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AI Will Transform Our Borders – From Travel to Trade. Here’s How.

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AI Will Transform Our Borders – From Travel to Trade. Here’s How.

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Technology is evolving at a dizzying pace, and artificial intelligence is no exception. Today, artificial intelligence is being deployed in our cars, computers and social media networks.

It would be easy to assume a crisis of public confidence and trust in AI – not least around its use in public services. As with any emerging technology, there are concerns about the implications and impact of different AI applications, such as “black box” problems relating to machine learning management and regulation. However, Accenture’s recent Citizen Survey across six countries found that 50 percent of respondents support the use of AI in the delivery of public services and that support rises noticeably when presented with specific benefits. One of the most promising public applications of AI? For our border agencies.

Although government executives often reference “smart border” capabilities, this vision has not been fully realized.  Today, the focus is largely on merging historical data from border and customs systems and applying analytics to realize process efficiencies.  This approach is valuable but limited. Rather than playing a supporting role in border management technology, AI should take centre-stage.

If deployed fully, AI has the potential to vastly improve travel and trade across our airports, shipping ports and other ports of entry. Border agencies must not be daunted or overwhelmed by the latest AI capabilities – or let fear of the unknown detract from the valuable opportunities this technology affords.

As cross-border trade and travel value chains become increasingly digitized, five value-drivers can help border agencies maximize the benefits of AI:

Responsible AI

People must feel confident that AI decisions are ethical and reliable. Fortunately, agencies are already working to establish public trust in AI. According to Accenture’s Technology Vision 2018 report, 78 percent of public service executives say they’re seeking to gain citizen confidence by being transparent in their AI decisions. Since these AI systems can make choices that affect trade, border agencies must think carefully about how they’re adopted, understand the implications for public sector organizations and their workforces. At the same time, border agencies must teach AI systems to act with both accountability and transparency.  Given the right strategy and controls, combined with a willingness to learn from other sectors, ‘responsible AI’ offers great benefits for border agencies.

Intelligent automation

With artificial intelligence gaining momentum across enterprises and industries, we’re entering the era of intelligent automation. Intelligent automation is much more than the simple transfer of tasks from man to machine; its real power is to transform traditional ways of operating by revealing what can be accomplished by integrating systems, data and people. Most process automation currently deployed by border agencies handles mundane and repetitive tasks rather than those requiring cognitive intelligence. However, that’s rapidly changing. Future AI use cases might include a chatbot that answers complex questions to an entirely autonomous port where humans’ only role is monitoring and security.

Enhanced judgements

It will be many years before AI can reliably make decisions on complex issues, such as determining what goods or visitors pass through a border and into a country. But AI does have a valuable role to play in augmenting human judgement and supporting choices about the “next best action” on case work. Take an area where humans’ visual perceptions are used as the basis for decisions – as in the classification of goods for customs declarations. Currently, these decisions may differ from port to port and from person to person, often resulting in delays. Artificial intelligence and machine learning can crunch vast amounts of data 24×7, removing subjectivity, inconsistencies and delays – especially when deployed uniformly across border agencies, shippers and traders.

Enhanced interactions

One of the biggest benefits of digitization is the ability to eliminate paper forms and provide more personalized online and in-person service. With AI, personalization can be elevated to a whole new level – and in an environment like customs, the impact on user experiences can be transformational. A border agency’s wealth of existing and historical data about each transaction or entity means routine information-gathering can be almost completely automated, enabling the agency to focus on providing a positive experience and facilitating the safe and frictionless passage of people and goods. In the airport of the future – humans will collaborate effortlessly with machines, combining instantaneous facial recognition with flight data to validate each passenger’s identity and travel itinerary, drawing on his or her full travel history and other data to assess risk levels. Then, if necessary, the AI system will prompt its human counterpart with questions for additional human-human screening.

Intelligent product categorization

Customs classifications processes are notoriously complex and bureaucratic, and the descriptions often are esoteric – yet any individual or organization that gets the classification wrong can face severe penalties. Artificial intelligence has enormous potential for simplifying these complex nomenclatures, making it easier to find the right classification while improving understanding, reducing costly errors and fostering the effective flow of trade.

It’s the nature of emerging technology to have ups and downs. Whatever the latest headlines may say, the genuine promise and business case for Artificial Intelligence at the border remain as compelling as ever.  It’s vital that border agencies stay focused on the value that AI can deliver – and don’t let short-term concerns distract them. So far, most border and customs agencies have only scratched the surface of AI’s potential. It’s now time to dig deeper into AI capabilities – and combine humans and machines in ways that don’t just improve efficiency at the border but reinvent border processes altogether.

 

 

 

 

Archives, Commentary, Global Trade Daily

3 Common Invoicing Scams and How to Avoid Them

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Invoicing and payments fraud can take a variety of forms: invoices from fictitious companies, invoices for products that were never delivered, for unusually high amounts, or as part of a phishing scheme. As your business grows and your vendor list gets larger, how do you stay on top of the validity of each invoice? Below are some common invoice fraud schemes and how you can prevent them.

