Bellevue, Washington(Quality of Life/Cities to Watch)

Green and lush like it’s big sister, Seattle, Bellevue is an ideal place to live. Sitting between two lakes, Lake Washington and Lake Sammamish, it’s a wonderful place for outdoor activities, still in the warm zone created by the Puget Sound. Microsoft, Amazon, Starbucks and all the other amazing businesses of Washington state are just a stone’s throw away. This is a city that is making room for the next wave of Washington innovation.

 

Buffalo, New York(NAFTA/USMCA/Skilled Workforce)

Buffalo sits on the very western edge of New York and at the leading edge of New England’s boom. Right on the Great Lakes and the heart of an East Coast Silicon Valley, Buffalo has more skilled workers per capita than most of the rest of the country. Many of these workers hail from New York state colleges and universities. The state’s incentive commitments are forging powerful partnerships with business.

 

LISTS BY CATEGORY

Rather than clog up the lists below with the repeat winners, we’ve pulled those cities out so we can highlight the great cities that win in their respective categories.

While each category has up to 10 winners, they are presented in no particular order as each offers its own assets, such as location, that make it unique for a business’ needs.

 

Top Export Cities

These are cities that make it easy to bring goods in and send goods out. Many have deep-water ports, or like El Paso have import/export assets that are outstanding.

-Houston, TX
-Los Angeles, CA
-New Orleans, LA

 

Top Financial Hubs

Banks, investment firms and stock brokers flock together to allow them to share information and often, because the city’s data capabilities are high enough to prevent a slowdown of information from around the world. Another significant reason to choose a city is its proximity to a growing industry that needs financial services.

-Richmond, Virginia
-Lincoln, Nebraska

 

Most Advanced Ports

The level of automation and quality of the dockside equipment in a port can hugely influence how quickly products are offloaded or put onto a ship. The ports on this list lead the nation in innovation, reliability and speed.

-Port of Long Beach, Port of Los Angeles
-Port of Savannah, Georgia
-Port of Virginia (Norfolk), VA
-Port Houston
-Port of Oakland Oakland, California
-Port of Charleston (South Carolina)

 

Intermodal Access

The ability to move from ship to train to truck to plane or any combination can mean the difference between shipments in days or weeks. The cities on this list provide the fastest and most intermodal access for shipments into or out of the United States. Some are located inland and allow for transport to the central part of the country. Others are coastal and act as the jump-off points to waters surrounding the country.

-Kansas City, Missouri
-Indianapolis, Indiana
-Columbus, Ohio
-Atlanta, GA
-Portsmouth, Virginia
-Elizabeth, New Jersey
-Little Rock, Arkansas

 

Start or Relocate a Business

This is the list of cities that are the best in the country for starting or relocating a business. Low start-up costs, an excellent business environment and plenty of qualified staff make these cities the ideal places to create a new global trade empire.

-Oklahoma City
-Missoula, Montana
-Billings, Montana
-Raleigh, North Carolina
-Grand Rapids, Michigan

 

NAFTA/USMCA Access

The latest update to NAFTA, the USMCA appears to be a modernization of the now 25-year-old agreement. The cities on this list provide a home base for any business seeking to work with the most important U.S. trading partners, Canada and Mexico. Most are near the borders, providing the ease of access to the U.S., while being ideally placed for shipments into and out of the northern and southern neighbors.

-Albuquerque, New Mexico
-Corpus Christi, Texas
-Fort Lauderdale, Florida
-Laredo, Texas
-Peoria, Illinois

 

Quality of Life

Business is important, but everyone needs to live some place that they love. This list represents the nicest places to live in the country. Where living is good, business is also excellent. Although not a strictly business category, the list compiles cities to consider if you need a great staff. Being someplace that people want to live makes it easier to attract great workers.

-Colorado Springs, Colorado
-Madison, Wisconsin
-Denver
-Huntsville, Alabama
-Portland, Oregon
-Las Cruces, New Mexico

 

Best Business Incentives

Incentives for businesses are thought of as being cash or tax credits, but many cities here offer many more diverse choices. Among them: free land or buildings, free education for staff, and many other attractive incentives.

-Omaha, Nebraska
-Salt Lake City
-Boca Raton, Florida
-Cleveland, IN

 

Skilled Workforce

Every business needs a great staff. In this era of near full employment, finding the right qualified staff can be a challenge. The cities on this list have a disproportionate number of educated laborers. For companies seeking a place to be that will give them the world’s greatest employees, these are places to be.

