Major Changes from NAFTA to USMCA that affect the Apparel, Footwear and Gear Sector
The BC Apparel and Gear Association is pleased to host a free webinar with Carson International’s Vice President, Dave Pentland. He will walk us through the major changes from NAFTA to USMCA that affect the Apparel, Footwear and Gear Sector.
Dave has worked in the Customs and Logistics Industry for the past 40 years, much of this involved with large, medium and smaller apparel, footwear, action sports companies. With experience in the airline industry, trucking industry, freight forwarding as well as Canadian and American Customs Brokerage, He is a Licensed Canadian Customs Broker and an IATA Certified Freight Forwarder. Dave has guest lectured at a number of post-secondary institutions and hosted many Trade Association Seminars on a wide array of Customs, Logistics and International Trade topics.
Carriers will keep capacity tight to protect their bottom line, meaning shippers will need to get used to paying higher ocean freight rates, according to DHL Global Forwarding’s Dominique von Orelli.
The global head of ocean freight for the Germany-based forwarder says he has never seen carriers as united as they are today in their strategy of managing capacity to match demand.
To manage the steep drop in volume as major markets locked down in the battle against COVID-19, carriers have been blanking significant numbers of sailings. Sea-Intelligence Maritime Consulting data show carriers have announced 74 blank sailings from Asia to North America for April and May. Asia-Europe trades will cancel 75 sailings through September in a bid to match capacity with weak anticipated volume levels.
The amount of capacity withdrawn from service in the third quarter means shippers would have to improve their long-term planning over the next few months, von Orelli said.
“What’s clearly been shown in the last two months is that carriers are really agile in taking out capacity, and extremely quick at changing schedules,” says von Orelli. “Carriers will do whatever they have to in order to keep the capacity tight and to protect their bottom line, so service will not be the number one criteria for the carriers at the moment.”
Tight industry-wide management of capacity has enabled carriers to not only prevent a rate slide, but to actually push rates higher — significantly, on some east-west trades. The Shanghai Containerized Freight Index (SCFI) this week shows Asia-US West Coast rates at $2,692 per FEU, up 94 percent year over year, while Asia-North Europe rates are 18 percent higher at $890 per TEU.
Von Orelli said he was “cautiously optimistic” for the second half of the year and expected the forwarder’s volume to grow at levels slightly ahead of the market, but there was certainly no surge in demand so far on the Asia-Europe trade.
“There is some replenishment going on, but we don’t see a big rush from European importers to fill up stock. Everyone seems to be ramping up in slow motion,” he said. “I don’t think there is a big appetite to consume, and importers are cautious not to buy what they cannot sell.”
(Source: JOC)
If you have any questions about ocean rates, please get in touch:
U.S. Customs and Border Protection published an Interim Final Rule to implement Rules of Origin provisions for the new United States-Mexico-Canada Agreement that came into force on July 1.
The interim rule creates Part 182 to the customs regulations for the new trade deal and amends the NAFTA regulations under 19 CFR Part 181 so they no longer apply to entries on or after July 1.
The majority of the regulations included in the interim final rule are found in Appendix A to 19 CFR Part 182, which reproduces the Rules of Origin provisions of the Uniform Regulations agreed upon by the U.S., Mexico, and Canada and released last month.
This appendix contains the uniform regulations for the interpretation, application, and administration of the Rules of Origin of Chapter 4 of USMCA and the Rules of Origin of Chapter 6 of USMCA related to textiles and apparel goods.
Currently, most of the sections of 19 CFR Part 182 include a title only and are reserved for future regulatory text.
CBP says it expects to publish additional regulations over the course of the next year and be finalized by July 1, 2021.
With the United States adding 40,000 new cases of COVID-19 each day, the European Union is leaving the U.S. off a list of 15 countries whose citizens soon will be allowed to visit its 27 member nations. In Canada, there seems to be no great desire to quickly reverse the unprecedented border restrictions that were imposed in March.
The question for Canadians is how much longer the virtual wall will have to be in place — and how much it might hurt to keep it there.
“My guess is it’s going to have to stay closed for more than 12 months,” Colin Furness, an epidemiologist at the University of Toronto, told CBC News this week. “It’s hard to imagine what’s going to happen in the United States until we have a vaccine or until the population has been sufficiently infected that you have herd immunity.”
When Leger Marketing asked Canadians in May when they thought Canada should reopen its border with the United States, 47 per cent of respondents said “not before the end of the year.” With more than 2.6 million cases now in the United States, it’s unlikely Canadians’ enthusiasm for welcoming our American neighbours has increased since then.
An exemption for “essential” travel significantly reduced the disruption to the Canadian economy. “Canadians continue to get the food, medicine, commercial goods, and other essential supplies they need to live and work, and Canadian exporters for the most part have not suffered disruption,” said Goldy Hyder, president and CEO of the Business Council of Canada.