CEO Impersonation

Imagine you’re an accountant and you receive an email from your CEO with a request for an urgent payment. He or she is finalizing the acquisition of another company and need you to wire money immediately in order to close the deal. You receive a follow-up phone call from a third party with the wiring instructions and authorize the payment as instructed. Only later do you find out that the email wasn’t really from the CEO and both the email and the phone call were an orchestrated scam.

This type of fraud, known as “business email compromise,” “CEO fraud,” or “CEO impersonation” was responsible for over $675 million in losses last year alone, according to the 2017 FBI Internet Crime Report. Using a spoofed email address (a common method for phishing schemes), fraudsters specifically target individuals responsible for wire transfers or invoices within an organization and solicit payments from them. They thoroughly research a company’s recent activity and target companies that conduct a lot of foreign transactions via wire transfer, since those payments are difficult to reverse. The authority of the sender, the urgency of the request, and the spoofed email address create a very convincing hoax.

                              Vendor Impersonation

Fraudsters may impersonate trusted vendors as well. Using a spoofed email, they may send notice that they’ve recently changed addresses or ACH routing information along with a fake invoice. Similar to CEO impersonation, this type of fraud happens when someone impersonates a vendor you already conduct business with. Fraudsters specifically target an employee within accounts payable, hoping that the payment will go through long before anyone questions its validity.

Awareness is key to prevent CEO and vendor impersonation fraud from happening in your organization. If you receive an email that seems suspicious, pay attention to the tone of the email: Does it sound like something your CEO would send to you? Is it their usual tone, or is it overly formal? Another thing to consider: Is it unusual for you to receive a wire transfer or urgent payment request from your CEO or this particular vendor? If you’re unsure, just ask, especially for large amounts.

Shell Companies

The creation of a shell company is one of the easiest ways for an employee to perpetrate an invoicing fraud scheme. A shell company only exists on paper, provides no services, and produces nothing. This type of fraud is often an inside job; the employee might set up the entity in a friend’s or relative’s name and invoice their employer and collect the payments. Typically, the employee will have information on the way the invoices are processed (or may even be the one paying them), so they know exactly what threshold to stay under to avoid further approvals, potentially remaining undetected for years.

Shell companies can be difficult to distinguish from real companies, but there are a few red flags. Be wary of invoices that have vague or unspecified services – this doesn’t necessarily indicate fraud, but services never rendered are a lot harder to detect than products never delivered. Are the invoices you receive numbered in sequential order? This may be because they have no other customers, and you’re the only one receiving the invoices. If you suspect it’s a fake invoice from a shell company, keep an eye out for other red flags (typos, grammatical errors). If it’s from a vendor you don’t recognize, then be cautious. Look closely at the address, tax ID number, and phone numbers – one of these might match one of your employees.

 

Josephine McCann is a Senior Marketing Associate at AppZen,the world’s leading solution for automated expense report audits that leverages artificial intelligence to audit 100% of expense reports, invoices and contacts in seconds.

 

 

3pls, Archives, Global Trade Daily

Leading 3PL Provider Announces Expansion in Seattle Region

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Team Worldwide, a leader in 3PL and global freight forwarder, announced this week expansion efforts for the company’s Seattle branch, “Team Seattle.”

“The opening of Team Seattle is a strategic part of our domestic and global expansion. Seattle is an important ocean gateway to and from the US. It will allow us to better support the needs of our customers in the Northwest and will also help expand our cross border services with Team Worldwide, Ltd. in Canada,” Team Worldwide CEO Jason Brunson said.

As strategic efforts kick-off, the Seattle-based branch has an anticipated opening for December. This initiative aligns well with the results currently seen in the Tacoma-Seattle port regions which are currently ranking as the fourth largest container gateway through the merging and creation of Northwest Seaport Alliance.

“Our mutual association with Team and their network allows us to invest in our passion for Supply Chain Management; providing solutions for our customers, with an array of services, to meet their individual expectations,” General Manager Brian Purugganan said.

For more information, please visit: Team Worldwide

Source: TeamWW

Archives, Global Trade Daily, Imports/Exports

Local Entrepreneur Brings “Magic” Back to Miami Apparel Industry

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Serial entrepreneur Jason Prescott believes in the future of Miami – so much so, that the Los Angeles native packed up his family last year and moved to the city, where he launched Florida’s first ever international apparel and textile show.

Now, Prescott and his team – with expanding offices in Aventura – are gearing up for the second act of his show, called Apparel Textile Sourcing Miami (ATSM) 2019, which is set to take place May 20–22 at the Mana Wynwood Convention Center. The largest apparel and textile sourcing show in the Southern U.S. and Latin America, ATSM is focused on global trade and poised to bring thousands of out-of-state and international visitors to the Magic City.

Not only is Prescott producer of ATSM – and its sister shows in Toronto (Apparel Textile Sourcing Canada) and Germany (Apparel Textile Sourcing Germany) – but he’s also CEO of JP Communications Inc., the highly successful publisher of the leading online international trade platforms TopTenWholesale.com and Manufacturer.com.