-Boston
-Washington, D.C.
-Milwaukee

 

Leading Southern Ports

The South is in the midst of a decade or more long boom. The area from Florida to Louisiana has some of the world’s greatest ports, providing a gateway to a powerful economic engine. These ports vary in size and volume, but all of them represent some of the best places in the world to move products into and out of the United States.

-Port Miami
-Port Everglades (Florida)
-Port Tampa (Florida)
-Port New Orleans
-Port Canaveral (Florida)
-Port South Louisiana
-Jacksonville Port Authority (Florida)

 

Small Markets (<100,000 population)

These small cities make a big imprint. Large cities are expensive and crowded, while these are small enough to be inexpensive, easy to move around in, and easy to be “a big fish in a small pond.” Look to these cities to be offered the respect you deserve.

-St. George, Utah
-Wilson, North Dakota
-Denton, Texas
-Bozeman, Montana
-Burlington, Vermont
-Ft. Myers, Florida
-Enid, Oklahoma
-Holland, Michigan

 

Cities to Watch

These are cities that deserve attention for their economic climate and the efforts that the leadership and the great citizens are putting in to make their cities great places in which to live and do business.

-Kenosha, Wisconsin
-Dumas, Texas
-Madison, Wisconsin
-Baltimore, Maryland
-Jersey City, New Jersey
-Fremont, California
-Odessa, Texas
-Birmingham, Alabama
-Reno, Nevada
-Irvine, California
-Marietta, Georgia
-Decatur, Illinois
-Little Rock, Arkansas
-Tulsa, Oklahoma
-Peoria, Arizona

Archives, Global Trade Daily, U.S. Ports

WE CAN’T CONTAIN OURSELVES

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As global trade continues to grow (albeit at a slower pace than the World Trade Organization initially projected for 2018), there are some ports that are already processing an impressive number of twenty-foot-equivalent units (TEUs). A TEU is a unit of measurement given to cargo capacity, based upon the volume of a 20-foot-long container. Height does not factor in when determining TEUs, though most containers range between four feet, three inches and 9 feet, six inches. When a port processes a TEU, one container counts as one TEU. When a port processes 9.3 million TEUs in a year like the Port of Los Angeles, that earns them the No. 1 spot on Global Trade’s Top 50 North American Container Ports.

But while some ports are already doing big business, a greater push for more efficient container ports is being applied across the continent. While many larger ports are already equipped to handle large vessels, many simply cannot accommodate the newer, larger Panamax-sized ships which are becoming increasingly more common thanks to new larger size limits allowed by the Panama Canal expansion. Super Panamax, Post Panamax and Neo Panamax vessels got their name from the Panama Canal Authority (ACP) in 1914, but newer requirements were enacted on June 26, 2016, when the Panama Canal opened its most recent set of locks.

Whether a vessel is Panamax, Neo Panamax, Super Panamax or Post Panamax is based upon the Panama Canal’s initial lock chamber dimensions of 1,050 feet long by 110 feet wide by 41.2 feet deep. These guidelines allow the ACP to determine whether a ship can pass through the canal, by factoring in the width and depth of the water in the available locks, as well as by the height of the Bridge of the Americas, which these ships must pass under on their way through the canal.

But Super, Post and Neo Panamax ships aren’t just larger, they’re more efficient, too, thanks to their ability to carry more cargo per trip. Unfortunately, all that efficiency is for naught if a port can’t accommodate that size vessel. The good news is that an increasing number of ports are expanding to accommodate these ships, investing millions of dollars to dredge deeper waterways and wider locks, expanding docks, adding cranes, extending existing rail and much more. Among those ports, many of the top 50 have gone above and beyond to expand and improve, earning them spots among the top 50 container ports by TEU in North America.

The Big Guys

The two largest ports by TEU are both located in the Golden State of California. With more than 9.3 million TEUs in 2017 alone, the Port of Los Angeles is the No. 1 port by volume in North America, with the Port of Long Beach not far behind with 7.5 million TEUs the same year.

So, what’s bringing so much cargo to the Left Coast? In addition to its capacity for larger Panamax ships and high volume shipments, the Port of LA’s proximity to Asian markets such as China, Japan, Hong Kong, South Korea, Vietnam and Taiwan that make it so popular. In fact, the 7,500-acre Port of LA alone processes 20 percent of the foreign cargo entering the United States.

