Trade Issues 2009: A Roundup
With President Barack Obama's administration now in place, there will be inevitable changes to U.S. trade policy. While we don't know the exact scope of these changes, it's clear the U.S. trade agenda will increasingly focus on the growing responsibilities of all players in the global supply chain. Longstanding concerns such as trade enforcement, food and product safety, labor rights, environmental issues, transfer pricing, and cargo security are expected to see close scrutiny. Importers, exporters, customs brokers, retailers, transportation and logistics companies--everyone involved in international trade--should get ready now by paying particular attention to the following issues:
While U.S. import duties are, on average, relatively low, there are a number of exceptions, especially for consumer goods like clothes and shoes. Many manufacturers have therefore moved operations to countries that have preferential access to the U.S. through free trade agreements or programs like the U.S. Generalized System of Preferences (GSP), a program designed to encourage economic growth in developing countries. Others, however, seek to obtain such treatment by falsely reporting the country of origin or transshipping goods through other ports. U.S. Customs and Border Protection has issued statements declaring it plans to keep a sharper eye on such activity and increase its scrutiny of duty preference claims.
The Consumer Product Safety Improvement Act of 2008, which Congress passed in response to the uproar over problems with imports from China, is only the beginning. Dozens of new regulations to implement this sweeping new law, affecting all types of consumer goods, are slated to be proposed, finalized and enforced in 2009. The continued presence of this issue in the headlines will keep the heat on federal agencies to show improvement.
Lawmakers were unable to pass a food safety bill last year, but with recent concern about tainted dairy items, produce and other goods the issue is likely to be revisited sooner than later. If anything, food safety is an even more fundamental issue to the American public, and federal regulators will be under pressure to strengthen safeguards regardless of what may come down from Capitol Hill.
Anti-dumping and countervailing (AD/CV) duties are among the enforcement tools most commonly used against foreign competition. They're politically popular because they target imports that domestic industries claim are sold below fair value or with the aid of illegal government subsidies. The number of AD/CV duty cases nearly always rises when prices and profits plunge, and this time around should be no different.
Intellectual property rights (IPR)
Industries that rely heavily on IPR, particularly the high technology sector, are always in search of new ways to guard against infringement. Customs has identified IPR as one of its top trade priorities and is pouring more resources into interdicting and seizing illegal and dangerous knockoffs. The International Trade Commission is being inundated with Section 337 cases, which can bar infringing goods from entering the country and take a lot less time to yield results than a court case.
The Justice Department has significantly ratcheted up its prosecutions of companies that bribe foreign officials to obtain or retain business, and fines in the millions of dollars are handed down regularly. The campaign could well be further intensified by a White House eager to improve the United States' global image.
Many multinational corporations lower their tax liability on their overseas operations through a variety of means allowable under the complex U.S. tax regime. But key lawmakers are on a mission to crack down on this practice, which they argue is denying substantial amounts of tax revenue to the federal government at a time when budget deficits are soaring. Possible action this year could include stepping up enforcement of the rules, which many feel are being bent if not broken, or overhauling the system to limit acceptable tax avoidance schemes.
Preventing the exportation of dual-use goods--those that have both commercial and military uses--to countries and entities that could use them to build weapons of mass destruction or otherwise threaten U.S. interests has become one of the top trade priorities across the federal government. Authorities have a particularly sharp eye out for goods exported without required licenses and approvals or that may be transshipped to restricted destinations.
It's a lot to keep an eye on, but any business owner relying on cross-border trade needs to stay apprised of the latest regulations that could affect his livelihood.