His long-time industry expertise has enabled him to connect with the China Chamber of Commerce for Import and Export of Textile and Apparel (CCCT), the largest textile and apparel trade agency in the world, which supports the production of ATSM. He has also attracted the participation of dozens of other apparel and textile organizations – from some 15 countries – all of which will have a presence at the May show.

“We at ATSM are so grateful for the support of all our international partners, and our community and business partners in South Florida, each of whom has been instrumental in helping us make this show a success and with whom we look forward to growing,” said Prescott said.

ATSM 2019 event – which presents three days of networking, seminars and fashion shows and connects Southeastern U.S., the Americas and the Caribbean to the production world of apparel, textile, and fashion – will host more than 300 international and domestic manufacturing companies exhibiting a wide range of products and process solutions in the field of manufacturing and sourcing services. The 2019 event is expected to double in size from this year’s inaugural show.

Prescott, through this one-of-a-kind show, has brought $2 million in investment to Miami and boosted local tourism by attracting thousands of out-of-state and international visitors. He has awarded dozens of projects to local contractors and has brought hundreds of Chinese and other global manufacturers and respected industry experts to do business and revive “Magic” in the Magic City.

In addition to CCCT, the show’s impressive list of international partners includes: Worldwide Responsible Accredited Production (WRAP), Federation of Indian Chambers of Commerce & Industry (FICCI) , Apparel Export Promotion Council (AEPC), Wool and Woolens Export Promotion Council (WWEPC),  Export Promotion Bureau of Bangladesh (EPB), Bangladesh Garment Manufacturers Exporters Association (BGMEA), VESTEX Guatemala, Export and Investment Promotion Organization of El Salvador (PROESA) and PRO MEXICO.

Local supporters include Moishe Mana of Mana Wynwood, City of Miami Mayor Francis Suarez, Miami Dade County Mayor Carlos Gimenez,Commissioner Dale Holness from Broward County, Commissioners Jose “Pepe” Diaz and Audrey M. Edmonson from Miami Dade County, Dr. Shanjie Li, Executive Chief Economist and CEO of Miami-based American Da Tang Group, as well as organizations such as the Greater Miami Convention and Visitor’s Bureau, the Broward County Office of Economic and Small Business Development, the Port of Miami, the City of North Miami, Port Everglades, Florida East Coast Railway, the Fashion Business Association of America, Fashion Group International, Greater Miami Convention and Visitors Bureau, the Beacon Council, the City of North Miami, Enterprise Florida and Miami International University.

According to Manny Mencia, Senior Vice President of International Trade and Development for Enterprise Florida: “The apparel sector remains very important to Florida’s international economy. In 2017, nearly $8 billion in apparel trade flowed through Florida ports and airports.”

“The Apparel Textile Sourcing Miami Show will bring a large number of domestic and international industry decision makers to our community, and promote Florida as a premier destination for the industry and stimulate the local economy,” he said.

Archives, Commentary, Global Trade Daily

House Democrats Won’t Accept USMCA In Its Present Form

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Looks like it’s back to the drawing board for NAFTA aka USMCA.

House Democrats, who will be in charge of the new Congress that convenes in January, have made it clear that they won’t accept the NAFTA revision that President Trump forced on Canada and Mexico in its present form. Among other things, they want stronger, more enforceable labor standards.

NAFTA labor standards are addressed in a side agreement and aren’t fully enforceable. In the revised NAFTA, which Trump renamed the U.S. Mexico Canada Agreement, labor standards, including new ones, are in the body of the agreement and are fully enforceable. But there’s a big difference between “enforceable” and “enforced.”

For example, the new deal requires that 40-45% of a car built in North America be built by workers earning at least $16 per hour. This is aimed at Mexico, because American and Canadian auto workers already earn more than that.

It’s hard to imagine how anyone could enforce a rule like that.

Also, U.S autoworkers earned between $19.31 and $29.73 per hour in September, according to the U.S. in Mexico and paying the 2.5% tariff to import them into the United States.

USMCA’s labor chapter also requires Mexico to enact laws or regulations mandating the “effective recognition of the right to collective bargaining,” and “the elimination of discrimination in respect of employment and occupation.”

However, a June 2018 report on employment discrimination against Mexican women, prepared for the Office of the UN High Commissioner for Human Rights, said, “Although employment discrimination can be legally punished through many different means in Mexico, according to available data, it is rarely actually punished. . . between 2013 and 2017, not one single employer in all the country was fined for employment discrimination or harassment.”

This is one of many problems with employment discrimination against women the report described.

The United States or Canada could file complaints against Mexico for employment discrimination under one of USMCA’s dispute resolution chapters. But the process for doing so would be long and complicated and winning would affect little if any change on the ground in Mexico.

Sex discrimination is rampant there, although it’s not as bad as it used to be. As recently as the mid-1990s, Mexican businesses placed want ads in newspapers specifying that applicants must be young, female and attractive. Women who didn’t fit that description had a hard time finding work. This led many of them to immigrate to the United States.