Just nine miles south of the Port of LA, No. 2 ranked Port of Long Beach prides itself on being a popular cruise ship port as well as one of the “greenest” ports in the world. With its Green Port Policy initiative and more than 20 years of environmental protection programs, the Port of Long Beach strives to reduce its environmental footprint, encourage sustainability and protect the greater community from environmental impacts the port may make. As such, the port has invested $4 billion dollars toward efforts to become a zero-emissions port in the coming years.

Changing Infrastructure

One way North American ports are accommodating the new Super and Neo Panamax ships is by changing infrastructure and expanding ports to allow larger vessels to maneuver through locks with ease. The Port of Miami (No. 18) recently invested $1 billion into a major port overhaul and expansion, complete with channel widening (from 50 to 52 feet), $50 million dollars in rail improvements, and several super Panamax-capable cranes with 22-container outreach that are the biggest in the entire Southeast United States.

A $350 million-dollar expansion at the Port of Virginia (No. 7) is slated to be completed in 2019 and will include a brand new, 26-lane motor carrier gate, rail mounted gantry cranes (RMGs) to allow for higher container stacks, and various rail improvements. Not far up the coast, the Port of Baltimore is investing in several port-related projects around the city, including replacing the dilapidated Colgate Creek Bridge, which will expand access from the port to Interstate 95 for larger logistics trucks. A recent purchase of 70 acres of land will enable the port to store and process the increased amount of cargo coming off Super Panamax vessels. The expansion is expected to generate 1,650 new jobs for the city.

This past September, the Port of Georgia (No. 4) announced it would be investing $2.5 billion over the next 10 years to jump from its current capacity of 5.5 million, 20-foot TEUs to an impressive 8 million. It’s part of a whopping $14.1 billion in investments over the next five decades. For each dollar invested, the Port of Georgia expects a profit of $7.3 dollars to the U.S. economy.

Not too far north, the South Carolina Port Authority has committed $2.4 billion to deepen the Port of Charleston (No. 11) to 52 feet, making it the deepest port on the East Coast by the year 2021, and capable of an 8 million TEU capacity by 2028. Furthermore, the port plans to double its rail capacity by the year 2020. With a planned 180,000 additional feet of rail, the project is part of a strategy to cut 24 hours off transit time to the Midwest.

The Port of Philadelphia (No. 24), now known as PhilaPort, doesn’t just carry cargo but a rich history dating back to 1701 and the days of William Penn. But the 300+-year-old PhilaPort is anything but dated. Today, the port is undergoing improvements as part of a $300-million expansion authorized in 2016. The funds will be used to double PhilaPort’s container capacity, improve their PAMT terminal and increase the terminal’s capacity from 485,000 to 900,000.

Philaport is also undergoing a channel expansion which will bring the main channel from its current 40 feet to 45 feet to accommodate larger Super and Neo Panamax ships.

The Port Authority of New York and New Jersey (No. 3) is in the midst of a $4-billion expansion and improvement project that will make room for Super Panamax vessels, as well as their increased cargo load.

International Ports

The U.S. is not the only country with ports making big changes—and doing big business—in North America. Canada is also home to two notable ports. The Port of Vancouver (No. 6), which is the largest port in Canada and the sixth-largest in North America, boasts a decidedly global hub, while the Port of Montreal (No. 12) does much of its business with Europe.

The Port of Vancouver processes about 2.9 million TEUs each year. Located on Canada’s west coast in picturesque Vancouver, British Columbia, the Port of Vancouver contributes $24.2 billion CDN to Canada’s economy each year, supplying about 92,600 jobs in British Columbia and an additional 115,300 jobs across Canada.

On Canada’s east coast, the Port of Montreal processes more than 1.5 million TEUs annually and has recently entered a partnership with the Centre for Technological Entrepreneurship (CENTECH) and École de technologie supérieure (ÉTS) to create a “port logistics innovation unit.” The aim is to help address modern issues facing the port such as cybersecurity, supply-chain visibility and decarbonization and process improvement. The innovative program will be the first of its kind in North America.

The Port of Montreal also happens to be the closest port to Europe, and as such offers the shortest direct route of any North American port from Europe and the Mediterranean.

