Trump, Trade and 2017 #1

I know I promised to do a piece on Trump and his potential impact on global trade in 2017. The problem is, everyone beat me to it! No really – I lost count of how many trade compliance law and consulting firms aired web casts and blog posts about “2017, and the impact of a Trump presidency” (or something along those lines) …. To be honest, I feel a little silly just sending out a “me-too” post about what the Trump Presidency will mean for global trade.
With that said, I think the most value I can offer my readers is a closer look at specific issues, and what it will mean to the rank and file involved in trade compliance. Enough talks, posts and presentations have already covered the potential future of NAFTA, TPP and TTIP, but maybe I can offer some more personal insight, for those responsible for compliance with such programs.
The first one I’d like to cover is the big umbrella term of “Buy American”. As anyone involved in US Government procurement knows, there is more than simply one governing piece of legislation, and many relevant regulations, regarding “Buy American”. The key ones I personally encounter most are:

- 48 CFR 225 “Buy American” provisions, enacting 41 U.S.C. 83, found in the Federal Acquisition Regulations
- 49 CFR 661 “Buy America” provisions, enacting 49 U.S.C. 53
- Other US origin procurement rules at the State level
- Municipal procurement funded by the Department of Transportation and as such subject to 49 CFR 661

These programs often differ and have unique requirements, but the consistent theme is an attempt to push publicly funded procurement to solicit US origin goods. Readers quite likely have run into other programs not listed above, but similar in intent.
There is one other key factor to mention, and that’s the Trade Agreements Act. Under the Trade Agreements Act there must be provisions for the sourcing of non-US goods if they are eligible for a signed Free Trade Agreement. For example, there are provisions in the Buy American rules for the acquisition of NAFTA eligible goods. Buy America (49 CFR) does not allow for TAA exemptions, but has a much more limited scope applying to Transportation projects.

With all of the above in mind, what can we expect to see in 2017? Well, a recent tweet from the President elect offers a little clue:

https://twitter.com/realDonaldTrump/status/814484710025994241?lang=en

For those without Twitter the tweet actually only contained a link to an Instagram post, which is the important part:

https://www.instagram.com/p/BOmuafXjnVB/

“Buy American and Hire American”.

If that doesn’t offer you a clue than you’re thinking this through too hard. What exactly can or will his administration change? To be honest: just about anything they want to. The Trade Agreement Act could be scrapped/modified. The core procurement rules themselves can be made stricter. Most importantly, enforcement can be ramped up ensuring that existing rules are enforced 100% of the time. That’s the first thing the executive branch can do, with no help from congress: just enforce existing rules.
Since I mentioned congress, a quick note on that. Anyone thinking that a push for increased protectionism regarding procurement will be blocked by the Democrats, should think again. Here’s why:

Recently the Democrats chose Chuck Schumer as minority leader of the Senate. Senator Schumer is a name I recognize, and the main reason was the following link:

https://www.schumer.senate.gov/newsroom/press-releases/schumer-feds-are-currently-listing-flatware-and-other-products-made-by-companies-as-american-made-when-they-are-actually-produced-overseas-putting-companies-that-manufacture-in-us-like-sherrill-manufacturing-in-central-ny-at-a-disadvantage_senator-pushes-feds-to-review-made-in-america-listings--immediately-remove-companies-that-are-falsely-listed

Have a look at that press release, and ask yourself if it’s likely the Democrats would challenge any effort to strengthen Buy American provisions. Furthermore, remember Bernie Sanders? He is now arguably a very influential force within the Democrats. Here’s what he has to say about working with a Trump administration on trade:

http://www.washingtontimes.com/news/2016/nov/17/bernie-sanders-i-could-work-donald-trump-infrastru/?utm_source=RSS_Feed&utm_medium=RSS 

What’s the bottom line? We have an incoming administration that is advocating for more Buy American. We have a Republican majority in both houses which (in theory) will work with the President. We have a loyal opposition that is showing no signs they will oppose Buy American efforts. Sounds like a slam dunk to me. If I were you, and you have any exposure at all to US government procurement and associated protectionism provisions, I would get up to speed fast. I predict 2017 to bring us an increased amount of requests related to Buy American. If there’s any doubt you understand them or are ready to comply, make that a New Year’s Resolution to fix the situation.

Oh, and it may also be worth watching how Canada responds, as this develops….

Happy New Year! And I look forward to sending more posts in the 2017! It's truly an exciting time to be involved in international trade compliance!

Meanwhile, north of the border…

(Image from: By AWeith (Own work) [CC BY-SA 4.0 (http://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia Commons)

Unsurprisingly, this week has been all about the USA. In fact, I don’t remember a time in my life when the rest of the world was this focused on the USA and its future approach to trade! On that note – I promise to do a review of what I see in the Trump administration’s first 100 days[i], as they relate to trade. President-elect Trump made some promises to the voters about his first hundred days (after he assumes office, not yet), and a few of the points could directly impact trade compliance professionals. I’m sure I’m not the only one, but I plan to have a look at that, and see what may be in the cards…

In the meantime, there’s a couple developments north of the border I’d like to mention.

First up: something I hadn’t actually heard about until recently: the TFA. What’s that? Its long name is the “World Trade Organisation (WTO) Agreement on Trade Facilitation”, or “TFA” for short. The TFA is essentially an agreement to standardize and streamline customs release processes among member nations (members of the WTO). Below is an image of the official pamphlet[ii]:

There’s nothing earth shattering in here, but it will affect countries that adopt it. Perhaps the most controversial portion is an agreement for the more “developed” countries to help (through direct financial aid) less advanced countries as they adopt the provisions. Significant provisions include:

·         Prompt release times at the border

·         Release upon bond, not requiring payment of duties up front

·         Processes for advanced rulings

·         Processes for appeals and audits

·         Discipline regarding fees, charges and penalties

·         Authorized operator programs

Overall, as I say, not that revolutionary from a North American perspective, but clearly a big change for some other countries. As expected, the USA has signed this deal. It will come into force when 2/3 of the members ratify the deal. Imagine my surprise when I read the list of current signatories and my own county wasn’t on it? Canada is usually first to the dance floor when UN or WTO agreements are proposed! Especially considering the little impact it would surely have on us, I was really confused.

