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!

Follow up # 3 on US CBP forced labour seizures

Not a whole lot has happened related since my last post on the subject (Click to see last post on topic), but there have been some developments which are worth mentioning:

First, there has been a new detention order issued for Peeled Garlic from Hongchang Fruits and Vegatbles[i]. That makes for 4 so far this year after a period of none in 21 years.

Second, US CBP has begun a new TFTEA web page, which (among other things) covers the repeal of the consumptive demand clause[ii]. (The banner from that page is atop this blog post).

Third, the issue of forced labour and enforcement was given a spot in the most recent quarterly enforcement newsletter from US CBP[iii].

Lastly, forced labour is specifically listed as a topic at the upcoming US CBP East Coast Trade Symposium[iv].

Overall I still maintain my position that this trade issue will not go away, and will only become more important. I encourage anyone with overseas supply chains to pay attention. A good starting place is the Department of Labor list of goods produced by forced labor. While not directly binding, CBP alludes to it multiple times and I would say any item on that list is at high risk of enforcement from CBP[v].

Stay tuned….

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[i] https://www.cbp.gov/trade/trade-community/programs-outreach/convict-importations

[ii] https://www.cbp.gov/trade/trade-enforcement/tftea

[iii] https://www.cbp.gov/sites/default/files/assets/documents/2016-Jul/Quarterly%20CBP%20Trade%20Enforcement%20Bulletin-%20FY%202016%2C%20Quarter%203.pdf

[iv] https://www.cbp.gov/trade/stakeholder-engagement/trade-symposium

[v] https://www.dol.gov/ilab/reports/child-labor/list-of-goods/

Follow up # 2 on US CBP forced labor seizures

Just a quick entry here, to give an update on some new developments on this subject, since my first two posts:

First post on forced labor

Second post on forced labor

Since those posts, a couple key developments tell me this is a story that has yet to be fully told.

First, on July 27, CBP Commissioner Kerlikowske raised the matter in his opening remarks to the Commercial Customs Operations Advisory Committee (COAC)[i]:

“And as you know, enforcement of the nation’s trade laws is a core mission for CBP, and I want to announce the new Forced Labor Working Group focusing on this key enforcement priority.

Following the Custom’s Bill’s repeal of the “consumptive demand” loophole, we have been working with industry, civil society organizations, and others to rigorously enforce the law and prevent the import of goods made with forced, convict, or child labor into the United States.”

He further went on to say:

“The role of industry in this issue is clear, and we must work closely with importers, brokers, and companies who want to do the right thing to clarify standards for their supply chains.”

I find this second statement very interesting. Is this hinting at a trusted trader type strategy? Perhaps a CTPAT type model, but targeting forced labor in supply chains? How about CTPAFL? No, to many letters…. Regardless of my conspiracy theories, this is just further evidence that CBP has no intention of dropping the matter, whatever their future plans are exactly.

Another development comes from the private business side. Recently Descartes’ SPL division “Descartes MK Denied Party Screening” added a new list type to their offering, called “Customs and Border Protection Forced Labor”.  They explain the list as: “The manufacturers listed have Withhold Release Orders (WRO) issued by the Commissioner”.

Descartes MK is a leader in the generation of SPL content[ii] for automation, such as in SAP GTS, and their inclusion of this content is a good indication that we can expect to see the list grow.

I’ll keep checking in on this subject, and I encourage anyone reading this to start the process of a supply chain review for forced labor. As I mentioned in my last post on the subject, there are other good reasons to do so.

P.S.: I’m a little surprised that Descartes called the list “… Forced Labor”. I was really hoping to see “… Forced LaboUr” from a Canadian company, eh! Ok. If you’re not Canadian, you probably didn’t get that one….

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[i] https://www.cbp.gov/newsroom/speeches-and-statements/2016-07-27-000000/commissioner-kerlikowske%E2%80%99s-opening-remarks

[ii] https://www.descartes.com/documents/descartes-mk-denied-party-screening-list-offerings

Follow up on US CBP forced labor seizures

On April 23, I posted about an unexpected result of the Trade Facilitation and Trade Enforcement Act of 2015, which had passed in February. See here:

http://intltradecompliance.blogspot.ca/2016/04/import-controls-on-products-produced.html

In that post I predicted that this would become a more significant factor in global trade then it had been previous to TFTEA. I just wanted to follow up on that with a couple observations; however, the jury is still out on whether or not I was accurate in my prediction!