If the Trump administration put stronger labor standards in USMCA to get Democrats to support it, it didn’t work.

“Right now, it’s a work in progress,” said Rep. Nancy Pelosi, D-Calif., who will probably be the speaker of the House in the next Congress. “Without enforcement you don’t have anything.”

Rep. Richard Neal, D-Mass., who probably will be chairman of the House Ways and Means Committee, said in a statement, “ we will need to assess whether this agreement makes real improvements to the terms of the existing NAFTA . . . especially when it comes to the enforcement and enforceability of the agreement’s provisions, including the provisions that have always been critical to Democratic support – the ones that provide for worker rights and environmental protections.”

Trump has two choices.

If he wants to put USMCA into effect, he’s going to have to do the hard work of making it acceptable to House Democrats. That will mean, among other things, making sure the labor rights provisions aren’t just enforceable, but enforced. That, in turn, will mean more negotiations with Canada and Mexico, neither of which will be keen on going at it again with the Trump administration.

Or, he can walk away from the deal, leaving NAFTA in place. In that event, he might make good on his threats to withdraw from NAFTA, leaving the United States even more isolated than it already is. Commerce Secretary Wilbur Ross suggested that Trump would do that if Congress doesn’t ratify USMCA.

“The president can revoke the old NAFTA deal by simply giving six months’ notice,” he said in an October 1 interview with Fox Business News. “The old NAFTA deal is not going to be a realistic alternative.”

And, of course, Trump views NAFTA as “perhaps the worst trade deal ever made.” So, why wouldn’t he withdraw from it if he doesn’t get USMCA?

Taking the United States back to 1989, when it had no trade agreement with either Canada or Mexico, is not a realistic alternative, either.

I was speechwriter for U.S. Trade Representative Michael Froman and for Korean Ambasador Han Duk-soo during the Korean government’s quest for ratification of the Korea-US Free Trade Agreement.

IMO 2020
Archives, Global Trade Daily, Ocean Carriers

OCEAN LOGISTICS: CARRIERS

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The International Maritime Organization (IMO) adopted a strategy this year for reductions by the shipping industry of CO2 emissions. The UN agency adopted goals that would reduce ocean-carrier emissions by 50 percent by 2050, compared to 2008 levels. That matched the position being pushed by Norway’s government and its shipowners’ association and supported by industry groups such as the International Chamber of Shipping (ICS) and Canada’s Chamber of Marine Commerce (CMC).

There are also a number of initiatives being undertaken by individual carriers, ports and even localities to reduce the environmental impact of ocean shipping. These include testing alternative fuels, reducing ship speed, even employing innovative coatings to ships that help improve fuel efficiency.

Advocates of IMO’s adopted plan emphasized that the strategy matches the expectations of the Paris climate agreement and sets global standards. “Agreement upon a mid-century objective for the total reduction of CO2 emissions by the sector, regardless of trade growth, is vital to discourage unilateral action and to provide the signal needed to stimulate the development of zero-CO2 fuels,” said Esben Poulsson, the ICS chairman.

The new greenhouse gas standards represent the second stage of a three-step approach under an IMO strategy agreed to in 2016 for reducing emissions from ships. The first is a set of requirements for ships to collect data on their fuel oil consumption which entered into force on March 1, 2018, with amendments to International Convention for the Prevention of Pollution from Ships (MARPOL).

The reporting requirements under those amendments will begin on January 1, 2019, with data to be reported at the end of each year to the IMO. The purpose is to inform further measures needed to enhance energy efficiency and to address GHG emissions related to international shipping.

Under new Regulation 22A, ships of 5,000 gross tons and above are required to collect consumption data for each type of fuel oil they use. These ships account for 85 percent of CO2 emissions from international shipping. Data will be reported to flag states each year, and the flag state must determine the data has been properly reported and issue a statement of compliance to the ship.

Meanwhile, the IMO’s restrictions on sulfur oxide will come into force in January 2020. Those measures will reduce acceptable SOx levels, from 3.50 percent m/m (mass of sulfur/total mass) today to 0.50 percent m/m in 2020.

According to a report released by European Maritime Safety Agency, methanol and ethanol are good potential alternatives for reducing carbon and sulfur emissions of ship operations. Methanol has been investigated as a marine fuel in a few research projects, two of which involved pilot test installations on ships. The world’s first methanol conversion of vessel’s main engines came on a passenger ferry, the Stena Germanica, in 2015.

Ethanol has not been studied for use on ships but has been used in truck diesel engines for years. Methanol is the simplest of alcohols and is produced mainly from natural gas while ethanol is mainly produced from biomass such as corn and sugar cane.

Challenges to the use of the alcohols include their lower energy density compared to fossil fuels, which will require more fuel storage space on board vessels. The flashpoints of both substances are below the minimum for maritime fuels specified in IMO rules, requiring further evaluation, the report noted.

