The Massachusetts Export Center hosted its ninth annual Mass Export Expo on Friday, December 7th. Although the conference was regional in nature, the topics of discussion are currently of great interest to businesses across the country and even across the globe. There were a number of sessions on topics ranging from US-China trade, US economic sanctions, the recently established USMCA, and much more. The panels included a number of corporate compliance officers and attorneys that discussed the intimate details of trade regulations, procedures, experiences, and opinions. Here are some of the points that I found most informative.
The session on US-China trade relations was certainly timely and relevant to many. As such, there were a number of questions from the audience. Erin Ennis, SVP of the US-China Business Council moderated the session. When asked about the potential fallout from last week’s detainment of Huawei’s CFO, she stated that clearly, she could only speculate, but she has already seen evidence that some US technology execs are giving a second thought to traveling to China in concern of China retaliation. Audience members also expressed frustration with the many subtle differences between the US and China harmonized tariff schedules and the fact that there is no central repository of translations of China’s tariff schedule to English. With respect to technology development, Martin O’Neill, SVP of Cabot Corporation noted that China is a leader in the development of battery technology. I found this to be interesting due to the common view that China is typically a late-stage entrant in technology development.
I engaged in a separate discussion with Kristen Morneau of Mohawk Global Trade Advisors about the recently enacted tariffs on steel imports and their unintended consequences. Kristen noted that the US steel tariffs were intended to increase US jobs. But she has US clients that are experiencing difficulties from the tariffs. Specifically, companies that import steel as raw material are now subject to high tariffs. These companies transform the steel into final goods. However, their competitors that import the steel in final good form are not subject to the same tariffs. Therefore, the tariffs are threatening the intermediate goods processing jobs in the US, while providing cost advantages to competitors that import the goods from China in final form. Although the importers of steel in raw form can apply for duty drawback, the increased costs and time to reimbursement are substantial enough to threaten their ongoing operations.
The US-Mexico-Canada Agreement (USMCA)
The session on the recent USMCA included presentations and discussions about some of the significant changes from the exiting NAFTA framework. Suzanne Richer of Amber Road pointed out the agreement’s substantial focus on the automotive industry. In particular, the USMCA increases the North America content threshold requirement to 75 percent (at least 75 percent of an automobile must be made in North America to qualify for duty-free treatment). In addition, at least 40-45 percent must be made by workers earning at least $16 an hour. This will clearly reduce the wage advantages of Mexico and encourage manufacturers to reconsider the content inputs from the three countries. Also, the USMCA removes the standardized certificate of origin and transfers responsibility from the exporter to the importer. Although the new process will be more flexible, it is also less standardized and can increase the burden on importers. Finally, I found it interesting that the USMCA includes an automatic review process 6 years after initiation and an automatic termination of agreement in 16 years, unless the parties (US, Canada, Mexico) confirm their wish to continue.
US Economic Sanctions
Providers of sanctioned party screening software will be happy to hear that the panelists in the session on economic sanctions recommended to the audience that they use automated screening software. In fact, a couple panelists mentioned that their firms use multiple systems to assure a thorough process. However, they also stressed that human critical thinking must be paired with the screening software to achieve reliable results. A number of policies and directives (OFAC, etc.) were discussed throughout the session. But I found the difficulties faced by EU companies with respect to US-Iran sanctions to be most interesting. In particular, the updated EU blocking statute forbids EU persons from complying with the US extraterritorial sanctions on Iran. This places EU companies with a US business presence in a difficult situation – disregard US interests or disobey EU law.