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

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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.”

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Don’t Feel Entirely Helpless in Trade Volatility

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The great American humorist and author, Mark Twain, once quipped, “Be careful about reading health books. You may die of a misprint.” In today’s politically charged environment, we all could use a dose of comicalness. Or perhaps, Twain’s premise is an important guide for how to approach the overly published and greatly analyzed reports and commentary about the looming “Trade War.”

Pointedly, as a manufacturer, the Trump Administration’s trade policy cannot be evaluated through one report, a singular set of analytical data, or a forecaster’s prognostication about the future of the aluminum or steel markets. It is far more complex, and any manufacturer who has not already done so should be preparing for long-term volatility in the international trade market.

There is no debate that the United States is in an unprecedented and unchartered posture relative to its largest trade partners. One needs to look no further than the Trump Administration’s latest September announcement of a third round of 10 percent Chinese tariffs – bringing the total amount of impacted goods to approximately $250 billion or half of all imported Chinese goods.

With the Trump Administration placing a deadline of January 1, 2019, before the latest round of Chinese tariffs is raised to 25 percent, there is mounting fear of international, political and business consequences on the horizon. Additionally, the Administration is threatening another $267 billion that would essentially subject all imported Chinese goods to increased tariffs.

That said many observers believe that the Trump Administration is simply creating an environment conducive to a favorable new trade relationship with its trade partners. So, as a U.S. manufacturer who sources materials and products internationally, what are you supposed to do in the short- and long-term?

The simple answer is to focus on what you can control and to not sit idle. To that end, all U.S. manufacturers – big or small – should consider three explicit and proactive steps to protect their interest.

For one, companies should take advantage of the available exclusion processes. If granted, the exclusions apply retroactively to the date that tariff went into effect. The Commerce Department is tasked with reviewing exclusion requests for the Section 232 Steel and Aluminum tariffs. A product exclusion will be granted if the article is not produced in the United States 1) in a sufficient and reasonably available amount; 2) satisfactory quality; or 3) there is a specific national security consideration warranting an exclusion. There is no deadline for submitting, but the Commerce Department has received over 30,000 requests, so companies should evaluate their potential for the exclusion if they have not done so already.

Similarly, the United States Trade Representative (USTR) has provided a mechanism to request exclusions for the Section 301 (China) tariffs. But unlike the Section 232 requests, these are time sensitive. There is an October 9, 2018 deadline for the first round of tariffs, and a December 18, 2018 deadline for the second round of tariffs. Key considerations are whether 1) the product is available only from China or whether a comparable product is available from other sources; 2) the imposition of the tariff will cause “severe economic harm to the requestor,”; and 3) the product is strategically important to the “Made in China 2025” program or other Chinese industrial programs. The USTR has not released an exclusion process for the latest round of 10 percent tariffs, but industry groups are petitioning the USTR for a similar process.

Second, as good corporate hygiene, it is prudent for a manufacturer to regularly evaluate its existing contracts, including supply contracts. Now, it is even more critical, as existing supply contracts may provide relief resulting from tariff increase, price increase, force majeure or potentially even causes for termination of the agreement that can be invoked. Of course, to cancel or amend an existing supply contract is only functional if you can replace the imported good with another source for those materials. And, if you are entering into an amended, extended or new supply contract, it is important to incorporate key protection clauses to avoid major spikes in prices that would be damaging to your business model.

Third, if you haven’t already, as a manufacturer who is importing goods and materials, it is important to evaluate the classifications of the imported products. The classification of each product is the determinative factor as to whether it may fall in or out of the tariff order. Whether there is an accidental misclassification, an intentional misclassification by the overseas seller or a product that is within a gray area, an audit of the classifications of your imported goods will avoid unnecessary surprise, potential liabilities and could result in an avoidance of higher tariffs. If there is uncertainty, the manufacturer can request guidance from Customs.

There are some camps who will point to the incredible and sustained bull stock market as prima facia evidence that the Trump trade policy is not impacting the economy. There are others, such as the National Association of Home Builders, who has implored the administration to back off the aggressive trade policy as it is experiencing increasing cost and estimates the tariffs will translate into a $2.5 billion tax on the U.S. housing market. The only certainty we can count on regarding the Trump trade policy, whether short- or long-term in duration, is that now is the time to act and to do what is in your control to protect your interest.

 

Christopher Kane is a Partner and Global Trade, Transportation and Logistics Team Leader at Adams and Reese (New Orleans). He maintains a multi-faceted practice, counseling clients on economic development matters, transportation law, construction law, business litigation cases, governmental relations and professional athlete injury claims. In some ways, these areas overlap, and as a result, the regional, national and international clients he advises benefit. He may be reached at christopher.kane@arlaw.com.

Cole Callihan is an associate at Adams and Reese (New Orleans), whose practice encompasses maritime/transportation, trade and customs matters. He advises companies on their compliance with maritime and transportation laws and regulations before the US Coast Guard (USCG), the US Customs and Border Protection (CBP), the Maritime Administration (MARAD), the Federal Maritime Commission (FMC) and the Federal Motor Carrier Safety Administration (FMCSA). He can be reached at cole.callihan@arlaw.com.