US Passes Trade Facilitation and Enforcement Act

Francisco A. Laguna

After more than two years of debate, last week, the United States Senate passed the Trade Facilitation and Enforcement Act of 2015 (2015 Trade Enforcement Act). The legislation contains the most far reaching set of changes since the Customs Modernization (MOD) Act. Of particular significance is the inclusion of brand new measures to protect intellectual property rights and to combat antidumping and countervailing duty violations, including a mandate that Customs and Border Protection (CBP) establish its own program for these purposes.

By U.S. Customs and Border Patrol

By U.S. Customs and Border Patrol

Surprisingly, the major provisions of the Act received almost universal support from the trade community. The House had passed the bill last year, but it got bogged down in the Senate because of an unrelated internet sales tax provision. While the provision remains in the final version of the law passed by the Senate, the Senate leadership in return has agreed to take up new Internet sales tax legislation this year. President Obama is anticipated to sign the legislation into law this week.

The 2015 Trade Enforcement Act makes some significant changes to the operations and programs of CBP, adds new provisions to the antidumping and countervailing duty laws, including new procedures to combat evasion of AD/CVD orders, and revamps the drawback laws.

This week, we begin a short summary of the more significant changes. We will continue our summary next week.

Trade Facilitation and Trade Enforcement (Title I)

Title I establishes a various trade facilitation and enforcement programs. It:

By WestportWiki - Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=34507625

By WestportWiki – Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=34507625

  • requires CBP to work with the private sector and other federal agencies to ensure that all CBP partnership programs provide meaningful trade benefits to program participants;
  • authorizes CBP programs, including customs modernization efforts such as the Automated Commercial Environment (ACE) and the International Trade Data System (ITDS), also known as the “Single Window” approach to collecting trade data;
  • formalizes the Commercial Customs Advisory Committee (COAC) and the Centers of Excellence and Expertise (CEEs);
  • creates a National Targeting Center (NTC) within the Office of Field Operations that will gather data and assess risk on each of CBP’s Priority Trade Issues (PTIs): 1) agricultural programs; 2) antidumping and countervailing duties; 3) import safety; 4) intellectual property rights; 5) revenue; 6) textiles and wearing apparel; and 7) trade agreements and preference programs;
  • requires CBP to develop criteria for assigning importer-of-record identification numbers; and
  • establishes a new importer program that directs CBP to adjust bond amounts for new importers based on the level of risk assessed by CBP for revenue protection. CBP is required to develop risk-based guidelines and procedures to ensure increased oversight of imported products of new importers, including new non-resident importers.

Import Health and Safety (Title II)

Title II creates an interagency import safety working group, chaired by the Secretary of Homeland Security. The group is responsible for developing a joint import safety rapid response plan to establish protocols and practices that CBP, in conjunction with other federal, state and local authorities, must use when responding to cargo that poses a threat to the health or safety of US consumers. Title II also requires joint exercises with these entities and training for CBP port personnel in enforcement of import health and safety laws.

Import-Related Protection of Intellectual Property Rights (Title III)

Enforcement of intellectual property rights remains one of CBP’s highest priorities. Accordingly, the provisions of Title III will be one of the most scrutinized areas of the 2015 Trade Enforcement Act. Specifically, Title III:

  • authorizes and directs CBP to share information with rights holders so that they could help to quickly identify whether a product entering the United States is in violation of a copyright or trademark. Rights holders could even examine and test the merchandise;
  • authorizes CBP to seize merchandise if it is found to be in circumvention of IPR laws;
  • requires CBP to notify an injured right holder if they are included on an annually revised, CBP-maintained list (i.e., if rights are recorded with CBP);
  • establishes a National Intellectual Property Rights Coordination Center within CBP to coordinate actions with other agencies and conduct outreach to importers; and
  • calls for an increase in IPR enforcement personnel.

Enforcement of Trade Remedy Laws (Title IV)

The Act adds significant new provisions to deter evasion of antidumping (AD) and countervailing duty (CVD) orders. Directed largely at steel imports, the new provisions, called the “Enforce and Protect Act of 2015” are likely to be invoked frequently by US producers combating imports under an AD or CVD order.

