After months of negotiations between Senate Finance Committee Chairman Max Baucus and Senate Finance Committee Ranking Member Charles Grassley over disclosure requirements for individual Senators and lobbyists, the Senate Finance Committee has finally announced the official start of Miscellaneous Tariff Bill (MTB) process, giving Senators until the end of the month to introduce individual duty suspension bills for consideration for inclusion in the MTB.
The MTB is a collection of hundreds of individual pieces of legislation that suspend duties on certain imported products and make technical corrections to the U.S. Harmonized Tariff Schedule (HTS). Duty suspension bills, which last for three years, have two primary requirements: 1) Duty suspension bills must be non controversial (i.e. there can be no competitive U.S. made product and no objections during the process); and 2) The total revenue lost to U.S. Treasury from duty suspension cannot exceed $500,000 ($660,000 in actual duties collected) per year.
The House Ways and Means Committee is further along in their MTB process because the Committee is only going to consider individual tariff suspension bills that House members submitted during the last Congress and the International Trade Commission (ITC) and Customs and Border Protection (CBP) has already vetted. The House Ways and Means Committee is not accepting new tariff suspension requests this year.
Because the Senate MTB process has been delayed, Congress may not be able to pass new MTB legislation until the spring, despite the fact that a large number of tariff suspensions from previous MTBs will expire. If it is clear that Congress will not be able to pass an MTB by year’s end, Congress could pass a short-term extension of current tariff suspensions this year, and then pass a comprehensive MTB next year. Alternatively, Congress could renew expired suspensions retroactively as part of a bill next year that would also include new tariff suspensions.
The timing of the Senate Finance Committee's consideration of the MTB may depend a lot on the schedule that Senate leaders set for other important legislative initiatives. The Finance Committee is playing a key role in the formulation of health care reform legislation, and the Committee will again be front and center as Congress develops climate change legislation, tries to figure out how to pay for a transportation bill that will carry a price tag upwards of $500 billion, and works to extend expiring tax breaks. The Finance Committee is also responsible for extending the Andean trade preference program and the Generalized System of Preferences (GSP) program before they expire at the end of the year.
If you have further questions about the Miscellaneous Tariff Bill process, contact Ray Bucheger at Ray@FederalRelations.com.
Congressional Trade Agenda – Overview (back to top) September 2009
The White House has devoted most of its attention in 2009 to the domestic economy (and for good reason). As a result, the trade agenda has been stuck in neutral since President Obama took office. While the business community has been anxiously waiting to see which way Obama will lean on trade, there are hints that Obama will not entirely toe the labor line. For instance, the President has consistently voiced his opposition to a provision in the House-passed climate change bill that would impose tariffs on countries that do not regulate carbon dioxide emissions in order to protect domestic manufactures from foreign competition, despite widespread support for this provision in Congress. While Obama may be drawing a line in the sand on this issue because he knows that Congress will never pass a climate change bill, he could not avoid making a decision recently on the Section 421 Safeguard case relating to Chinese tires.
In the meantime, a number trade-related issues remain on the legislative agenda, and while Congress has managed to avoid addressing these issues so far this year, that may change in over the next several months. Here is a brief run-down of the major trade items pending in Congress:
Generalized System of Preferences
The U.S. Generalized System of Preferences (GSP) program, which provides preferential duty-free entry for more than 4,650 products from 143 designated beneficiary countries and territories, expires on December 31, 2009. While Congress is likely to extend GSP, the question is when and for how long. Also up in the air is whether Congress will decide to tackle “GSP reform”. Senator Charles Grassley (R-IA), ranking member of the Senate Finance Committee, has questioned whether certain countries should continue to receive GSP benefits and has been pushing for an overhaul of the system.
Free Trade Agreements
Panama: The 110th Congress refused to consider the Panama agreement because the president of the Panamanian Assembly was indicted in the US for murdering two US soldiers in Panama. While that issue has been resolved, there are now questions about the country’s status as an international tax haven, and as a result, it is unclear if the Panama FTA will pass during the 111th Congress.
