U.S. Aims to Simplify Foreign Trade Zones
In February, the Department of Commerce announced a major regulatory overhaul to the Foreign Trade Zone (FTZ) in order to simplify processes and paperwork. A FTZ is a restricted-access physical site operated under supervision from U.S. Customs and Border Protection where a company can temporarily import goods for storage, exhibition, assembly and/or processing without paying duties. Duties are owed if the goods move outside the FTZ and enter the United States for domestic consumption; duties are avoided if foreign merchandise is re-exported without formally entering the United States.
Based on U.S. President Obama’s desire to make it easier to work with government offices, these changes aim to provide a streamlined and more effective process for manufacturers and exporters who want to use FTZ’s to expedite decision-making and reduce paperwork requirements.
Mexico Customs Launches Electronic Trade Portal, Ventanilla Unica
Mexico Customs launched phase one of its single window project (Mexico Digital Window or Ventanilla Unica) on June 1. Considered the most important modernization of Mexican import and export processes in recent history, this trade portal aims to simplify trade flows by allowing the submission of all import and export information in a single file to one agency in order to fulfill compliance requirements for customs and other government agencies.
Officially launched on June 1, the trade portal acts as a single point of contact for the exchange of trade-related documents such as certificates of origin and permits. The new system will reduce paper use, curtail administration and customs inspection times, and simplify access to information for reporting purposes.
C-TPAT Costs and Savings for Corporates
The U.S. Customs and Border Protection (CBP) surveyed more than 1,400 importers, carriers, service providers and foreign manufacturers that participate in the U.S. supply chain security program, Customs-Trade Partnership Against Terrorism (C-TPAT). The survey “2011 C-TPAT Costs & Savings Survey", aimed to quantify the costs and savings experiences of the program.
Key findings include:
In general, the costs associated with being a C-TPAT member are not quantifiably offset by savings. CBP noted that most members view the program as a best practice for supply chain security approaches as it provides improvements in security practices and less exposure to legal and financial risks. CBP also believes that the program is a crucial part of supply chain security and that membership allows for enhanced security methodologies, feedback, and improvement recommendations.
Brazil to Amend Automotive Trade Pact with Mexico
Brazil announced plans to terminate or at least change its Economic Complimentary Automobile Agreement (ACE 55) with Mexico due to its automobile trade deficit ($1.5 billion) with Mexico. The decade-old agreement negotiated between Mexico and Mercosur (Argentina, Brazil, Paraguay and Uruguay) was established to support the automotive sector through gradual deregulation and tariff reduction for vehicles and automotive parts. Initially, Brazil ran an estimated $10 billion automotive surplus with Mexico. Over the past few years, Brazil has been running an estimated $1.7 billion deficit. Brazilian cars have become more expensive due to increased taxes, strength of Real currency, and lower economies of scale in manufacturing.
In March, Mexico agreed to limit the value of its automotive exports to Brazil to $1.45 billion in 2012, with a gradual increase to $1.64 billion in 2014. Brazilian President Dilma Rousseff and Mexican President Felipe Calderon have agreed to set up a commission to negotiate changes to the pact. Following rules outlined in the 2002 accord, any country that wants to end the trade agreement must wait 14 months before it can impose the higher tax. Mexico’s agreement to renegotiate has caused Argentina to demand a similar agreement amendment.
Mexico accounts for 14% of Brazil’s auto imports. The Mexico agreement has a 35% content requirement while the Mercosur agreement between Brazil and Paraguay, Uruguay, and Argentina has a 45% content requirement, putting them at a disadvantage. In a worse-case scenario, if the agreement ends, Mexican cars (like the Fusion) sold in Brazil face a 35% import tax and an "industrial products" excise tax (IPI) of up to 41%.
Argentina Import Restrictions Trigger Backlash
Argentina’s January 2012 announcement requiring the preregistration, review and approval of each import transaction triggered a backlash among trading partners. The new process went into effect on February 1, and has caused long delays due to paralyzed port activities that have resulted in huge costs to industry. Some companies have reported waiting up to six months for imports or receiving import denials with no justification. In response, the European Union has referred the matter to the World Trade Organization.
EU and U.S. Supply Chain Security Programs Recognized
On May 4, the European Union and United States officially signed their agreement to recognize each other’s supply chain security programs (the EU’s Authorized Economic Operator and the U.S. Customs-Trade Partnership Against Terrorism). Starting on July 1, customs authorities in the EU and United States will treat members of the other entity’s trade programs as they would their own program members. An estimated 15,000 companies will benefit from streamlined and simplified customs processes when entering and/ or exiting the EU and United States.
China Renminbi is 3rd Most Traded Currency
According to the Society for Worldwide Interbank Financial Telecommunication (SWIFT), China’s renminbi is the third biggest currency by value for the global issuance of Letter of Credits. With a market share of 4%, the renminibi has quickly become a major global currency behind the U.S. dollar and euro.
Singapore Extends Temporary Import Period
Singapore Customs issued Circular 03/2012 on March 20, announcing a revision to the Temporary Import (TI) Scheme. As of April 1, the TI relief period of three (3) months has been extended to six (6) months. Singapore’s TI scheme allows goods, except for liquor and tobacco products, to be imported without payment of duty and/or tax if they are to be re-exported within a certain timeframe from the date of importation. Refer to Circular’s Annex A for a list of eligible items.