U.S. Customhouse, 555 Battery St, San Francisco

U.S. Customhouse, 555 Battery St, San Francisco

In particular, the new law establishes a whole new procedure within CBP which allows US producers or wholesalers, unions, foreign manufacturers or exporters, or trade associations of a covered product to file an allegation that a party has entered covered merchandise through evasion. Importers beware!  As soon as CBP can get this procedure up and running, it is likely to be very active.

Once a complaint is filed and accepted, CBP is required to conduct a formal investigationwith specific deadlines.

CBP can issue questionnaires just like in a trade remedy cases to importers and foreign producers.

Failure to respond will result in “adverse inferences” regarding the alleged evasion.

If evasion is found, CBP can suspend liquidation, order payment of duties owed, and pursue an enforcement action.

The new anti-evasion measures of Title IV also include various directives for CBP to target and investigate potential evasion of AD and CVD orders, including setting up a new Trade Remedy Law Enforcement Division to more aggressively investigate possible evasion cases, and conducting aggressive auditing of firms at high risk. Failure to cooperate in an investigation by an importer or foreign exporter may result in a finding of evasion.

Contact TransLegal with your questions concerning the Trade Facilitation and Enforcement Act of 2015.

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What is the Importance of Trade Adjustment Assistance?

Francisco A. Laguna & Rolanzo White

After months of an internal Democratic battle, which pit House Minority Leader Nancy Pelosi against President Barack Obama, Congress passed the Trade Promotion Authority bill (“TPA”) which will give the president a “fast track” to negotiate deals with foreign nations. The TPA is characterized as “fast track” authority because it gives the president the ability to negotiate trade deals with foreign states without interference from Congress. Legislators can only vote yes or no when these deals reach the floor.

"A hot June summer afternoon on Capitol Hill. (9136720373)" by USCapitol - A hot June summer afternoon on Capitol Hill.. Licensed under Public Domain via Wikimedia Commons

“A hot June summer afternoon on Capitol Hill. (9136720373)” by US Capitol. Licensed under Public Domain via Wikimedia Commons

For months, the TPA was the center of a debate among Democrats: whether to give the president this authority; or to demand a part in trade negotiations. Republicans supported the bill because they saw it as necessary for promoting the recently agreed-to Trans-Pacific Partnership (“TPP”). Rand Paul believes that the bill actually affords Congress more control over the negotiations and the last word. Even with the divide in the Democratic Party, on June 24, 2015, Senate Republicans gathered the 60 votes needed to pass the TPA with the help of 13 democrats.

The TPA certainly facilitated the negotiation of the TPP, an agreement among Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam. All potential member states required the passage of the TPA to ease their fear that Congress would overturn the agreement after a deal was struck. President Obama and proponents of the bill advocate that the TPP will lower the cost of imported goods, open overseas opportunities for America businesses and establish the first American trade agreement with Japan. Those who oppose the TPP, including Massachusetts Senator Elizabeth Warren, fear it will kill jobs in the US and give the president too much unilateral power in trade negotiations.

"US Dept of Labor" by Ed Brown. Licensed under Public Domain via Wikimedia Commons

“US Dept of Labor” by Ed Brown. Licensed under Public Domain via Wikimedia Commons

As a way to protect people that may lose their job as a result of trade agreements, Congress voted to reauthorize the Trade Adjustment Assistance (“TAA”) program through 2020 and renew the program’s 2009-2010 eligibility and benefit levels. Democrats believe that Congress needed pass the TAA to assist those hurt by job loss.

 

The TAA program is a federally funded program that provides necessary assistance for workers, with no cost to employers, whose jobs are lost or threatened due to trade-related circumstances as determined by a Department of Labor investigation. The TAA program provides assistance to eligible workers in the form of reemployment services, training, job search, relocation, and support benefits in the form of Trade Readjustment Allowances (TRA) and / or Alternative/Reemployment Trade Adjustment Assistance (ATAA/RTAA) for older workers. The Department of Labor estimates that since 1975 over two million workers have relied on the TAA program to receive benefits to make ends meet and obtain the training necessary to find new jobs.