At the time I wrote the original post, there had been 2 "withhold release" orders since TFTEA, in contrast to only 39 times in 85 years (and not at all in 15 years previous to TFTEA). How many times has this power been used by US CBP since my post? Well, as far as I can tell, only 1 more time[i], which is still significant (no activity in 15 years, 3 times since TFTEA), but not earth shattering. However, I still feel confident that this is a new dynamic for global supply chains that compliance officers need to take seriously.

Perhaps more telling than the enforcement in the last 3 months is the amount of communication and publicity around the subject. Here are some highlights that may convince you the new reality is here to stay:

·         On May 2^nd, following the TFTEA, US CBP announced the creation of a new task force. This Trade Enforcement Task Force will “focus on issues related to enforcement of antidumping and countervailing duty laws, and interdiction of imported products using forced labor”[ii]. (My emphasis)

·         On May 2^nd, US CBP Commissioner R. Gil Kerlikowske referred to the following in his remarks to the Joint Annual Meeting of the American Iron and Steel Institute: “core priorities like interdiction of products manufactured using forced, convict, or child labor”[iii]

·         The Commissioner warned the public of the following, in a June 1^st announcement: “It is imperative that companies examine their supply chains to understand product sourcing and the labor used to generate their products,” and followed this with: “CBP is committed to ensuring U.S. values outweigh economic expediency and as part of its trade enforcement responsibilities, will work to ensure products made with forced labor do not cross our borders”[iv]

The reader must make their own appraisal, but it seems to me that US CBP is signalling to trade to get ready: this is going to be a significant initiative.

As you consider whether or not this is significant, I want to remind the readers about the similarly intended California Transparency in Supply Chain Act[v]. This California law, effective since 2012, requires affected companies to disclose what efforts (if any) they are taking to combat slavery and human trafficking throughout their supply chain. This law stops at the requirement to disclose, and makes no minimum effort requirements. Therefore, you could be 100% compliant simply by stating you have absolutely no plan to eradicate slavery from your supply chain. However, that may be bad PR, and so most companies do in fact speak to some level of effort.

This is where the risk appears: your statement (as required under the law) must be accurate and truthful or you risk a lawsuit (such as the class action lawsuit against Costco[vi]) or worse: could this be a False Claims Act violation?

Lastly, I just wanted to mention another new possible development: Canada may very well end up with similar laws. A recent World Vision report[vii] demanded that Canada enact laws to restrict commerce that uses forced labour. There is no indication yet that this will happen, but as a Canadian I can say doing so would fit squarely with the agenda of the current government.

If you take one thing away from this, I hope it is that your company needs a strategy for dealing with possible forced labour in your supply chain. You need it to ensure the new US Customs enforcements don’t affect you. You need it to comply with California’s law. And you just may need it to comply with new laws we haven’t yet seen. I happen to think it’s also just the right thing to do….

Please leave comments on this if you disagree: I’m curious to know what the rest of the industry thinks!

Kevin Riddell

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[i] https://www.cbp.gov/trade/trade-community/programs-outreach/convict-importations

[ii] https://www.cbp.gov/newsroom/national-media-release/2016-05-02-000000/cbp-creates-trade-enforcement-task-force

[iii] https://www.cbp.gov/newsroom/speeches-and-statements/2016-05-02-000000/commissioner-kerlikowske%E2%80%99s-remarks-joint-annual

[iv] https://www.cbp.gov/newsroom/national-media-release/2016-06-01-000000/cbp-commissioner-issues-detention-order-stevia

[v] https://oag.ca.gov/sites/all/files/agweb/pdfs/sb657/resource-guide.pdf

[vi] https://www.consumerproductmatters.com/wp-content/uploads/sites/13/2015/11/Sud-v.-Costco.pdf

[vii] https://nochildforsale.ca/resource/supply-chain-risk-report/

Import controls on products produced with forced labor: a developing story

Most professionals involved in international trade compliance in the USA have heard of the recent Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA), signed by President Obama on February 24, 2016. There was significant coverage of this both within our industry and outside of it, no doubt helped by the incredible coverage of the Republican and Democratic primaries. Some of the clauses in this act have been covered well, such as:

• The increase from $200 to $800 for Section 321 clearances
• Changes to the US Goods Returned program
• Minimum standards for Customs Brokers
• Changes to Duty Drawback procedures
• Etc.….

One aspect of this bill that has not been discussed as much, is the repeal of an old law called the “Consumptive Demand” clause. This clause was found in 19 U.S.C. § 1307[i] until the TFTEA repealed it.

What does this mean exactly?