But the decline in traffic across the border has still been precipitous. According to data obtained by Postmedia, between June 15 and June 21 just 170,998 people entered Canada at a land crossing with the United States — and 104,247 of those people were truck drivers. Over the same period in 2019, more than 1.2 million people traveled through a land crossing from the U.S. into Canada.
Based on those numbers, the pandemic is going to leave a deep mark on the Canadian tourism industry and on border towns like Windsor and Sarnia, Ontario. Hyder and the Business Council have called on the federal government to extend its wage subsidy for the tourism sector through the rest of the year.
But it can’t be assumed that the exemption for essential business travel and widespread use of video conferencing are preventing all damage to the economic relationships between Canadians and Americans.
“People say, okay, well, the trucks are going, so the supply chains are working. But the supply chains reflect agreements and contracts that were made in the past with a lot of face-to-face interaction,” said Bill Anderson, director of the Cross-Border Institute in Windsor. “If those agreements aren’t being made now, the question is — what’s the supply chain going to look like six months to a year from now?”
But all complications associated with the current restrictions must be balanced against the significant health risks of reopening the border — and the economic disruption that would occur if there is a resurgence of COVID-19 in Canada.
The border restrictions put in place in March have been extended three times and are now set to expire on July 21 — officially, at least. Even if the deal is only extended for another month, it’s likely time to accept that a largely closed border between Canada and the United States is, like the disease itself, going to be our reality for the foreseeable future — and to plan accordingly.
With NAFTA soon to be history after 26.5 years on the books, USTR is publishing a Federal Register notice today explaining its proposed procedure for groups or individuals to file labour complaints under the new U.S.-Mexico-Canada Agreement, which takes effect Wednesday. Interested parties have until Aug. 15 to comment.
The notice details the steps for an interested party to file a “rapid response petition” asking for an independent panel to investigate allegations of labour rights violations — such as denying the ability to engage in collective bargaining — at individual facilities in Mexico. That new mechanism was included at the insistence of House Democrats and carries the potential for penalties and for blocking imports from the plants.
USMCA allows U.S. and Mexican observers to accompany the panel on any visit it makes to the facility to verify claims in the petition. And, “if Mexico refuses an on-site verification, the panel can take this into account in making its determination” of whether a violation has occurred, the law firm Hogan Lovells wrote in a brief on the enforcement tool.
In theory, a Mexican group or individual can also file a complaint against a “covered facility” in the United States. But it can only take that step against a U.S. facility that is subject to a National Labor Relations Board enforced order, which is a much smaller universe of companies than can be targeted in Mexico.
Updated Rules for Automakers
The Labor Department on Wednesday will also publish a Federal Register notice specifying how it plans to calculate whether a vehicle is meeting USMCA’s “labour value content” provision, which requires 40 percent to 45 percent of the content of a vehicle to be made by workers earning at least $16 per hour.
The interim final rule takes effect right away, but interested parties will have 60 days to outline any changes they would like to see. Automakers must meet the labor value content provision, as well as other tough new “rules of origin” requirements, in order for trucks made in Mexico and Canada to qualify for U.S. duty-free treatment.
The Aluminum Association published an open letterto U.S. Trade Representative Robert Lighthizer on Thursday seeking to convince the Trump Administration to continue excepting North American producers from Section 232 aluminum tariffs.
The letter, which was signed by more than a dozen CEOs and other executive officers from companies all along the aluminum value chain, praises the administration for exempting Canada and Mexico from Section 232 aluminum tariffs early on. The letter notes that fully 97 percent of the jobs held in the United States in the aluminum industry are in mid- and downstream portions of the value chain, which are highly reliant upon imported aluminum.
“We strongly oppose any trade actions involving Canadian aluminum.”
Per the Association, the motivation for the letter was countering claims of a surge in imports in recent months. The Association notes that, according to the government’s own data, imports from suppliers in adjacent countries this year are generally in line with imports in recent years.
“Today’s letter shows an industry united in support of the continued free flow of metal within North America,” opined the Aluminum Association’s president and CEO Tom Dobbins. “After all of the hard work that has gone into making the USMCA a reality, it would be a shame to move backward by reapplying tariffs or quotas on aluminum. We trust that the administration will heed the advice of representatives from the impacted industry who recognize that this action would only hurt U.S. aluminum companies and workers.”
The Trump administration does not appear likely to grant tariff exclusions for imports of goods needed to fight the COVID-19 pandemic, according to remarks by U.S. Trade Representative Robert Lighthizer at recent congressional hearings.
House Ways and Means Committee Ranking Member Kevin Brady, R-Texas, said Congress and the White House should work together to create incentives for companies to develop and manufacture such products in the U.S. but that in the meantime duties for medical products should be suspended if there is no domestic opposition. Senate Finance Committee Chairman Charles Grassley, R-Iowa, said there should not be “any unnecessary taxes on goods key to the [economic] recovery or in fighting the pandemic” and that “we’ve got to find a smart solution that accepts the reality that trade is fundamental to our survival and prosperity.”