A look at the Global Affairs Canada web site doesn’t help much:

http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/wto-omc/negotiations-negociations.aspx?lang=eng

Yes, there is a great FAQ section and a presentation, but the answer to the question “When will Canada ratify the TFA?” is:

“Canada will be in a position to submit its instrument of acceptance to the WTO, once Bill C-13, introduced in Parliament on April 13, 2016, receives Royal Assent.”

Hmmn. It’s 2016 right, Justin? (Inside humour only a Canadian would get…). I’m really unsure why this is not ratified. The government has a majority, which is as close to a totalitarian government as you can get in Canada, so nothing is stopping them. Honestly – I don’t know. Just curious – if anyone has insight into this and would like to comment or reach out to me please do – is there more to the story than I know, or is this just the slow wheels of bureaucracy? It’s most unlike us to be the last to the table….

The other thing I’d like to discuss is CETA. It looks like Wallonia relented (See: Last post) and CETA will become reality. It’s time we take a hard look at the provisions, and prepare to adopt its rules into our trade compliance lives. Well… sorry folks: I took too long, this entry has reached its limit. But I will be back with a look at CETA rules of origin and what to expect for those familiar with NAFTA!

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[i] https://assets.donaldjtrump.com/_landings/contract/O-TRU-102316-Contractv02.pdf

[ii] https://www.wto.org/english/thewto_e/20y_e/wto_tradefacilitation_e.pdf

From the cubicle at the end of the hall to the front page…

Note - above image is from Library of Congress, and is public domain[i].

If you’re anything like me, you know what I mean by “the cubicle at the end of the hall”. Those responsible for or involved in Trade Compliance often feel like the unwanted guest at the party. No one is too sure what exactly we do, but they know it’s usually bad news when we get involved! I think sometimes they place us as far as possible from the action, but maybe that’s paranoia!

In all seriousness, most of us have had those conversations over the years when asked “what do you do”. I’m sure I’m not the only one who’s seen glassy eyes in response when I say “NAFTA”, or Customs Compliance. Cross border trade compliance just hasn’t been a well known or understood topic historically. Maybe this sounds familiar to you too:

“So, what do you do?”

“Oh, I look after customs and trade compliance, NAFTA, that sort of thing”

“Hmmn?”

“You know the North American Free Trade Agreement?”

“…”

“Forget it, just pass the crackers please…”

Similarly, many companies that take “compliance” seriously, historically haven’t considered “trade compliance” much. A recent survey by PWC showed that only 32% of companies with a corporate compliance function, include “Export compliance” under the umbrella of “Corporate Compliance”[ii]. (I’m proud to say I work for one of those 32%!).

Well, whether you consider it good news or bad news, I believe things are changing, and changing quickly. Since the beginning of the 2016 Presidential race (which feels like it started in 1916!), I have heard people comment on the benefits/costs of NAFTA that I swear had never heard of it before. Similarly, in Canada right now, it is big news discussing whether or not we will sign the CETA free trade deal with the EU. For those not following, a province in Belgium called Wallonia is sticking to their guns and refusing to ratify, which means the whole agreement may fail. As I write this, my Prime Minister has cancelled his trip to Europe for the signing. I guess there must be a ``Make Wallonia Great Again” movement going on[iii]… A good article on it can be found here:

http://www.economist.com/news/europe/21709330-failure-ceta-heralds-age-vetocracy-if-eu-cannot-do-trade-what-can-it-do

Returning to the US Presidential race, as anyone following knows, deals like TPP and NAFTA have been front and center in the debates. I haven`t seen this level of public discussion on free trade since NAFTA was first debated in the Clinton campaign… (Oh, am I having déjà vu…)

Beyond free trade, several other high profile events have affected trade compliance recently. From the activity in the Ukraine, to Syria, to Cuba, foreign policy decisions seem to be affecting the rules we trade by almost daily.

On the enforcement side, several significant court decisions and US CBP announcements promise to bring trade compliance into the public litigation sphere. For example, the recent court decision on False Claim Act application to Marking Duties:

http://whistleblowerlawinsights.com/2016/10/13/customs-fraud-whistleblower-case-victaulic-appeals-court/

And the recent US CBP statement re: AD/CV duty enforcement:

https://www.federalregister.gov/documents/2016/08/22/2016-20007/investigation-of-claims-of-evasion-of-antidumping-and-countervailing-duties

Based on these developments, we may see a new cottage industry for lawyers. I tried hard to think of an import/export equivalent to “ambulance chasers” but came up empty – any ideas?

As I said earlier: all of this may be good or bad news for you. If you liked your quiet cubicle at the end of the hall, maybe this is bad! However, if you’ve been seeking more exposure in your company, and feel ready for increased challenges, this can only be good for you. Best start catching up on what’s going on: wouldn’t want to be unprepared the next time someone brings a newspaper article to your cubicle and says “hey – isn’t this that stuff you do?”

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[i] http://www.loc.gov/pictures/item/ne0108.photos.198654p

[ii] https://www.pwc.com/us/en/risk-management/state-of-compliance-survey/assets/pwc-soc-2015-chart-pack.pdf

[iii] Fear not – I`m not making a judgement on the value of `Make American Great Again`… just trying to point out how much our profession has been hitting the news lately!