"Vincent Thomas Bridge aerial view" by United States Coast Guard, PA3 Louis Hebert - U.S. Coast Guard Visual Information Gallery. Licensed under Public Domain via Wikimedia Commons

“Vincent Thomas Bridge aerial view” by United States Coast Guard, PA3 Louis Hebert – U.S. Coast Guard Visual Information Gallery. Licensed under Public Domain via Wikimedia Commons

In response to the TPA decision, the US Conference of Mayors voiced their support for the bill and urged congress to pass the TAA as well. Newly appointed US Conference of Mayors (USCM) President, Baltimore Mayor Stephanie Rawlings-Blake, issued the following statement: “The nation’s mayors now call on Congress to pass reauthorization of Trade Adjustment Assistance that will provide resources to US workers who may need re-training and employment services due to foreign competition. TAA has helped over 2.2 million workers since its inception and is an important safety net for them.”

As trade agreements like the TPP and the Transatlantic Trade & Investment Partnership are negotiated and implemented, it will be interesting to contrast the number of workers who require TAA assistance with overall trade numbers to determine whether fast track negotiating authority is, indeed, worthwhile.

TransLegal is available to answer questions concerning regional and other trade agreements as well as the availability of benefits under the TAA.

Commercial Space Flight and Exploration Opportunities with NASA

Francisco A. Laguna & Wojciech Kornacki

The National Aeronautics and Space Administration (NASA) has opened the gates to commercial space flight, and, as a result, new business opportunities for the private sector are becoming available in the space industry. Before now, in the United States, all space travel was state-controlled, state-owned and taxpayer paid-for. Now, NASA is partnering with private businesses and high-technology companies to take space exploration and travel beyond the limits of any other government space agency. The first $6.8 billion in space travel contracts with Boeing and SpaceX are just a preview of what is yet to come.

The Evolution of NASA Continue reading

Benefits of BRICS New Development Bank for Brazil

Francisco A. Laguna & Annapurna Nandyal

This week, we conclude our 4-part series on the BRICS’ New Development Bank (NDB), focusing on the potential benefits the NDB could offer Brazil, the only BRICS country in the Western Hemisphere.

The closest BRICS to Brazil is South Africa

The closest BRICS to Brazil is South Africa

Brazil is one of the world’s largest growing economies. In comparison to other BRICS, Brazil is seen as soft rising power rising, and it tends to be underrated: the country’s growth rate was just 3% in 2013, while China and India had 8% and 6%, respectively. Notwithstanding, Brazil is hot on the international stage: it held this year’s World Cup; it will soon be the home of the 2016 Olympics; and it hosted the 2014 Sixth Annual BRICS Summit this year. Heads of other South American states participated in the Summit for the first time, and the event turned out to be one of the region’s most significant geopolitical summits in recent history. Continue reading

Benefits of BRICS New Development Bank for India

Francisco A. Laguna & Annapurna Nandyal

 Today, we continue our series on the impact of the BRICS New Development Bank (NDB), focusing on the potential benefits the NDB may provide India as well as a possible focuses the NDB can use to compete with historical institutions such as the World Bank and the IMF.

The 2008 global recession affected most parts of the world, and India was no exception. Apart from challenging economic conditions, there was a widespread criticism of the previous government’s policies which took a toll on the Indian economy. India’s newly elected Modi government, which recently completed its first 100 days, has promised to revive the economy and improve the ease of doing business in the country. As pointed out earlier in this series, it was India that proposed the establishment of a BRICS bank as a way of aligning the growing economies of the five emerging powers with those of the developed nations. India hopes to benefit greatly from the formation of the NDB and play a more prominent role in the global order in the 21st century.

