Fuel affecting the China based supply chain

I just read an interesting article on the Canada Gazette about the effect that high fuel prices are having on China based supply chains. According to the article, with soaring fuel costs, companies are second guessing putting all of their eggs in the China sourcing basket.

Now China’s cost advantage is being eroded by soaring oil prices, rising wages and an appreciating currency. Canadian companies that outsource their manufacturing to China are already feeling the pinch and some are even bringing production closer to home.

The article says that many companies are now looking to lower cost manufacturing countries such as Vietnam as well as the maquiladora factories in Mexico again. In the last couple of months I have been receiving an increase in pricing requests from many of my clients for transportation out of Mexico and South America. These companies are looking to benchmark their total China based production costs against those in Mexico. Back in the late 90’s many of my customers were utilizing the maquiladora plants in Tijuana for contract manufacturing, but with the shift of manufacturing to China over the last 8 years, Mexico based manufacturing became less prevalent.

Fuel is an increasingly hot topic in the supply chain community right now and rightfully so. Over the next couple of weeks we will be posting various articles on the cost of fuel and its effect on the logistics industry.

June 12th Senate Hearings on U.S. Trade Preference Programs

Several important U.S. trade programs are set to expire partially or fully by the end of this year. The programs involved are the GSP (Generalized System of Preferences), CBI (Caribbean Basin Initiative), ATPA (Andean Trade Preference Act), and AGOA (African Growth and Opportunity Act). In general, these programs aim to promote economic development in developing countries by allowing preferential treatment to products imported from these countries. Out of all of these the GSP is probably the most widely used by U.S. importers as it includes a long list of beneficiary countries and some rather large trading partners, such as India and Indonesia.

Last week the Senate held a hearing on the Oversight of U.S. Trade Preference Programs and received testimony from the GAO (Government Accountability Office), a global trade consulting firm called Split Rock International, the Progressive Policy Institute, and the U.S. Conference of Catholic Bishops. Here is a link to the Senate web page on the oversight with links to PDF files of all the witness statements. Here are excerpts from each report:

The GAO report:

To address the concerns I have summarized today, in our March 2008 report, GAO recommended that USTR periodically review beneficiary countries that have not been considered under the GSP or regional programs. Additionally, we recommended that USTR should periodically convene relevant agencies to discuss the programs jointly.
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We also suggested that Congress should consider whether trade preference programs’ review and reporting requirements may be better integrated to facilitate evaluating progress in meeting shared economic development goals.

Grant Aldonas/Split Rock International:

First, I would recommend that the Committee expressly limit the
availability of our preferences to the least developed countries in the world. That
would enhance the benefit of the preferences as a tool for attracting investment
to the poorest countries in the world (i.e., those that lack access to global flows of
private investment capital). Limiting our preferences would also limit the “free
rider” problem we face where developed countries lack any incentive to negotiate
further liberalization, whether within the framework of WTO, regionally or
bilaterally.

Edward Gresser/Progressive Policy Institute:

…U.S. trade policy can continue to make good use of trade preferences
during the next decade. They have been an important part of our policies since the 1970s,
and have made significant contributions to development and poverty reduction, to the
creation of a fairer U.S. trade regime, and to some of our major foreign policy goals.
With attention and careful reform, they can do the same in the decade to come.

Fr. Andrew Small/U.S. Conference of Catholic Bishops:

In 1999, Pope John Paul II addressed the theme of globalization and equitable economic
integration in the context of this hemisphere. He warned: “If globalization is ruled merely by the
laws of the market applied to suit the powerful, the consequences cannot but be negative.”17
Preference programs offer a unique way for countries with tremendous economic advantages, like
the United States, to reach out in solidarity to least developed countries and to establish trade
laws that suit not just the powerful, but also the weak.

Again you can read the entire testimonies of each of the witnesses in PDF format from the links at the Senate website.

In 2006, I believe, Congress extended such programs on a short-term basis, extending them to the end of this year while they figured out what they wanted to do about them. This being an election year, I have my doubts that Congress will take any firm action on what to do with these trade preference programs and may simply defer them to later by extending them yet again by 1-2 years. So hopefully importers who benefit from these trade programs won’t have to worry, at least that’s my guess.

U.S. Customs rolls out online system for anonymous reporting of trade violations

I wasn’t aware of this before and just kind of stumbled upon it, but this week U.S. Customs and Border Protection (CBP) rolled out their a-Allegations online reporting system that allows any member of the public to anonymously report suspected trade violations. For those who don’t know, CBP has always maintained a toll free number (1-800-BE-ALERT) for reporting trade violations and anyone can still call that hotline to report suspected illegal activity.

But now CBP has also implemented an online system for reporting possible trade violations that they call e-Allegations. Here’s an excerpt from the faq from their official site:

Q: What types of issues can I report via e-Allegations?
A: e-Allegations provides a means for the public to report to CBP any suspected violations of trade laws or regulations; those that relate to the importation of goods into the U.S. These types of violations include misclassification of merchandise, false country of origin markings, health and safety issues, valuation issues, and intellectual property rights.

Q: Do I have to provide my name to submit an e-Allegation?
A: No. If you wish, you may remain anonymous when you submit an e-Allegation.

Via the official press release:

CBP has established this reporting system to make it easier for the public to notify CBP of possible trade violations. CBP will confidentially research concerns, determine the validity of the allegations and any actions required based on the subsequent review.

To report a possible violation, an individual must submit the following information: the type of trade violation, description of what has occurred, the products or goods involved and the alleged violator’s name and/or company. Other information may be included on a voluntary basis.

eAllegations is not intended for assertions of security issues such as terrorists or weapons of mass destruction. Violations that may be reported online through eAllegations include misclassification of merchandise, country of origin markings, health and safety violations, intellectual property rights violations, textile or other trade violations.

For example, eAllegations will provide a means to report a possible violator who is importing substandard steel, claiming that it is of a higher grade, therefore creating a potential safety issue. Other possible violations that can be reported include a company claiming a lower than actual value on a product they are importing to pay less duty or a company who is importing textiles from one country but stating that the goods are from another country to avoid quota restrictions.

Emphasis ours. While 1-800-BE-ALERT is more of an all-encompassing hotline, e-Allegations appears to be geared more towards specific import violations such as mis-classification and country of origin markings. These kinds of details tend to be known within the trade community and company specific, so my impression is that e-Allegations is a way for insiders to anonymously report their, or other, company’s illegal behavior. If anyone else out there has more details on the system, let us know, but based on what little I’ve read and seen, unscrupulous importers and customs brokers best beware!

Official site for e-Allegations here.

Port of Oakland planning container fees

Following the examples of the ports of Long Beach and Los Angeles the Port of Oakland is planning on implementing their own container fees to help pay for Air Quality improvements. While I’m no fan of any kind of container fee that is, in essence, a container “tax”, at least they aren’t as prohibitive as Los Angeles and Long Beach. The Port of Oakland is proposing a $12.50/TEU fee, not to exceed $25 per loaded container. It’s on their official agenda for today’s meeting. From there you can find a link to the full Agenda Reports (upper right hand corner of the page). Pages 32-39 contain the details of this agenda item, which outline the background and reasons for implementing such a fee and what the port plans to do with the funds.

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