Colombia: During the 110th Congress, President Bush unilaterally sent the US-Colombia free trade agreement to Capitol Hill in order to force a vote on the agreement, and the House of Representatives voted to change Trade Promotion Authority (TPA) rules so that it could delay consideration of the agreement indefinitely. Under Trade Promotion Authority (TPA) rules, the House of Representatives would normally have had 60 days to act on an FTA that is sent up by the President, and the Senate would have had 30 days after that. The House vote to change TPA rules did away with that clock. While this action was directly in response to Bush’s action, the real reason that Congressional leadership did not want to vote on the agreement is because of concerns about violence against labor officials in that country. While the number of attacks on labor leaders in Colombia has gone down since that time, key members of Congress remain concerned about this issue, and the prospects for the Colombia FTA in the 111th Congress remain murky.
South Korea: The US-South Korea Free Trade Agreement was held up in the 111th Congress over concerns about access for beef and automobiles. The prospects for this FTA do not look much better in the 111th Congress, especially with the US auto industry struggling to stay afloat. In fact, the Korean FTA is the least likely of the three pending FTAs to be sent to the President’s desk.
Additional Import Requirements under the Lacey Act (back to top) September 2009
What is the Lacey Act?
The Lacey Act prohibits trade in wildlife, fish and plants that have been illegally taken, possessed, transported or sold. The Lacey Act amendments included in the Food, Conservation and Energy Act of 2008 makes it unlawful to import, export, transport, sell, receive, acquire, or purchase in interstate or foreign commerce any plant or plant product taken in violation of the laws of a U.S. state or any foreign law that protects plants, and requires additional reporting for imports of these products. Items covered by these new reporting requirements are discussed below.
What are the new Lacey Act reporting requirements?
The Lacey Act amendments require that import declarations state the scientific name of any plant (including genus and species) used to produce the plant product and the country of origin of the plant. If the genus and species is not known, then the declaration must contain the name of every species of plant that may have been used to produce the plant product; and if the country from which the plant was taken and used to produce the imported plant product is unknown, the name of every country from which the plant may have been taken must be stated.
USDA will only enforce the declaration requirement for formal consumption entries. It does not currently intend to enforce the declaration requirement with respect to informal entries (i.e., most personal shipments), personal importations or mail (unless subject to formal entry), transportation and exportation entries, in-transit movements, carnet importations (i.e., merchandise or equipment that will be re-exported within a year) and foreign-trade zone and warehouse entries.
What is covered by the new Lacey Act reporting requirements and what is not?
USDA-APHIS has issued a phase-in schedule that lists what products and the associated Harmonized Tariff Schedule (HTS) Chapter or Heading requires a Plant Product Declaration Form (PPQ 505). The USDA-APHIS phase-in schedule covers reporting requirements through September 2010, at which time USDA-APHIS is expected to review the process. While many processed items, including footwear and apparel are not included in the current phase-in schedule, USDA-APHIS has held open the possibility of adding these products at a later date. The phase-in schedule is as follows:
April 1-Sept. 30, 2009
- 4401(fuel wood);
- 4403 (wood in the rough);
- 4404 (hoopwood; poles, piles, stakes);
- 4406 (railway or tramway sleepers);
- 4407 (wood sawn or chipped lengthwise);
- 4408 (sheets for veneering);
- 4409 (wood continuously shaped);
- 4417 (tools, tool handles, broom handles); and
- 4418 (builders' joinery and carpentry of wood).