Emblem of India Photo Credit: Zscout370 via Wikimedia Commons

Emblem of India
Photo Credit: Zscout370 via Wikimedia Commons

The NDB is already providing impetus for the BRICS to increase intra-member trade and investment. For instance, the tense relations between India and China have been an open secret despite the fact that they are strategic trade partners in Asia. Recently, trade volumes have lessened; however, after the creation of the NDB, the two countries have vowed to correct the decline. Since BRICS economies can trade in their local currencies instead of dollars, the Indian government has allowed domestic infrastructure companies to borrow yuan-denominated loans from the Chinese government to pay for imports from China. Continued improving relations between these two most populous countries could result in profound, short-term economic benefits.

The NDB is also influencing India’s relationship with Russia. India is the third largest importer of energy, and it may become the largest energy consumer. With instability in Middle East and West Asia, India is reaching out to traditional partners, like Russia, for help. Since 2005, India and Russia have been negotiating a gas project. After the announcement of NDB in July, both countries are actively working toward concluding the agreement. Analysts feel the countries’ increasing common interests could help finalize this much-needed energy deal.

Rupee Notes

Rupee Notes

Another energy-related event may also affect India. In a major shift in the policy, the World Bank has announced that it would restrict funding to new coal projects in developing countries and only fund the poorer nations on a case-by-case basis. As a result, developed countries such as US, United Kingdom and Netherlands have decided to stop funding coal projects. Many new coal plants are being built around the world, and the majority is or will be located in India and China. The new policy obviously impacts India: China can fund its own projects; India cannot. India’s extreme dependence on coal plants for its electricity generation and alternative source of income to fund coal projects must be addressed as quickly as possible. The NDB could play a crucial role by urging India and other developing countries to adopt solar panels and clean energy methods and offer cheaper loans for such power projects, while providing financing for existing coal projects.

Besides improving trade among the member states, the NDB needs to have broad policy framework to make the bank robust. For instance, climate change could have a profound impact on the BRICS. Global warming will have severe effect on developing countries affecting agriculture and tourism. The bank could focus on utilizing its funds on climate projects and educate poorer countries on climate change policy. In fact, BRICS leaders have advised their finance ministers to work out modalities for the bank to include environmental safeguards. This could help the NDB emerge as a bigger player in the future, thereby increasing the BRICS global economic influence.

TransLegal has correspondent offices in each of the BRICS. Contact us with your questions concerning doing business in Brazil, Russia, India, China and / or South Africa.

Can the BRICS New Development Bank Revive Russia?

Francisco A. Laguna & Annapurna Nandyal

The Russian Federation, formerly part of the Union of Soviet Socialist Republics (USSR) is the largest country in the world, sharing its borders with 14 countries spread over diverse geographies. It is the fifth largest economy in the world. In 2013, Russia was among the top three most attractive countries for investors and foreign direct investment, following the US and China, respectively. Russia’s status, however, has changed drastically. In March 2014, pro-Russian forces annexed Crimea, which shocked the international community. Countries like the US, Canada and Australia, as well as the European Union (EU) and international organizations have since imposed a series of sanctions against Russian businesses and individuals. Feeling isolated, there can be no better time for Russia to look for support from the BRICS countries.

Map of Russian Federation

Map of Russian Federation

Russia is unusual among the major economies in the way it relies on energy revenues to drive growth. Oil and natural gas are abundant and account for major exports from Russia to Western Europe countries. After the Crimean crisis, the West has completely banned imports from Russia, which has affected the Russian Ruble to an all- time low. Russia was also expelled from the G8 group of leading industrialized nations. In light of increasing international isolation, the creation of New Development Bank (NDB) is of particular significance for Russia: it opens new avenues for investment opportunities. Continue reading

Creation and Role of the BRICS New Development Bank

Francisco A. Laguna & Annapurna Nandyal

Map of BRICS countries

Map of BRICS countries

In July, Brazil hosted two important events, each significant in its own way: the FIFA World Cup; and the Sixth Annual Summit Meeting of Emerging Economies of Brazil, Russia, India, China and South Africa (BRICS). The members of BRICS meet annually to discuss the world economy, global development and the further strengthening of the BRICS group. Since its inception in 2009, BRICS have called for a greater role in international financial institutions like the World Bank and International Monetary Fund (IMF), as well as transparency in electing the leaders of these institutions. Despite robust economies, BRICS members continue to play a relatively minor role in global finance decisions. In a first step to provide an alternative to “Western-dominated” international financial institutions, the BRICS members announced a proposal to open the New Development Bank (NDB) during their 4th annual summit, held in Delhi, 2012. Continue reading

