Posted on February 18, 2021
The year 2020 was by all accounts extremely challenging for the global trade community. While a number of those same challenges remain for 2021, there are also new issues to be aware of. Here are ten areas of concern and relevance to the trade community.
On Jan 20th, 2021 Joe Biden was sworn in as President of the United States. And while his immediate focus is on domestic issues, eventually he will wade into the current trade situation between the U.S. and China. Will the increased tariffs continue, and for how long? Most anticipate that Biden will continue with some of the same policies but will certainly adapt a softer tone, as he is adept at strengthening relationships.
Joe Biden has traditionally been a proponent of free trade, and he is expected to work toward reinstating the U.S. back as a world leader in this area. However, the new administration, especially with a democratic majority Senate in tow, will also insist on workers’ rights and protections for the environment.
The U.S. is also experiencing a decreasing trade relationship with the EU. It will be interesting to see how Biden moves forward; his options are to work to improve the trading relationship or to maintain the pressure. Eventually a more predictable multilateral approach between the U.S. and Europe will most likely take hold, but it won’t be a high priority for anyone until domestic issues related to Covid-19 are solved.
Increased tension with trading partners is not an issue that is unique to the U.S. Currently several other countries are working through disagreements.
China and Australia continue to escalate restrictions. The rift between the two countries deepened last year when Australia supported a call for an inquiry into China’s handling of Covid-19. China took several steps, restricting Australian imports via new tariffs and even bans. The items affected by these restrictions are barley, wine, beef, cotton, timber, lobster, and coal. One item that has not been affected has been Australia’s exports of iron ore to China. Australia has asked the WTO to mediate the dispute regarding barley, on which China levied 80.5% additional duties accusing Australia of dumping and using subsidies.
How will Brexit affect the day to day trade operations between the UK and the EU?
While there will be no tariffs or quotas on goods moving between the UK and the EU, importers and exports can expect increased delays and increased costs for these transactions, which until this year would have been considered “domestic”.
There will be increased volume as customs formalities that were not previously needed for imports and exports between the UK are now required. This could put a strain on systems and create bottlenecks in several areas. There will also be additional checks and inspections as a large number of shipments are now considered international shipments.
Importers and exporters can also expect additional costs related to their shipments. While there will not be any additional duty costs, there will be costs associated with the filings of import and export declarations, and broker fees. Additionally, businesses will face new potential costs due to storage, demurrage, or delayed delivery, especially as all parties get used to the new process.
Entry summary volume decreased by 8% from 2019 to 2020, primarily attributed to Covid-19. The largest decrease took place during Q3, 2020 (20%).
In 2020, CBP enforced 45 new AD/CVD orders, which represented a 7.3 increase over the previous year. At the end of 2020 a total of 540 AD/CVD orders were in effect.
CBP processed more than 100,000 Section 232 exclusions and reviewed 1,700 Section 301 exclusions.
CBP assessed $500 million in Section 232 aluminum duties, $1.3 billion in in Section 232 steel duties, and $35.6 billion in Section 301 duties during FY2020.
Collected from Audits
Collected from LD
Despite entry volume going down, the number of audits went up almost 20% in 2020.
Seizures increase due to Covid-19 as well, including 177,356 unapproved or substandard test kits, over 12 million counterfeit masks and prohibited chloroquine tablets.
New year, new trade deals. 2021 will usher in a new era of trade among some major countries. With the U.K. has left the European Union at the end of 2020 and the United States changing presidential administrations, we should expect some new trade deals to be sparked up in 2021.
With the U.K. leaving the European union, they also left behind trade deals for almost 40 countries. The U.K was able to reach about 30 post-Brexit trade deals that mirror those from the European Union, that include many bigger trade partners such as Switzerland, Iceland and Norway, and Singapore. The U.K. is in the process of starting a new deal with Japan that will remove most of Japan’s tariffs on U.K. goods, and the U.K. will remove tariffs from Japanese cars by 2026. The U.K. is also in talks with other major trade partners such as the U.S., Australia, and the European Union.
Another free trade agreement that was ratified at the end of 2020 was the PACER Plus (Pacific Agreement on Closer Economic Relations Plus). The agreement includes Australia, New Zealand, and several Pacific Island countries. The agreement will build on the imports of food, metal, and machinery, and lock in a tariff rate of “0” for goods from the included Pacific Island countries to Australia and New Zealand with flexible rules of origin.
On January 1, 2021 there was a new issue of the HTSUS released. The release includes updated HTS codes, revisions of duties, and unites of measure.
Some notable changes include additions, and revisions of antiviral immunizations and anti-bodies, change in duty for several household items including but not limited to lighters, glassware, and propellants. There is also the expiration of almost 5,000 existing HTSUS codes. Items that would fall under those codes are either given a new HTS or will be included in another HTS of similar items.
Perhaps one of the biggest changes will be to the unit of measure. Some of the simplicity of unit of measure has been replaced with more statistically driven measurement. A notable one would be for wool products. Instead of the unit of measure being “NO” they have now changed it to either “CY KG” or just “KG”. CY KG is the clean yield kilogram. The clean yield kilogram is the weight of the product, clean of all foreign matter. Importers should also note that items imported with the UOM “X” have been updated. The new UOM could include NO, KG, or a combination of these, and other measurements.