South of the U.S. border in the State of Colima, Mexico, is the Port of Manzanillo (No. 8), which processes more than 2.8 million TEUs per year. The largest port in Mexico, the Port of Manzanillo is the only container port from the country in the top ten. The port generates most of its business from iron ore, pectin, pickles (yes, pickles), cement and seafood products such as giant squid, swordfish, tuna and even shark.

Teaming Up

Much like the No. 3 ranked Port of New York and New Jersey, the Ports of Seattle and Tacoma have merged to create the Northwest Seaport Alliance, which has rounded out the top of the list at No. 5. In 2017, the Northwest Seaport Alliance processed more than 3.6 million TEUs, with a 15.6 percent increase in September 2018 over the prior year—the biggest increase in September volume since 2005. The port hopes to increase its annual TEUs from its current rate of 3.6 million annually to 6 million by the year 2025, generating 14,600 new jobs in the process.

In addition to being a major gateway for cargo from Asia and a major distribution point for cargo from Asia heading to the Eastern United States, the Northwest Seaport Alliance is also home to the Puget Sound, which has the strategic position of being an important gateway to Alaska. In fact, according to the Northwest Seaport Alliance, more than 80 percent of total trade volume between Alaska and the rest of the U.S. passes through the alliance’s North and South harbors.

New Ownership

This past September, the Port of Wilmington (No. 27) in Wilmington, Delaware, was sold to Gulftainer, a United Arab Emirates-based port operator on a 50-year concession. Gulftainer plans to invest $600 million into the improvement of the port. No stranger to North American ports, Gulftainer also currently operates Florida’s Port of Canaveral.

Of Gulftainer’s planned $600-million investment, $400 million would go toward a new, 1.2 million TEU container facility. Currently, the Port of Wilmington can process 600,000 TEUs. A new cargo terminal and training facility are also slated for development with the new concession.

 

Everything’s Bigger in Texas

The State of Texas is home to several major ports, including the Port Houston (No. 9) and Port Freeport (No. 39), both of which are undergoing expansions of their own.

Port Freeport is planning a major expansion which will deepen the port from its current 45 feet to 55 feet. It also will be lengthened to 2,200 linear feet to accommodate larger Post Panamax vessels. There are also plans at Port Freeport to expand operations from 125,000 TEUs to 800,000 TEUs each year with the addition of 90 acres of land that will be developed for container operations in the coming years.

Another current Port Freeport development is the Velasco Container Terminal, which upon completion will include another 130 acres of land where 1.5 million to 2 million TEUs will be processed annually. The Velasco Container Terminal will eventually house five Post-Panamax gantry cranes.

North of Port Freeport is inland Port Houston, which is undergoing some big changes of its own. Thanks to a $314 million budget approved in 2016 by the Port Commission, Port Houston is slated to undergo numerous repairs on existing properties. Current projects include rehabilitating Wharf Three to accommodate 100-gauge, ship-to-shore cranes, construction of 6,500 feet of railroad track and the demolition of several buildings and Lash Dock.

In addition to these improvements, Container Yard 7, which will span 50 acres of land, is being constructed at Port Houston. According to the facility’s website, the yard will boast reinforced and roller-compacted concrete pavement and will be fully equipped with water and sewer, stormwater collection, communication conduit and high-mast lighting.

Future plans for Port Houston include adding five security cameras, installing numerous drainage systems and conducting general repairs around the port.

Looking Ahead

These 50 North American container ports are leading the way in TEUs and making way for anticipated growth in the future. From updating security systems to survive in an increasingly “cyber” world, to fixing irrigation issues and repairing dilapidated structures, more and more ports are turning their focus to customer service, making their facilities more modern, efficient and comfortable.

Additionally, many ports are dredging deeper and wider channels to make room for larger Post Panamax, Super Panamax and Neo Panamax ships that are quickly becoming the norm. These ships don’t just enable shippers to ship more product at once, they also create a major savings in time and money for both the shipper and the ship. Plus, with fewer ships in the water, this larger class of Panama ships allows for a greener footprint, reducing emissions. Larger ships also mean more work unloading, and thus have the potential to generate more jobs, boosting local economies—and isn’t that what trade is all about?

 

 

 

 

 

 

 

 

 

 

 

Archives, Global Trade Daily, News

DHL GLOBAL TRADE BAROMETER CONTINUES TO FORECAST TRADE GROWTH, ALBEIT SLOWER

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Global trade continues to grow, according to October’s three-months forecast from the DHL Global Trade Barometer (GTB). The index for global trade now stands at 63 points, which is a decline of four points on the previous quarter’s forecast, indicating an overall slightly slower pace of growth. In the GTB methodology, an index value above 50 indicates positive growth, while values below 50 indicate contraction.