New Free Trade Zone between the EU and Ukraine

Francisco A. Laguna & Wojciech Kornacki

 On June 27, 2014, the European Union (EU) and Ukraine signed the Deep and Comprehensive Free Trade Area (DCFTA) agreement. This agreement established a brand new free trade zone between the EU and Ukraine. Following the continuing hostilities in Eastern Ukraine, the ratification of this agreement will be put on a fast track in the EU and the Ukrainian parliament. The DCFTA will remove customs, tariffs, quotas, and harmonize Ukrainian regulations with EU regulations. The agreement revolutionizes current trade relations between the EU and Ukraine and is likely to generate hundreds of millions of dollars in revenue and result in economic development in Ukraine.

 The European Union

The Ukrainian Assembly called ‘Verhovna Rada’ or ‘Upper House’ will have to ratify the Deep and Comprehensive Free Trade Area (DCFTA).  The agreement is expected to dramatically increase trade, but on the other hand, it will decrease proceeds from duties and tariffs.   Courtesy of http:// http://en.wikipedia.org

The Ukrainian Assembly called ‘Verhovna Rada’ or ‘Upper House’ will have to ratify the Deep and Comprehensive Free Trade Area (DCFTA). The agreement is expected to dramatically increase trade, but on the other hand, it will decrease proceeds from duties and tariffs. Courtesy of http:// http://en.wikipedia.org

Besides militarily, the EU is important to the Ukraine for obvious economic reasons. It is a supranational organization of 28 countries across the European continent. Its current population stands at over 500,000,000, which places it third behind China and India in terms of the population size. It is a single market with free movement of goods, services, labor, and capital and largely enjoys a common currency. The EU also has numerous Association Agreements with other countries, including Ukraine and Turkey. Its GDP stands at almost $16 trillion (2013), making it the second largest economy, behind the United States. According to its own statistics, the EU’s economy is bigger than that of the United States, and it accounts for 20% of all global exports and imports, exporting more than China and the United States.

Ukraine Continue reading

Sanctions Equal New Business Opportunities

Francisco A. Laguna & Wojciech Kornacki

International consumers and entrepreneurs benefit from free and unimpeded flows of goods, information, and services around the world. This allows access to the latest information to purchase the most competitive products without artificial trade barriers, embargoes, sanctions, additional taxes, duties or outright prohibitions. This also results in lower costs, more competition and innovation. The new international sanctions stemming from the crisis in Ukraine offer new business opportunities because they re-direct the flow of goods, information and services between the US, EU and the Russian Federation to other States. This post discusses the current state of globalization, the international sanctions, and how the changes in the flows of commerce may benefit other countries and businesses.

 Globalization

Recently the European Union signed new international trade agreements with Ukraine, Moldova and Georgia.  These three States have been previously included in the EU’s Eastern Partnership program, as shown on the map here.  The agreements reduce international trade barriers between the EU and the three States, and will re-direct some of the goods banned by the Russian Federation.   Courtesy of http:// http://en.wikipedia.org

Recently the European Union signed new international trade agreements with Ukraine, Moldova and Georgia. These three States have been previously included in the EU’s Eastern Partnership program, as shown on the map here. The agreements reduce international trade barriers between the EU and the three States, and will re-direct some of the goods banned by the Russian Federation. Courtesy of http:// http://en.wikipedia.org

After the end of the Cold War, many new markets emerged allowing for an international trade bonanza. The rise of the Chinese industrial and consumer market economy is the most widely known example. However, at around the same time, critics of globalization argued that globalization was only about outsourcing labor intensive products to developing countries and the so-called “brain drain”.