But Lighthizer said he is “not in favor of reducing tariffs on the things we need” to fight the pandemic but instead would “be far more in favor of increasing tariffs on the things that we need as part of an overall plan to make sure that the next time we have domestic manufacturing capability in these areas.” This effort is “going to require a combination of a lot of things,” he said, “but also I think it requires tariffs.” As a result, he rejected the idea of waiving MFN tariffs on such goods, which he indicated are helping “U.S. companies who are now getting into this business.” He also said that the administration will consider extending exclusions from the China Section 301 tariffs for medical products “depending on what the need is” but will “probably not” grant extensions that would not have been granted otherwise just because the affected goods are needed to fight the pandemic. Companies have had “a year or two years to make a change” in sourcing these products, Lighthizer said, and therefore “should have made the change.”
The House is expected to vote today on a rule that effectively kills chances of a resolution to withdraw from the WTO that was introduced by Reps. Peter DeFazio (D-Ore.) and Frank Pallone (D-N.J.).
The House Rules Committee voted 9-4 Wednesday evening to approve a rule for floor action on a number of pending measures, including the WTO provision.
The rule, which is not open to amendment, would waive Section 125(c) of 1994 Uruguay Round Agreements Act for the remainder of the current Congress. That effectively strips the expedited procedures guaranteeing any withdrawal resolution will reach the floor. Those procedures include a requirement that any resolution be automatically discharged from the House Ways and Means Committee after 45 days.
If approved, the rule could also kill any possibility of the United States withdrawing from the WTO until at least 2025, since both the House and the Senate would have to approve such a measure for withdrawal to occur. In addition, the URAA only provides the opportunity for a vote on withdrawal once every five years.
The WTO could in a few days hand down a ruling on Trump’s China tariffs that’ll either deepen Trump’s belief that the WTO has an anti-American bias or legitimize the president’s repeated use of unilateral trade actions to resolve disputes.
The case comes down to whether Trump’s use of Section 301 of the Trade Act of 1974 to slap tariffs on China was a violation of international trade rules.
Ruling against the U.S. — as some trade experts speculate will happen — would give Sen. Josh Hawley (R-Mo.) a fresh talking point to push his withdrawal resolution, which still appears headed for a Senate floor in late July. Republicans have become increasingly skeptical of the WTO, as the Trump administration has repeatedly said the Geneva-based organization has failed the U.S. and international trading system.
A ruling upholding Trump’s tariffs would send the message that the use of unilateral trade actions is an acceptable way to solve disputes, rather than using the WTO’s dispute settlement system. China has argued that the U.S. violated WTO dispute settlement procedures by acting unilaterally.
The United States is planning to re-impose tariffs on aluminum imports from Canada, Bloomberg reported late on Monday, citing people familiar with the matter.
If Canada declines to impose export restrictions, the United States will announce on Friday the re-imposition of 10 per cent tariffs on aluminum from the country, the report said.
The tariffs would then be implemented by July 1, the report said, which is also when the new CUSMA agreement will take effect. Some industries, including automakers, had been asking for a delayed implementation of the agreement due to the difficulties they are facing amid the COVID-19 pandemic.
Earlier in the day, the U.S. Supreme Court turned away a challenge to President Donald Trump’s tariffs on imported steel brought by an industry group that had argued that a key part of the law under which he imposed the duties violates the U.S. Constitution.
Trump signed a proclamation this year increasing tariffs on derivative steel products by an additional 25 per cent and on derivative aluminum products by an additional 10 per cent, from which countries including Canada and Mexico were exempted.
Global Affairs Canada has issued notices to importers and exporters setting out the administration of Tariff Preferential Levels (TPLs) under CUSMA. TPLs are the preferential tariff treatment granted to specified quantities of certain yarns, fabrics, apparel, and textile articles that do not meet the CUSMA rules of origin.
For Exports from Canada:
Serial No. 995: Wool and Cotton or Man-Made Fibre Apparel Goods for Export to the United States under CUSMA
Serial No. 996: Cotton or Man-Made Fibre Fabric and Made-Up Goods for Export to the United States under CUSMA
Serial No. 997: Cotton or Man-Made Fibre Spun Yarn for Export to the United States under CUSMA
Serial No. 998: Wool and Cotton or Man-Made Fibre Apparel Goods, Cotton or Man-Made Fibre Fabrics and Made-Up Goods, and Cotton or Man-Made Fibre Spun Yarn to Mexico under CUSMA
For Imports to Canada:
Serial No. 1000: Wool and Cotton or Man-Made Fibre Apparel Goods, Cotton or Man-Made Fibre Fabrics and Made-Up Goods, and Cotton or Man-Made Fibre Spun Yarn from the United States and Mexico under CUSMA
The TPL year normally runs from January 1 to December 31 inclusive, but with CUSMA entering into force mid-year, it will cover the period from July 1 to December 31, 2020.