The overall slight reduction is largely driven by lower growth rates of air trade. The respective index value declined by eight points to 62. In contrast, the growth rate for global ocean trade merely decreased by one point to 63 points. Regarding the GTB’s seven constituent countries, this quarter sees a mixed picture with a threefold differentiation: India as the only country with simultaneously increasing and very high prospects for trade growth, the UK with an unchanged outlook, and all other countries with slightly diminishing prospects.

Despite intensifying global trade disputes, mainly between China and the U.S., these countries remain in growth mode, however, at a slower pace. American growth prospects slowed down by five points to 63, while the Chinese trade outlook decreased by four points to 59. Most other constituent countries witnessed decelerating trade dynamics, too: South Korea–still one of the previous forecast’s strongest growth drivers–saw its outlook reduced by five points to 69. Likewise, Germany’s trade growth forecast was reduced by six points to 58. The outlook for Japan went down by three points to 64.

UN REPORT: TRADE WAR THREATENS OUTLOOK FOR GLOBAL SHIPPING

The outbreak of trade wars and increased inward-looking policies threaten the prospects for seaborne trade, projected Mukhisa Kituyi, secretary general of the United Nations Conference on Trade and Development at October’s Global Maritime Forum’s Annual Summit in Hong Kong.

Kituyi’s warning while launching the 2018 edition of the UNCTAD Review of Maritime Transport came against a background of an improved balance between demand and supply that has lifted shipping rates to boost earnings and profits. Freight-rate levels improved significantly in 2017 except in the tanker market, supported by stronger global demand, more manageable fleet capacity growth and overall healthier market conditions.

Seaborne trade expanded by a healthy four percent in 2017, the fastest growth in five years, and UNCTAD forecasts similar growth this year, subject to Kituyi’s warning over trade and tariff wars: “Escalating protectionism and tit-for-tat tariff battles will potentially disrupt the global trading system which underpins demand for maritime transport.”

MYANMAR AT BOTTOM OF GLOBAL INDEX ON ILLICIT TRADE

The Transnational Alliance to Combat Illicit Trade (TRACIT) in October called for Myanmar to urgently step up efforts to fight illicit trade. Myanmar’s structural difficulties to effectively address illicit trade is evidenced in its very low score in the 2018 Global Illicit Trade Environment Index.

The index was produced by the Economist Intelligence Unit (EIU) and evaluates 84 countries on the extent they enable or prevent illicit trade. Myanmar ranks 82nd out of 84 countries evaluated, with an overall score of 23.0 (out of 100).

“This means that—apart from Iraq and Libya—Myanmar shows the poorest structural defense against illicit trade,” said TRACIT Director-General Jeffrey Hardy. “It also means we have a lot of work to do here, especially in the areas of illegal logging and mining, wildlife and human trafficking, spirits, beer and cigarette smuggling, and counterfeiting of all types of consumer goods.”

“We’re trying to solve illicit trade in all possible ways,” reported U Ko Lay, director of the Myanmar Ministry of Commerce. “But we need law and order first and that will pave the way for legal trade.”

COMMERCE UNDER SECRETARY SIGNS INDUSTRY COLLABORATION AGREEMENTS

Under Secretary of Commerce for International Trade Gilbert Kaplan met in Singapore with officials from the U.S. Chamber of Commerce, Singapore Business Federation (SBF) and Singapore Manufacturing Federation (SMF) in September to update and expand the Department of Commerce’s framework for U.S.-Singapore commercial collaboration.

The discussions were part of a broader trip that Kaplan led to India, Vietnam and Singapore to advance the U.S. government’s new Indo-Pacific Initiative by helping American companies navigate market challenges and by enhancing trade promotion efforts.

In his remarks, Kaplan emphasized that “our partnership with Singapore has been a great representation of the mutually beneficial outcomes we hope to accomplish throughout the broader Indo-Pacific region, especially with all of the gains we have seen since the United States and Singapore signed our bilateral free trade agreement 15 years ago. This includes the Commerce Department’s work with Singapore’s business organizations, who have been great friends and partners of the U.S. government and U.S. business community over the years.”