A recent study conducted by McKinsey and Company market analysts evaluated the actual data and concluded that there was much more to globalization than outsourcing. In its review of the study, Bloomberg pointed out that as the information revolution continues to spread, globalization has led to more knowledge-intensive products than labor-intensive goods. This, in turn, means that while sanctions may disrupt the flow of goods, the flow will not be stopped because most of the States around the world are too dependent on international exports and imports.

 The International Sanctions

 Generally, States or international organizations use economic sanctions against other countries to influence the sanctioned States to change their policies. Some examples involve the international community sanctioning Iran over its support of terrorist organizations, or North Korea since the Korean War, or Cuba since the Cuban Revolution.

During the ongoing crisis in Ukraine, the United States, Canada, Switzerland, Australia, Japan, the EU, and other States, have sought to modify the policies of the Russian Federation concerning the Russian intervention in Crimea and Eastern Ukraine by imposing economic sanctions on the Russian economy. In response, the Russian Federation imposed its own sanctions. The complete list of US sanctions against the Russian Federation is here.

 New Opportunities Stemming from the Sanctions

The newly elected President of Ukraine, Petro Poroshenko.  Here, in June 2014, he is addressing the Council of Europe in Strasbourg, during one of his first international visits following his election.  He has declared that the new EU-Ukraine trade agreement is one of the most important documents since the independence of Ukraine in 1991.   Courtesy of http:// http://en.wikipedia.org

The newly elected President of Ukraine, Petro Poroshenko. Here, in June 2014, he is addressing the Council of Europe in Strasbourg, during one of his first international visits following his election. He has declared that the new EU-Ukraine trade agreement is one of the most important documents since the independence of Ukraine in 1991. Courtesy of http:// http://en.wikipedia.org

The new international sanctions alter the flows of international trade, but do not extinguish them. While, the Russian Federal may ban imports of foods from the European Union, Russians still need to eat. The Russian Federation may threaten to refuse to sell its natural gas to the European Union, but it must find a new purchaser quickly. This creates new business opportunities because some markets may temporarily close their doors while opportunity knocks elsewhere.

Brazil and Argentina seek to increase their food and grain exports to the Russian Federation.   In addition, Russia recently signed a $400 billion natural gas delivery agreement with China, but it will take several years to implement it.

On the other hand, following the ouster of the pro-Russian Ukrainian President Victor Yanukovych, the European Union has signed new trade agreements with Ukraine. Similar trade agreements have been signed between the European Union and Moldova and Georgia. According to the European Commission Press Release, the agreements will boost imports and exports between the European Union and Ukraine, Moldova and Georgia, thus potentially re-directing some of the goods and services, and creating new business and investment opportunities. The agreement with Ukraine is expected to result in an immediate 500 million euros increase in trade. As previously reported in the TransLegal blog, Global Economy Needs More Natural Gas – Opportunities and Risks, the United States is also making preparations to sell more natural gas to the European Union.

Contact TransLegal to discuss how the international sanctions and changing flows of goods, information and services between the US, EU and the Russian Federation may affect your business.

The U.N. Convention on the International Sale of Goods: A New Way of Conducting International Trade

Francisco A. Laguna & Wojciech Kornacki

The U.N. Convention on Contracts for the International Sale of Goods standardizes international purchase laws for international buyers and sellers.  This is a critical breakthrough because, previously, international businessmen often experienced uncertainty as to which regulations were applicable which, in turn, caused unnecessary delays and additional expenditures.  While the Convention focuses strictly on goods, and not services, it offers timely answers to international businessmen who conduct business in countries which become Parties to the Convention.

Shipping Routes of the World  Photo Credit: Grolltech via Wikimedia Commons

Shipping Routes of the World
Photo Credit: Grolltech via Wikimedia Commons

According to the United Nations, thus far 80 States have ratified the Convention including the United States.  In addition, another 18 States have signed it.  States that have signed U.N. Convention on Contracts for the International Sale of Goods have to ratify it to be bound by it.  This means that about 2/3 of all international trade transactions around the world are covered by this Convention.  The primary purpose of the Convention is to assist international buyers and sellers of commodities and raw materials by creating greater predictability and reducing costs of doing business. Continue reading