Oct. 1, 2009-March 31, 2010
Items covered under the April 1-Sept. 30, 2009 phase;
4402 (wood charcoal);
4412 (plywood, veneered panels);
4414 (wooden frames);
4419 (tableware and kitchenware);
4420 (wood marquetry; caskets; statuettes);
April 1-Sept. 30, 2010
Items covered under the April 1-Sept. 30, 2009 phaseItems covered under the Oct. 1, 2009-March 31, 2010 phase;
4421 (articles of wood, not elsewhere specified or included);
6602 Walking sticks, whips, crops);
8201 Hand tools);
9201 Pianos);
9202 Other stringed instruments);
9302 Revolvers and pistols);
93051020 Parts and accessories for revolvers and pistols);
940169 (seats with wooden frames);
950420 Articles and accessories for billiards);
9703 Sculptures).
NOT COVERED: Packaging material that supports, protects, or carries another item is exempted from these reporting requirements, unless the packaging material itself is the item being imported. Also exempted from the reporting requirements are sundries that ordinarily accompany imported items such as tags, labels, manuals and warranty cards.
What is the trade community doing to minimize the impact of this new law?
FBB Federal Relations is working with a broad-based industry coalition to minimize the impact of the Lacey Act reporting requirements on international trade. This industry coalition has been working over the past year with Congress and the Executive Branch agencies tasked with implementing this new law, and is in the process of working to further clarify some parts of the new law that remain overly vague or particularly onerous.
For further information contact Ray Bucheger at Ray@federalrelations.com.
Health Care Reform (back to top) September 2009
Commerce Secretary Gary Locke said recently that "Small companies make up 95 percent of all the workers in our country, and they're reporting increases last year alone of, on average, 15 percent higher costs for health insurance for the same coverage. Several companies that I've talked to this year have reported that their health insurance companies want to charge 27 to 30 percent more for exactly the same coverage. That's going to crush American companies. It's going to keep them from growing, expanding, or hiring people. It's going to make them less competitive to sell their products and services here or around the world in competition with companies from other parts of the world. We've got to get a handle on healthcare costs."
While the link between health care costs and the economy is undeniable, and although reforming the health care system is essential to restoring America’s overall financial security, the way in which health care “reform” is structured and how the final bill is written will determine whether it has sufficient support to pass in Congress and whether that bill will have any discernable impact on health care costs in America. In the meantime, two very different bills are working their way through the House and Senate, and as a result, nobody knows what health care reform will look like if and when it is sent to the President. For further information contact Ray Bucheger at Ray@federalrelations.com.
Surface Transportation Reauthorization (back to top) September 2009
Congress is far from resolving the issue of how to pay for a new transportation bill, and in the meantime, there is much debate about how long to extend current transportation policy. House Transportation and Infrastructure Chairman James Oberstar and House Transportation and Infrastructure Highways and Transit Subcommittee Chairman Peter DeFazio are pushing for a three-month extension of current transportation law while the White House and Senate keep insisting on an 18 month delay.
Oberstar and DeFazio had until recently been pushing for a full six year reauthorization bill, arguing that such a bill was not only necessary to address the backlog of transportation projects and infrastructure needs in the U.S., but that it would also represent a second economic stimulus package. The Administration, on the other hand, claims that an 18-month delay is necessary to preserve the solvency of the Highway Trust Fund, which is facing a huge revenue shortfall that has slowed payments to contractors.
Many people speculate that President Obama is pushing for an 18 month extension because he believes the economy will be better in 2011, paving the way for Congress to increase the gas tax at that time without opponents arguing that such a move would further damage the U.S. economy. Further, pushing this issue into 2011 would also take Members of Congress off the hook, so to speak, because they would not be forced to take a difficult vote before the mid-term elections, when Democrats in the House are already expected to lose upwards of twenty or more seats.
Regardless of how long any extension is many people in and around the Capitol predict that Congress will ultimately defer on this issue until after 2011 anyway. Keep in mind that TEA-21 was extended 12 times over 680 days before Congress successfully passed SAFETEA-LU.
For further information contact Ray Bucheger at Ray@federalrelations.com.
