The President was prepared to end the North American Free Trade Agreement deal, which had governed trade relations for the past 23 years, with a dramatic announcement April 29th at a Pennsylvania political rally marking his 100th day in office. But after speaking with the leaders from Canada and Mexico, the President announced he will not cancel the North American Free Trade Agreement and will instead work to renegotiate it with Mexico and Canada, reserving the right to cancel if the US does not obtain a favorable deal.
News / Regulatory Updates
A TRANS-PACIFIC PARTNERSHIP (TPP) WITHOUT THE U.S.?
The President signed an order on January 23, 2017 withdrawing the United States from the Trans-Pacific Partnership (TPP). Because the original TPP deal required the ratification of TPP members comprising at least 85 percent of the GDP of the entire TPP grouping, without the U.S., a new version of the TPP agreement would be needed for it to take effect. However, a TPP agreement without the U.S. is still relevant and would have significant economic value. The remaining Parties include four of the world’s 20 largest economies — Japan, Canada, Australia, and Mexico — alongside significant emerging economies like Vietnam and Malaysia. With that economic value in mind, the 11 existing TPP members, joined by China and South Korea, met in Chile on March 14-15 to discuss: (a) the possibility of a TPP agreement without the U.S., (b) the Regional Comprehensive Economic Partnership (RCEP) as the TPP alternative and, (c) the Free Trade Area for the Asia-Pacific (FTAAP).
On March 1, 2017, the Office of the United States Trade Representative (USTR) released The President’s 2017 Trade Policy Agenda.
As detailed in the Agenda, the Administration believes that the United States will be best served by focusing on bilateral negotiations rather than multilateral negotiations – and by renegotiating and revising trade agreements when US goals are not being met. The Administration rejects the argument that the United States should, for an purported geopolitical advantage, ignore unfair trade practices that disadvantage American workers, farmers, ranchers, and businesses in global markets.
UK Prime Minister Theresa May invoked Article 50 of the Lisbon Treaty on March 29. This gives the UK and the European Union (EU) two years to agree the terms of the UK’s exit from the EU. EU member states will meet to discuss Brexit on 29 April, a month after the UK triggers Article 50. The purpose of the meeting is to provide the guidelines for the EU’s negotiating team headed by Michel Barnier, the French politician serving as the EU Chief Negotiator for Brexit since December 2016. The scheduled elections in France, Germany and Italy add a layer of complexity that may make consensus on these guidelines difficult to achieve.
What Comes After The Trans Pacific Partnership (TPP)?
The President formally withdrew the United States from the TPP on January 23. Because the United States represents over 60% of the combined GDP of the original 12 countries, without U.S. participation the agreement cannot enter into force.
The TPP was the largest regional trade accord in history and would have set new terms for trade and business investment among the United States and 11 other Pacific Rim nations, representing 40 percent of global GDP and one-third of world trade. Six (6) countries have existing Free Trade Agreements (FTA) with the United States (i.e., Singapore, Chile, Australia, Peru, Mexico, and Canada) and, five (5) have no FTA (i.e., Japan, Brunei, New Zealand, Vietnam, and Malaysia).
A Tax on Imports?
Yes, this is under serious consideration. President-Elect Trump has complained repeatedly about the unfair advantage enjoyed by nearly all of America’s trading partners, almost all of whom employ consumption-based value-added taxes (VAT) as a revenue source. The “unfair” advantage results from zero-rating exports and fully taxing imports. Because the US derives revenues primarily from income taxes, WTO rules make it difficult to implement a similar “border adjustment”
As part of a recent video series, Paul Fitzpatrick, Managing Director of Global Trade Management, discusses key point regarding the “Trade Facilitation and Trade Enforcement Act of 2015.”
Back in December 9, 2015 Congress reached a final agreement on H.R. 644, the “Trade Facilitation and Trade Enforcement Act of 2015.” The bipartisan, bicameral trade legislation was created to authorize U.S. Customs and Border Protection to put in place effective tools to: (a) strengthen trade enforcement at the border; and, (b) facilitate the efficient movement of legitimate trade and travel. The Bill went to the President for signature, was signed, and a statement was released by The White House Press Secretary on February 24, 2016.
Paul Fitzpatrick, MIQ Managing Director of Global Trade Management, recently presented on the Trans-Pacific Partnership and other trade agreements.
The TPP is a trade agreement among 12 Pacific Rim countries signed on February 4, 2016 in Auckland, New Zealand after 7 years of negotiations. The TPP will create the world’s largest free-trade zone. The countries within its scope account for 40% of the world’s economic output. The Agreement will not enter into force until ratified by the respective governments.
The Ocean Carrier Equipment Management Association (“OCEMA”) amended its Recommended Best Practice for the Acceptance and Transmission of Verified Gross Mass (VGM) to include a Terminal Weighing Approach (TWA). The TWA contemplates that marine terminals will provide gross container weights directly to ocean carrier stowage planners as VGM on behalf of shippers.
What this Means: Vessel Operators have finally agreed that the existing practice, whereby the marine terminals weigh containers prior to loading, is sufficient compliance for purposes of the VGM rule. Many Carriers have indicated they will now accept the weight provided by the terminals in lieu of receiving anything from shippers or NVOCCs with respect to traffic moving to the terminals by truck. With respect to containers moving by rail to the port of lading, most carriers have agreed to provide tare weights of the containers to be added to the weights reported by the shippers and NVOCC’s, and that would again constitute sufficient compliance with the VGM amendment.
MIQ Amended Procedures: MIQ will no longer require the Verified Gross Mass (VGM) Certification distributed in June. Instead, MIQ requests that our client shippers either (a) use the revised MIQ Shipper’s Letter of Instruction (SLI) or, should the client shipper prefer to use its own form(s), (b) sign and return the MIQ Amended Terms and Conditions acknowledging that (i) MIQ is entitled to rely on the accuracy of weights provided by the shipper and (ii) agreeing to indemnify and hold MIQ harmless from any and all claims, all claims, losses, penalties or other costs resulting from any incorrect or questionable statements of the weight provided on which MIQ or its agent relies.
MIQ will continue to monitor the situation very carefully on a carrier by carrier basis. Please contact your MIQ Account Representative with your questions and concerns.