It is important that anyone who intends to import anything in the United States either consults an expert or has the knowledge to understand the new changes for 2021.
Although the USMCA has been in effect since July 2020, it still holds significant impacts for 2021, and for the future. The trade agreement is still in its early stages, only being enforced for 6 months by the start of 2021.
One of the most significant changes has been to the automotive industry, in order to qualify as an originating product, the regional value content or “RVC” needs to be 75% for passenger vehicles, and at least 70% for heavy trucks. This is a significant increase over the 62.5% that was required by NAFTA. There is also a gradual pay increase, that tops out at $16 per hour for automotive employees. That means that if you are an exporter or importer of vehicles, in order to qualify for USMCA the regional value content needs to be at least 75% and produced by workers making no less than $16/Hour.
USMCA also has significant agriculture changes, mainly related to Canada’s dairy regulations. Canada has removed certain classes of milk, that are lower in price and oversell certain milk products that are produced in the United States. It has also changed the amount of dairy the United States can import into Canada, allowing the United States to access a greater portion of Canada’s multibillion-dollar dairy market.
There is a plethora of environmental impacts that come with the trade and transportation and of goods.
The World Trade Organization refers to different “effects” that trade has on the environment. They label these as the scale effect, composition effect, and technique effect.
The United States has been working to do their part by removing restrictions on environmental goods used to help with the lowering of greenhouse emissions. These goods can be items such as solar panels, wind turbines, soot removers and wet scrubbers. The United States also exports billions of dollars’ worth of environmental goods annually. This is done in part with the environmental goods agreement that includes 46 World Trade Organization members to reduce greenhouse gasses globally. The 46 countries have reduced tariffs on environmental items.
Furthermore, sustainability in logistics has become a focus for many companies, and the public in general. The goal of lowering carbon emissions is being incorporated into corporate strategies. One of the first steps for a company who wants to get involved with green initiatives would be to conduct a logistics sustainability study. This study will measure the carbon emissions for transportation activities, notably scoping 3 emissions involving upstream and downstream transportation, which accounts for 90% of emissions.
2020 saw a flurry of export regulatory changes involving new sanctions for countries like Iran and Russia and changes to the status of Hong Kong.
On June 14, 2020, Donald Trump signed into effect the Hong Kong Autonomy Act of 2020, stating that the United States will no longer treat Hong Kong as a sovereign state. What does this mean for importers? Goods that are produced in Hong Kong will have to be marked as country of origin "China."
Automated Export System (AES) filing requirements were strengthened for exports, reexports, and transfers (in-country) for military end-use or military end-users in China, Russia, or Venezuela. Traditionally exports that are No License Required (NLR) and are under $2,500 USD have not required Electronic Export Information (EEI) to be submitted via AES. Now, all exports from the U.S. to China, Russia, or Venezuela require an EEI submission regardless of value, so long as the items to be exported are identifiable on the Commerce Control List (CCL) and aren’t classified as EAR99.
It remains to be seen what actions will be taken by President Biden regarding sanctions. Will he alleviate some or impose others? It will be important to monitor how things move forward with specific countries (Iran, Russia, Venezuela) and specific companies (Huawei).
It will also be pertinent to monitor how the U.S. will handle exports of “emerging and foundational technologies”.The Export Control Reform Act of 2018 (ECRA) authorized the Commerce Department to adopt new regulations for these technologies. It remains to be seen how the Biden administration will move forward. These technologies include biotechnology, artificial intelligence, PNT technology, microprocessor technology, quantum computing, advanced computing, data analytics, additive manufacturing, robotics, advanced materials, and advanced technologies.
Focused Assessments were up about 20% in 2020. Tariff increases due to Sections 301 and 232 have resulted in importers facings increased risks. Allyn offers an efficient way for importers to mitigate those risks.
Allyn’s proprietary GTM software (CIMS™) offers industry-leading solutions that facilitate maximized compliance and efficiency. One key solution is the Entry Audit Module, which offers an electronic comprehensive audit of all customs entries. 100% entry audit offers a way to increase compliance rates and greatly reduce risk. This industry best practice ensures the correct entry of all imports and promotes increased visibility and access to entry data and documents. The available documents and data improve operational capabilities and allow for trade data analysis on a strategic level. Additionally, scorecards and dashboards are available for measuring broker and importer performance.
From a compliance best practice standpoint, there is simply no better way to ensure the correct declaration of all entries. From an added value standpoint, the additional benefits provided by the recordkeeping and reporting modules help ensure complete compliance.
Contributors: George Ciaffone and Matthew Dreckman
Incorporated in the State of Florida in 1992, Allyn International has 6 licensed customs brokers on staff. Our experts are well versed in current trade issues and all facets of import and export compliance. We help our customers improve compliance, streamline operations, minimize shipment delays, avoid penalties and fines, and minimize costs. If you have any questions or if you would like any additional information on any of the above matters please contact Allyn at firstname.lastname@example.org