Methanol and ethanol both have environmental advantages compared to conventional fuels: they are clean-burning, contain no sulfur, and can be produced from renewable feedstocks. Emissions are low compared to conventional fuel oils.

Guidelines are being drafted for the use of methanol and ethanol fuels on ships, for future incorporation in a newly adopted international code for ships using non-conventional fuels. “This,” the report noted, “will facilitate the use of these fuels on board ships.”

Many ocean carriers around the globe have slowed their vessels to save on fuel. An example of a regional initiative comes from Southern California, where last year 10 shipping companies participated in an incentive program to voluntarily reduce speeds in the Santa Barbara Channel region to 12 knots or less. Ship emissions account for over 50 percent of smog-forming nitrogen oxides emissions in Santa Barbara County.

“Since the shipping industry is regulated by national and international organizations, the only way for us as a local agency to address shipping emissions in our region is through innovative strategies,” said Mike Villegas, director of the Ventura County Air Pollution Control District. “The level of participation is very encouraging.” A similar program for 2018 was launched in July and has been expanded to include the San Francisco Bay area.

Efforts to reduce fuel usage emissions also involve changing hull coatings. The vessel COSCO Europe sliced fuel costs by $4.5 million and reduced CO2 emissions by 29,500 tons in the four years since it was coated with an innovative material that limits the growth of organisms on a vessel’s hull and minimizes frictional resistance. Jotun’s Hull Performance Solutions (HPS) system has been applied to over 400 vessels since its launch in 2011. The COSCO Europe is a 2008-built, 10,062 TEU container ship.

“As a company we are committed to delivering optimal value for all our stakeholders and the best environmental performance for our fleet,” said Hou Liping, deputy general manager of COSCO Shipping Lines.

Alfie Ong, vice president of Jotun Marine Coatings, said that more global shipping players are recognizing “that an investment in HPS is low-hanging fruit when it comes to optimizing hull performance.”

There’s good news when it comes to efforts to reduce the environmental impacts of ocean shipping. An ecosystem for fish and marine mammals is flourishing in Long Beach and Los Angeles harbors, according to a report on the water and habitat quality released last year. The survey, conducted through an ongoing partnership between the ports, identified 558 species of plants and animals living on the rocks and pilings in the harbors. That’s 60 percent more than in 2008 and almost double the number cataloged in 2000. Water quality conditions have also improved, with oxygen and phytoplankton measurements higher than ever before.

“There’s growing biodiversity in the harbors, including more birds and marine mammals, and we’re seeing species that cannot thrive in polluted waters,” said Lori Ann Guzmán of the Long Beach Board of Harbor Commissioners. “We should all be proud of these results and continue to work hard to build on this progress.”

Archives, Global Trade Daily, News

As sales of U.S. soybeans to China plunge amid trade dispute, exporters need a new strategy to access international markets

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Trade tensions between the United States and China are being felt across America’s heartland.

Prices for soybeans have tumbled and stockpiles are growing with the harvest nearly complete because exports to China, the largest foreign destination for U.S. soybeans, have plummeted. The latest federal data, through Oct. 25, shows American soybean sales to China have declined by 97 percent from last year’s harvest.

In response to U.S. tariffs placed on billions of dollars of Chinese goods, China imposed a 25 percent tariff on U.S. soybeans and shifted to buying soybeans from Brazil and other countries. Since tariffs were announced in June, the going rate of U.S. soybeans has fallen from roughly $10.50 a bushel to $8.34, as of Oct. 30, according to Markets Insider.

The timing of the trade dispute couldn’t be worse for American farmers. The USDA has forecasted that U.S. soybean production in 2018 harvest would rise to an all-time high of 4.6 billion bushels, up from 4.4 billion bushels a year earlier. The federal estimate for Illinois, the top-producing state, shows an increase of 12.4 percent to 688 million bushels.

While farmers hope for a new trade deal, there is urgency to find alternative markets for the oilseed. One of the keys to diversifying the U.S. export market lies in a 20-foot-long steel box.

Shipping containers dominate international trade. Yet, they are not widely used in U.S. agricultural exports. The movement of soybeans in 20-foot or 40-foot-long containers has represented 5 to 7 percent of total U.S. soybean exports in recent years. Bulk ocean vessels and rail to markets in Canada and Mexico are the current primary transportation methods.

But to enter new markets, smaller shipments will be needed, and container shipping is the solution. It offers several advantages over bulk vessels, including:

-Soybeans shipped in containers are generally higher in quality because they are handled less, reducing the amount of split and broken soybeans and foreign materials.

-Smaller importers can buy the measured quantities they demand, ordering soybeans only when they need them, as opposed to taking positions for large deliveries on bulk shipping vessels. “Just-in-time” inventory management, popularized by the Japanese and now prevalent throughout manufacturing, cuts costs and reduces waste.

-In the event there are logistical problems, the demurrage for containers is much lower than that of entire vessels, thereby minimizing the overall financial risk.