GPA APPROVES $92 MILLION RAIL EXPANSION

During a September meeting of the Georgia Ports Authority (GPA) board of directors in Atlanta, $92 million was approved for the Mason Mega Rail Terminal, a project that will double the Port of Savannah’s annual rail capacity to 1 million containers and deliver the largest on-terminal rail facility in North America by 2020.

“It is no accident the GPA is constructing rail capacity as the demand for rail is growing,” said GPA Board Chairman Jimmy Allgood. “As part of our strategic planning two years ago, our team identified the growing role intermodal cargo would play in GPA’s long-term success and put into place this plan for expansion.”

The GPA also announced it had moved 375,833 TEUs in August, an eight-percent increase over August 2017, while handling 86,200 intermodal TEUs represented a 33 percent jump.

PORT MANATEE, CARVER MARITIME INK LONG-TERM TERMINAL PACT

Port Manatee and Carver Maritime LLC in August entered a long-term marine terminal operating agreement for a 10-acre aggregate offloading facility at the Florida Gulf Coast port.

The Manatee County Port Authority-approved agreement lasts for as many as 20 years (including options) and ensures property lease payments totaling $1.8 million for the initial five-year term, in addition to wharfage payments for annual cargo throughputs.

“We, along with our customers, are excited about this opportunity, and very much look forward to a long and fruitful relationship with Port Manatee, as well as its tenants,” said Carver Laraway, president of Altamont, New York-based parent firm Carver Companies. “The projected growth of Central Florida and the business-friendly environment of Manatee County make us eager to call it home.”

Archives, Global Trade Daily, Imports/Exports

Budding Signs of Trade Diversification a Welcome Sign for Canada’s Trade

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There’s been much ado in Ottawa as of late regarding the promotion of free-trade ideals and the pursuit of a globalist agenda in economics.

The recent handshake agreement on a rebranded United States-Mexico-Canada Agreement (USMCA) has understandably been the preeminent focus of business and political observers. But setting aside momentarily that historic détente in Can-Am relations, there’s been a great deal of work taking place in Ottawa to establish the conditions that will enable and empower not just globalism but genuine trade diversification.

Most Canadian businesses – particularly those for which trade across the 49th parallel is integral to their livelihood – have been alarmed by how quickly trade relations between Canada and the U.S. have regressed over the past 18 months, and how closely the USMCA negotiations came to leaving Canada without a free trade agreement with the U.S.

And yet, it was with little fanfare that Canada’s Parliament recently gave royal ascent (the last step in the ratification process) to the Comprehensive & Progressive Agreement for Trans-Pacific Partnership or CPTPP. For the uninitiated, the CPTPP is a multilateral free trade agreement involving 11 Pacific Rim countries. Originally, the agreement (then dubbed the Trans-Pacific Partnership) was a 12-nation pact that included the United States. However, U.S. President Donald Trump withdrew from the agreement via executive order on his third day in office.

Fearing the proliferation of protectionism and looking to solidify strength in numbers in Asia against China’s rising hegemony, the remaining members of the TPP relaunched trade talks in a rather expeditious manner in 2017. One year later, not only have those talks concluded, but also the required six signatory countries formally ratified the agreement, allowing entry into force on December 30, 2018.

For Canada, participation in the CPTPP represents a further bet on multilateral trade and the pursuit of a free trade agenda that is meant not only to provide greater import/export options for Canadian businesses, but to reduce Canada’s dependence on trade with the United States. That agenda has reasonably been pursued with increased vigor given Washington’s hyper focus on Buy American trade policies, bi-lateral trade, and the elimination of trade deficits.

To be sure, Canada’s globalist trade agenda predates the era of Donald Trump and the rise of trade protectionism. It is evident in the 2016 signing of the Comprehensive Economic & Trade Agreement (CETA) with the European Union; an agreement that took seven years to negotiate under an air of cynicism and opposition on both sides of the Atlantic.

Some have argued that Canada-EU trade data under CETA is indicative of Canadian businesses’ vulnerability to compete in a multilateral environment. These detractors note that since CETA’s provisional application in September 2017, exports to the EU increased only a modest 3.3 per cent versus a 12.9 per cent increase in imports from the EU.

But a closer look reveals one-fifth of those new imports are made up of machinery, indicating  the buds of economic diversification, rather than a sign of global non-competitiveness. Machinery is most often imported to enhance production efficiency and make businesses more innovative and internationally competitive. The fact that this taking place in a less-than-favorable exchange rate environment for Canadian businesses is all the more encouraging.

