Hundreds of AAEI industry members from around the U.S. and abroad gathered in Baltimore from June 6th-8th to share ideas and listen to panelists from the private and government sectors discuss a range of topics focused on recent regulations, customs programs, emerging technologies, and other challenges facing the trade community in the U.S. and those whom they do business with abroad.
One recurring theme in multiple panels was President Trump’s controversial tariffs on steel and aluminum and the effects of expected retaliation by affected nations. Another common topic was export regulations and sanctions on foreign entities doing business with the U.S. Keynote addresses were delivered each day by Rich Ashooh, Assistant Secretary for Export Administration, and Kevin McAleenan, Commissioner of U.S. Customs and Border Protection.
U.S. 232 Tariffs and Retaliation
Day one started with a session on “New Trade Legislation from Around the World”. Panelists representing trade interests with Canada, Brazil, and other parts of Europe and Asia took turns mocking President Trump’s designation of certain products, now subject to U.S. tariffs, as “national security threats” under Section 232 of the Trade Expansion Act. The panelists, mostly trade attorneys, explained the expected harm to those countries and why retaliatory tariffs needed to be enacted against the U.S.
Targeting Republicans’ Constituencies
The attorney discussing Canadian interests was more direct in stating that Canadian retaliatory tariffs would target products in U.S. states whose Representatives would pressure President Trump to rethink his position. The implication was mostly regarding agricultural products in rural states. In a separate panel on Friday, David Salmonsen, a representative of the U.S. Farm Bureau Federation and, Bill Reinsch, a trade expert from the Center on Strategic and International Studies (CSIS), stated they expected tariffs to go into effect specifically targeting the constituencies of Senate Majority Leader, Mitch McConnell (Kentucky bourbon), and House Speaker, Paul Ryan (Wisconsin dairy products, Harley Davidson products from Milwaukee).
Export Control – CFIUS
One panel discussed a series of recent cases pertaining to the Committee on Foreign Investment in the U.S. (CFIUS) regulations and what industry needs to be prepared for in dealing with foreign entities. In recent years, under both the Obama and Trump Administrations, there has been increased scrutiny by the CFIUS regarding acquisitions of U.S. assets by foreign entities, particularly China. The thresholds for potential foreign ownership have dropped below 50%. A broader variety of asset types, beyond national security and defense technologies, have been deemed critical to protect, such as food, telecommunications, and infrastructure such as bridges and ports.
Because of the globalization of business transactions, it has been challenging for the U.S. government agencies that comprise the CFIUS to review the large volume of potentially interesting cases. New legislation called the Foreign Investment Risk Review Modernization Act of 2017 (FIRRMA) is currently in U.S. Congress to help speed up the notification process, help block Chinese acquisition of land adjacent to critical U.S. defense and intelligence facilities, as well as Chinese acquisition of small Silicon Valley companies producing technologies such as artificial intelligence.
Department of Commerce, Export Control
The Thursday lunch keynote speaker, Richard Ashooh, Assistant Secretary for Export Administration at the Department of Commerce, discussed his Office’s challenge in regulating export control. In years past, when a smaller number of large defense technology producers and integrators were making the vast majority of the critical technology that needed to be protected, it was easier for the government to have oversight and regulate them. Today, with the emergence of so many small technology companies making innovative technologies such as drones, artificial intelligence, and new software, this process is much more difficult.
A panel on Friday discussed the challenges businesses face in complying with the increased level of sanctions placed on their foreign transactions; with Iran, Venezuala, Russia, and others. Particularly challenging, however, have been those sanctions put in place in April of 2018 against a group of individual Russian oligarchs. While self-monitoring transactions with sanctioned foreign businesses is difficult in itself, tracking different shell companies that may or may not be owned by Russian oligarchs is even more challenging. Even U.S. companies striving to play by the rules are questioning exactly what lengths they are obligated to go, to identify whether an asset being bought or sold may be linked back to a sanctioned individual in a complex web of an international business environment.
The E-Commerce panel featured Cindy Allen from FedEx, Amy Magnus from AN Deringer, Susie Hoeger from Abbott Labs, and Dave Dolan from U.S. CBP. CT Strategies has covered many of the challenges associated with E-Commerce, though these panelists, representing a variety of interests in the e-commerce process- carrier, broker, manufacturer, and regulator- shared interesting insights.
Dolan discussed how CBP was looking to coordinate with the World Customs Organization (WCO) on their recently released framework of standards for e-commerce. The U.S. is seeking to have more input when the refined framework is scheduled to be released later this summer. Because the U.S. has a higher de minimis ($800) and a much higher volume of small packages below that threshold for requiring duty and data submission, CBP’s e-commerce challenges are magnified.
Ms. Magnus criticized the extent of the de minimis increase in February 2016 with the enactment of the Trade Facilitation and Trade Enforcement Act. She stated that an increase to $500 would’ve been more in line with inflation than $800. She also critiqued CBP for not being prepared, as the increase had been in discussion between lobbyists and Congress for several years.
During the Friday lunch keynote, U.S. CBP Commissioner McAleenan discussed e-commerce as the number one challenge facing CBP’s trade mission. Increases in small packages shipping to the U.S. has drastically increased in recent years; from 2016 to 2017 alone, the increase in small packages crossing the U.S. border went from 1.2 million per day to 1.7 million per day. These small packages increase risk for shipment of dangerous narcotics, such as fentanyl, counterfeit consumer goods, and health and safety hazards, such as unregulated pharmaceuticals.
CBP has created a Small Business and E-Commerce Branch within its Office of Trade. Initiatives in this area for CBP include: 1) Legal and regulatory enhancements, such as collecting more data on small shipments; 2) Adapting operations and staffing- as traditionally low volume, low-staffed ports are being overwhelmed with small packages amidst a nationwide Officer staffing shortage; 3) Creating incentives for businesses involved in e-commerce to cooperate with CBP- such as a trusted trader program for e-commerce; 4) Engage with e-commerce internationally- through the public and private sector abroad.
Recently, there has been expanded engagement with China and other countries by the U.S. Postal Service and CBP on collecting electronic advance data for international mail shipments prior to their arrival in the U.S. Previously, there were no advance data requirements for international mail. As a result, fentanyl seizures from China have increased significantly.
A number of other excellent panels were held over the course of the two days. These included topics such as Single Window for Exports; Authorized Economic Operator (AEO) discussing CTPAT program change; Recent and Developing Free Trade Agreements Around the World; the Developing Role of Partner Government Agencies (PGAs) to U.S. Customs; BREXIT Challenges, Trade Facilitation Agreement (TFA) Implementation Around the World; European Union Customs Codes; and perhaps the biggest crowd pleaser of all, Drawback!
The AAEI Expo provides a great opportunity for trade community members from the U.S. and abroad to discuss important new and ongoing issues with each other as well as a small number of Government representatives. As the United States trade environment navigates uncertain times, it is essential to have events like this where industry members can speak freely about the problems and potential solutions to keeping the U.S. a prosperous, free, and appropriately regulated economy.