-Buyers seeking high-value or specialty soybean products can buy direct from smaller exporters. Importers in Japan use containers, for instance, to preserve food-grade soybeans.

-Customers can have their orders fulfilled much quicker. Three to four weeks is the typical turnaround time for the container shipping to Asia, compared with three to four months via the bulk vessel channel.

U.S. soybean exporters have been able to nurture markets in Taiwan and Indonesia by shipping in containers. Indonesia is now one of the largest importers of soybeans. In addition to producing animal feed, Indonesia uses soybeans to make foods such as tofu and tempeh.

Thailand, Vietnam and other countries in Southeast Asia are also using more soybeans as household incomes grow. Income growth leads more meat consumption, which in turn fuels demand for soybean-based animal feed.

Smaller international markets in Asia, Europe and Africa are perfect for container shipping because they haven’t achieved the economies of scale required to use the bulk transportation system.

Shipping by container also will help solve a major problem in the logistics industry. More than 11 million maritime containers arrive at U.S. ports each year. Most of those are coming from Asia, containing televisions, furniture, sneakers and other manufactured goods. But the imbalance of trade between Asia and the U.S. means about half of those are returning empty.

All this empty space on ships is a multi-billion-dollar loss for shipping companies, exporters and importers. Soybeans and other grains can take advantage of backhauling opportunities for ocean carriers repositioning empty containers.

Momentum to ship soybeans by container is growing. Soybeans loaded into containers in Illinois reached a new high of 66 million bushels in the 2017-18 marketing year ended Aug. 30, according to Informa Economics IEG.

But that represents about 10 percent of soybean production in Illinois, so there is a lot of room for growth. Illinois is the nation’s top producer of soybeans, is close to a sizeable supply of available containers and has several major railroads converging in the Chicago area.

The American economy depends on the exporting of soybeans and other crops. Even if China lifts the tariffs on soybeans, the trade standoff has sharply illustrated the need to cultivate new markets. Shipping by container can help lead the way.

Eric Woodie is a trade analyst with the Illinois Soybean Association’s Checkoff Program, and has over a decade of experience in export trade, foreign markets, and inland logistics.

 

Archives, Global Trade Daily, International Trade

Partisanship Alone Unlikely to Decide the USMCA’s Fate

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With the U.S. Congressional elections rapidly approaching, there’s been a fair bit of public analysis on the impact a Democrat-controlled Congress might have on the fate of the recently negotiated United-States-Mexico-Canada Agreement or USMCA.

Some have suggested a blue wave in Congress would almost certainly result in the quashing of a trade deal whose fate must be determined by a straight up or down vote. In fact, Mexico’s incoming trade secretary, Luz Maria de la Mora, recently opined that Democrats – who have traditionally viewed free trade in less favorable terms than Republicans – are likely to use the USMCA as a bargaining chip. Others have suggested Democrats may vote down the agreement as a means of spitefully derailing what is widely regarded as one of the Trump administration’s key accomplishments.

Such predictions are certainly plausible given the polarized political dynamic in Washington. But there may be more to quashing the USMCA than political partisanship. After all, each member of Congress, whether Democrat or Republican, represents a defined constituency characterized by its own local needs and considerations. If the USMCA is a stellar agreement that will widely benefit a Congressman’s or Congresswoman’s constituents, it would be politically damaging for him or her to vote against it simply out of spite.

Just how well Americans are embracing the USMCA is an open question. There’s still substantial ambivalence about the benefits of the new trade agreement and the degree to which it will improve Americans’ lives or prospects for employment. A poll carried out by POLITICO/Morning Consult 10 days after text of the USMCA was released by the Office of the United States Trade Representative (USTR) shows 38 per cent of Americans believe the USMCA will have a better or much better impact on manufacturing workers while 29 per cent feel it would have either a neutral or negative effect; the remainder had no opinion. And even fewer (32 per cent), believe the agreement would have a better or much better impact on consumers. Less than half (43 per cent) believe the USMCA is very or somewhat different than NAFTA.

Early reaction from industry groups suggests widespread relief the handshake agreement remains trilateral in nature and lifts the air of uncertainty over trade that had clouded investor confidence over the preceding 13 months. But mitigated anxiety is a far cry from resounding endorsement of an agreement few outside the U.S. Administration were itching to refurbish in the first place.

Given that ambivalence, a nullification of the USMCA’s ratification by Congress wouldn’t exactly be an act of tone deafness, though it would certainly earn it the ire of those groups for whom the agreement won modest concessions (e.g. dairy farmers, manufacturers, retailers, labour groups etc.). And it’s worthwhile noting that Congressional opposition to the USMCA wouldn’t necessarily be the exclusive domain of Democrats. There has been vocal opposition to tampering with NAFTA by Congressional Republicans whose constituents could be adversely affected by changes to select provisions within the trade deal.

Timing is also a critical consideration. A Congressional vote on the USMCA is unlikely to occur before the summer of 2019, after the International Trade Commission has filed its report on the anticipated economic impact of the trade deal. Much can change between the Congressional elections and the ratification vote with respect to how the trade deal is perceived by its most affected stakeholders, and how those stakeholders choose to air their accolades, annoyances and antipathies.