Far from driving job loss, the imports are spurring employment growth. In the year following CETA’s implementation, Canada’s unemployment rate fell from 6.2% to 5.9%. Furthermore, employment in some of the sectors most affected by the top imports from the EU, such as, mining and health care has risen 4.13% and 0.75% respectively. Granted, employment in manufacturing did drop 1.37% during that period; however, that figure is likely made up of job losses due to automation as much as job losses due to lost business.

It is also reassuring that trade growth with the EU hasn’t been limited to the UK, traditionally Canada’s largest European trading partner. According to a CBC report in September, exports from Canada to European countries other than the UK, grew 6.9%. This is yet another sign that Canadian businesses are looking outside their traditional comfort zones for both sourcing and selling opportunities.

Precisely how widely used the CPTPP will be amongst Canadian businesses is anyone’s guess at this point. Like the CETA countries, the CPTPP group is made up of diverse economies. And, like the EU, trade with the CPTPP group will require a reliance on ocean freight, multi-lingual communication and packaging, as well as multi-cultural considerations for how products are marketed.

The path of least resistance for Canadian businesses would be to breathe a heavy sigh of relief that the North American bloc has been salvaged by USMCA and revert to tried and true trade relationships with existing supply chain partners. No one would blame them for doing so. And for many businesses – particularly smaller ones – keeping trade within North America might be the only realistic approach.

For many others, the CPTPP and CETA represent a historic opportunity for businesses to diversify their sourcing and selling markets, but also to plant seeds that will grow sales, encourage innovation and productivity, expand product portfolios and serve as insurance against current and future trade disputes. For those reasons alone, businesses should be setting their sights on leveraging Canada’s newly acquired free trade prospects.

Cora Di Pietro is vice president of Global Trade Consulting at trade-services firm Livingston International. She is a frequent speaker and lecturer at industry and academic events and is an active member of numerous industry groups and associations.

 

 

 

 

 

 

Archives, Global Trade Daily, International Trade

Update on Russia: Restrictions Expanded to New Actors, Industries

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Since the beginning of August 2018, the United States has taken multiple actions that will affect U.S. trade with Russia.  The actions cover exports to Russia, doing business with Russian partners, and potential Russian investment in the United States.  These actions have added to the already challenging landscape of conducting business in and with Russia.

 

Economic Sanctions in Place Since 2014 Are Expanded Again

The United States has maintained targeted economic sanctions on Russia since 2014.  Most of these sanctions are administered by the U.S. Treasury Department, Office of Foreign Assets Control (OFAC).

These sanctions ensnare many prominent Russian individuals and entities.  They have also ensnared prominent U.S. companies: see our July 2017 blog post on penalties imposed against Exxon for Russia sanctions violations.  For an example of how sanctions have been periodically and consistently extended, see our September 2016 blog post.

There are also more recent examples.

First, in Executive Order 13,848, issued on September 12, 2018, President Trump established a process to investigate and impose sanctions against foreign parties and their agents that interfere in U.S. elections.  Under the Order, no later than 45 days after an election is concluded, if there is an indication of actions taken to interfere with the outcome of the election, an assessment must be conducted.

When the assessment is concluded, the outcome must be reported to the President, the Attorney General, and the Secretaries of Defense, Homeland Security, State, and Treasury.  Within 45 days of receiving that assessment, the Attorney General and Secretary of Homeland Security must report on whether there was foreign interference in the election.  Any party deemed to have been involved in that interference can be designated as a Specially Designated National (SDN).  As a general matter, U.S. persons cannot conduct any business with an SDN.

In addition, the Order authorizes the imposition of sanctions against the largest business entities licensed or domiciled in a country whose government authorized, directed, sponsored, or supported election interference, including at least one entity from each of the following sectors: financial services, defense, energy, technology, and transportation (or, if inapplicable to that country’s largest business entities, sectors of comparable strategic significance to that foreign government).

While the Executive Order does not say so specifically, it is safe to conclude that the Order is directed at least in substantial part toward Russia.

Second, sanctions were imposed pursuant to the Countering America’s Adversaries Through Sanctions Act (CAATSA).  (More information about CAATSA is available in our August 2017 blog post.)  Under CAATSA, among other things, the U.S. government designates parties that are affiliated with the Russian government’s defense or intelligence sectors, and can impose sanctions against persons that transact with those designated parties.