The risk in a ‘no’ vote isn’t just a return to an outdated agreement. The president has already publicly stated his intent to withdraw from NAFTA should Congress fail to ratify the deal his team has negotiated. It would leave Congress with a choice – the new USMCA or no free trade agreement at all, and therefore a return to trade uncertainty.

In addition, a ‘no’ vote would almost certainly secure the USMCA’s place as a 2020 presidential campaign wedge issue. Any candidate who votes in opposition to the USMCA will have to convince his or her constituents the concessions extracted from Mexico and Canada will not benefit the U.S. economy.

All this to say, the ratification of the USMCA does and should hinge on far more than a shift in the composition of Congress. A blue wave on November 6th shouldn’t necessarily be interpreted as a death knell for the budding trade deal. With any luck, members of Congress – regardless of their political stripes – will decide the USMCA’s fate based on the ITC’s economic impact report, combined with feedback from industry groups and their own constituents. That would not only serve to solidify the merits and/or risks embedded within the agreement, but would tangibly demonstrate to Americans that their political representatives are truly working on their behalf.

 

Candace Sider is vice president of Government and Regulatory Affairs North America 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, Imports/Exports

Whether it’s NAFTA or USMCA, Americans are better off when trade barriers are lifted

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When it took effect in 1994, the North American Free Trade Agreement (NAFTA) created the largest trading market in the world. NAFTA lifted tariffs on the majority of goods produced and traded by the U.S., Canada and Mexico.

At that time, the three signatories had a combined 365 million people and GDP totaling $6 trillion. Today, NAFTA encompasses a market of 500 million people with a combined GDP of $25 trillion.

NAFTA has been a boon for U.S. producers and consumers. Canada and Mexico are our number one and two export markets, respectively, as we exported almost $500 billion worth of goods to them in 2016. And of the 14 million American jobs supported by trade with Mexico and Canada, 5 million are a direct result of NAFTA. It is vital to our prosperity to continue that strong trade relationship.

But while NAFTA has been an overall success, the agreement needs to be modernized for the 21st century to reflect new developments, such as the advent of digital trade, e-commerce and communications. The Trump administration renegotiated NAFTA’s successor, the United States–Mexico–Canada Agreement (USMCA), which was a step in that direction. As trade policy junkies pore over the details to mixed reviews, one thing is certain: the new deal isn’t perfect, but it’s far better than no NAFTA at all.

USMCA includes new, largely positive, chapters on digital trade, e-commerce, and finance. Modernization – check. It also makes very modest improvements on some points of contention by lowering barriers to certain dairy markets in Canada and lowering U.S. barriers to sugar and peanuts. Lowering additional trade barriers – check.

But there are problematic new elements in this deal, including stricter country-of-origin requirements, which increase trade barriers. Not so good. Perhaps more troubling are the new minimum wage standards for Mexican auto workers, which will be massively complicated to comply with.

These kinds of protectionist policies drive up costs for everyone. Including domestic policies in free trade agreements may be a slippery slope for other trading partners to make unacceptable demands on U.S. policy.

But upending today’s strong North American trading relationships and returning to pre-NAFTA days would be a perilous path. Given the central role NAFTA has played in strengthening our economy and improving lives in all three countries, it’s important not to undermine its obvious benefits as the new agreement undergoes approval and implementation. There are two areas that pose specific concerns.

First, the administration must keep the U.S. firmly in NAFTA until the new deal is fully ratified and implemented. Failure to do so could unleash real and unnecessary damage on the American economy.

Terminating NAFTA before a new deal is in place would reduce market access for businesses throughout North America, causing unnecessary pain for thousands of businesses and their workers.

One study for the Business Roundtable estimated that terminating NAFTA would shrink the U.S. economy by up to 1.2 percent annually and reduce net employment by as many as 3.6 million jobs, while imposing higher prices on working families. Threats to pull out of NAFTA are only creating unnecessary uncertainty for businesses whose time would be better spent preparing for changes under USMCA.

Second, U.S. tariffs on Canadian and Mexican steel and aluminum should be eliminated immediately, irrespective of any update to NAFTA, as should U.S. tariffs on Canadian soft wood lumber. Moreover, the administration should drop its 232 investigation for new tariffs – autos and auto parts hardly constitute a national security threat.

Every day, newspapers are filled with stories of how American workers, businesses, farmers and consumers are bearing the costs of these tariffs.

There is little evidence to show that the tariffs enhanced the United States’ bargaining position during the USMCA talks, despite claims to the contrary. If anything, the new agreement occurred in spite of the tariffs. And without the tariffs, American workers and companies would have been spared unnecessary harm.

The administration is now planning to negotiate respective trade agreements with Japan, the European Union and the United Kingdom. This is a welcome step. But leaving metal, lumber, and auto tariffs in place or in play may give negotiators understandable pause and make them less willing to lower barriers and open markets.

It is time to chart a new course, one based on cooperation, not confrontation.

The administration deserves credit for cutting taxes and removing regulatory barriers, which has resulted in a strong economy and the lowest unemployment rate in nearly 50 years.

Dropping tariffs and keeping NAFTA firmly in place while USMCA goes through the congressional approval process are key to ensuring this economic revitalization continues.

Alison Acosta Winters is a senior policy fellow for Americans For Prosperity.

Source: https://thehill.com/blogs/congress-blog/politics/412804-whether-its-nafta-or-usmca-americans-are-better-off-when-trade

3pls, Archives, Global Trade Daily

Tariff Turbulence

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Whether you endorse or decry the strategy, it’s clear that the escalating exchange of tariffs between the U.S. and other countries is not going away anytime soon. The unpredictable roller coaster of tariffs in the last year has led to growing trade tension and shifting trade dynamics with countries like China, Canada, Mexico and Turkey.

For third-party logistics providers, the current state of affairs presents both new complexities and new responsibilities—but also new opportunities. While this trade instability persists, logistics providers’ ability to serve as true counselors and problem-solvers for their clients will be essential.

With new tariffs constantly emerging, third-party logistics professionals must think on their feet. They need to understand and appreciate what products (and in what forms) are subject to tariff taxes, and be willing and able to help their clients identify opportunities to recapture some of those taxes to lessen the impact on the organization’s bottom line. Clients expect their logistics partner to mitigate the extra cost of tariffs through other means, as well, such as localizing products in lesser amounts. Providers need to continue to get smarter and more strategic with respect to production and distribution locations as well.

The following tips will help third-party logistics providers achieve some of those goals, navigating today’s rapidly shifting tariff landscape and mitigating the financial impact of the current trade war. In the process, both clients and providers will be better able to position themselves for continued flexibility and resiliency going forward.

 

Open negotiations

Now is the time for clients to head to the negotiation table with their supply base. We strongly advise our clients to use the current circumstances as a negotiation tactic to try and get as many pricing concessions as possible. Approaching a steel supplier in Canada, for example, and informing them that you can get a better deal here in the U.S. might secure those concessions without requiring costly and complex adjustments to your existing supply chain.

 

Make exceptions

Look closely at any available duty exceptions, and identify opportunities to leverage those exceptions to your clients’ advantage. The high-profile 25 percent tariff on raw steel imports from Canada and the EU might be avoidable if a manufacturer purchases the steel and ships it to an outside processor before bringing it into the U.S. Modest changes to a product or tweaks in the supply chain may make it possible to bypass tariffs that would otherwise be costly or prohibitive.

 

Conduct an audit

In today’s environment, it makes sense to conduct a full-blown audit of the Harmonized Tariff Schedule (HTS) codes that apply duty rates globally to different commodities. Third-party logistics providers need to ensure that, whether the product is steel or potatoes, the HTS codes applied by U.S. Customs are accurate and valid. Within the category of steel alone, for example, there are literally thousands of different HTS codes. Errors are surprisingly (or perhaps, depending on your perspective, unsurprisingly) common.

 

Utilize duty drawback programs

Another strategy is to make efficient use of duty drawback programs, especially with respect to temporary bonds. When material is imported, processed or altered and shipped back to its country of origin within a certain time frame, clients can file through a temporary import bond instead of a their standard continuous import bond. Logistics providers should be diligent about ensuring that all clients with a supply chain that ships freight back are doing so through a temporary bond. If not, they can apply for a duty drawback—essentially a refund from U.S. customs. Duty drawbacks can also recoup funds in the event of mislabeled/mischaracterized material or misfiled documentation. Mistakes are all too easy to make, especially when dealing with massive volumes of  customs import entries.

 

Go direct

Finally, advise clients to create a direct ACH (automated clearing house) account with U.S. customs. Duties can be paid one of two ways: either through a contracted customs broker who makes payments on your behalf and subsequently invoices you/the importer of record, or through a direct ACH account with U.S. customs. With the first option, importers are typically paying a disbursement fee (typically 1-3 percent). While this wasn’t usually a significant sum with the modest to minimal tariffs in the past, it can now add up to a painful chunk of change.

 

While these practical and specific steps can all be impactful, third-party logistics providers should remain cognizant of the big-picture, recognize the value of staying nimble in the current environment. With circumstances changing constantly, maintaining strict record-keeping and regular audits is essential. None of these measures should be a one-time check list item. Navigating turbulent times requires a full-blown maintenance program that should continue indefinitely. Taking the time and investing the resources to set these systems up correctly before mistakes happen or circumstances change can help you avoid missteps and missed opportunities in the future. Don’t scramble and patch holes when your vessel springs a leak in the rough seas of a trade war—instead, do the proactive work and ongoing maintenance that it takes to make your operation seaworthy for years to come.

 

 

Drew Janney is Vice President of Operations at Michigan-based Argus Logistics, a non-asset based, third party logistics management provider with operations across the globe. To connect with Drew, email djanney@argussolutions.net.