On September 20, 2018, the U.S. State Department designated 33 such parties and added them to the list of 39 parties designated previously.  Those 72 parties are listed on the CAATSA section 231 List of Specified Persons (the LSP).

There is no outright prohibition on conducting business with these 72 parties.  However, any person – regardless of nationality – that engages in a “significant transaction” with a party on the LSP is subject to sanctions, including designation by OFAC as an SDN.

What constitutes a “significant transaction” is not well-established in OFAC regulations or guidance.  But some insight was offered on September 20.  On that day, acting in concert with the State Department, OFAC designated one Chinese individual and one Chinese entity as SDNs for involvement in a significant transaction with parties on the LSP.

The designations, and additional trade restrictions imposed on these two Chinese parties by the State Department, were made because the Chinese parties were involved in a transfer to China from Russia of combat aircraft and surface-to-air missile system-related equipment. The State Department characterized this as a significant transaction which triggered designation under CAATSA, though State did not specify whether the size of the transaction, the nature of the equipment transferred to Russia, and/or other factors rendered this a significant transaction.

 

New Export Restrictions Announced Under Chemical and Biological Weapons Law

On August 6, the State Department announced its determination that the government of Russia used chemical weapons in England in an effort to assassinate Sergei Skripal, a former Russian spy, and his daughter.  The determination was made pursuant to the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (the CBW Act).

On August 27, acting in accordance with the CBW Act, the State Department announced the following restrictions on Russia:

-Termination of sales to Russia of defense articles and defense services, including termination of existing licenses for exports of such articles and services, except for exports in support of government and commercial space activities; and

-The prohibition on exports to Russia of commercial products and technology (e., items controlled for export under the Export Administration Regulations) subject to national security controls, with exceptions for certain exports specifically authorized under new licenses and specific license exceptions.

The State Department also imposed limits on certain financial assistance and aid for Russia.

The restrictions, which will remain in place for at least one year, augment existing restrictions on exports to Russia of certain oil and gas exploration equipment and exports to military end-users and for military end-uses.

 

Russian Investment in United States Likely to Be Subject to Greater Scrutiny

In August 2018, President Trump signed the Foreign Investment Risk Review Modernization Act (FIRRMA) into law. FIRRMA expands the jurisdiction of the Committee on Foreign Investment in the United States (CFIUS) to review more types of transactions for potential national security concerns.

Much attention has understandably been paid to the impact that FIRRMA will have on investment from China. The impact on investment from Russia is likely to be significant, too.

For one, FIRRMA specifically contemplates scrutiny of investments originating in countries of “special concern.” In addition, the new law anticipates careful review of transactions that could create or expose U.S. cybersecurity vulnerabilities, including if the acquisition could facilitate election interference.

Russia is one of the countries that will be most impacted by these new provisions. Moreover, Russian investment in the United States will likely trigger CFIUS interest simply given how aggressively the Trump Administration has used national security as a basis for implementing trade restrictions. (In one particularly obscure example, OFAC recently emphasized how North Korea is using a large number of North Korean laborers in Russia to evade U.S. sanctions.)

 

Conclusion

We do not foresee the U.S. government easing trade restrictions on Russia anytime soon. To the contrary, we believe the U.S. government will continue to expand restrictions on Russia using mechanisms such as those described in this article.

It is therefore essential for companies to fully understand the scope of their Russia business. Screen transaction parties against the U.S. government restricted and prohibited parties lists, including – now – the LSP. Recognize that many U.S. exports to Russia are restricted based on the recipient or end-use of the product. Beware that Russian investment in the United States may face extra scrutiny.

Unfortunately, due diligence on Russian counterparts presents unique challenges. The ownership and organizational structures of such entities can be convoluted and obscure.  Accordingly, if a company has any reason to think a Russian business partner is affiliated in any way with a sanctioned entity, it is essential to enlist expert assistance to fully tease out ownership and control before proceeding.

Thad McBride is a partner in Bass, Berry & Sims PLC’s Washington, D.C. office in the firm’s International Trade Practice Group. They focus on counseling clients on compliance with economic sanctions and embargoes, US export regulations (ITAR and EAR), and the Foreign Corrupt Practices Act (FCPA). He may be reached at tmcbride@bassberry.com.