Federal Stimulus Spending (back to top) September 2009
Vice President Joe Biden delivered a speech on September 3rd to mark the 200-day mark since the American Recovery and Reinvestment Act (aka, the Stimulus Bill) took effect. In terms of the stimulus' effect on the construction industry, the vice president reported that more than 10,000 transportation projects have so far been approved. He went on to say that work created by the stimulus has exceeded goals. He specifically cited work that had been started on 2,200 highway projects (700 more than expected at this stage) and 192 airport projects (94 more than scheduled). Biden highlighted in his speech that work has begun on 200 new rural waste and water systems as a result of the stimulus. In terms of construction contracts, Biden acknowledged that on average bids are coming in at 8 to 10 percent below estimates and noted that he wants to ensure that any savings the government sees from these low bids is used wisely and invested back into infrastructure projects.
Putting stimulus spending in another perspective, a recent House Transportation and Infrastructure Committee report, another in a monthly series for spending that it oversees, said as of July 31 that about $20 billion in highway and transit projects had been put out to bid, and nearly $11 billion worth were under construction at that time. According to the report, Federal stimulus funds to states for such needs as highway, bridge and transit repairs were supporting at least 76,000 direct jobs as of July 31. The panel said that's how many on-project jobs were either saved or created from $35.5 billion in infrastructure projects announced by that time for programs under its jurisidction.
More recently, the Department of Transportation pushed its stimulus project payouts to $2.023 billion in the week ending Aug. 21, which represents a disbursement surge of more than $1 billion in just the past month.
For further information contact Ray Bucheger at Ray@federalrelations.com.
Immigration Reform (back to top) August 2009
The construction industry employs more than 7 million people in this country and the Bureau of Labor Statistics estimates that construction employment will add 180,000 net new workers annually. Immigration legislation will have a significant impact on how employers hire and fire, who they can hire and fire, and how long they can keep workers that they hire, train and employ. In addition to the congressional proposals that have been introduced over the past several years to address illegal immigration, many local and state governments have begun addressing the problems. As a result, a patchwork of federal, state, and local immigration laws exists and employers must navigate the growing complexity until Congress addresses the issue with comprehensive immigration reform.
Unfortunately, Congress will not pass immigration reform legislation this year. While President Barack Obama said recently that he is not backing off of his commitment to immigration reform, conventional wisdom states that the President and Congress will pay the issue little more than lip service this year. Case and point: House Majority Leader Steny Hoyer said in June that the House and Senate may focus again on comprehensive immigration reform. Here is what Hoyer said: "I think you are going to see immigration reform -- comprehensive immigration reform - addressed. Not necessarily on the floor, but certainly starting in the fall with reference to seeing if we can create a consensus in both the Senate and the House." Hoyer has not addressed immigration in a meaningful way since he made that statement.
At the time that Hoyer discussed immigration reform, Senate Majority Leader Harry Reid said immigration reform was his third major priority after healthcare and energy legislation. Since then, health care has remained a top priority, and energy appears to be slipping behind not immigration, but instead financial regulatory reform and passing the annual appropriations bills.
U.S. and EU Trade Action Against China (back to top) June 2009
In June, USTR announced that the United States and the European Union are jointly bringing a World Trade Organization case against China over its export restrictions on raw materials. This follows failure to persuade China to reduce its export tariffs and remove or raise export quotas on yellow phosphorous, antimony, bauxite, coke, fluorspar, indium, magnesium carbonate, molybdenum, rare earths, silicon, talc, tin, tungsten and zinc. The concern is that China has continued to restrict exports of these raw materials used in steel, semiconductors, aircraft and other products despite Beijing's pledge to eliminate taxes and charges on exports when it joined the WTO in 2001. China's export curbs drive down raw materials costs for Chinese manufacturers, at the expense of steel and other producers elsewhere in the world. One of the primary US constituencies that pushed the White House to pursue this case is the US steel industry.
The first step is a formal request for consultations with Beijing. If these talks fail, the next step would be to request that a WTO panel hear the complaint; that can take years. In the meantime, Beijing said yesterday it was cutting export taxes on a range of materials, including some used to make steel.
Most of us predicted that if there were to be any trade action by the U.S. against China, it would be in the area of apparel/textile imports, perhaps some new mechanism to replace our expired import quotas. There has also been some saber-rattling on Capitol Hill about punishing China for manipulating its currency (keeping the value of the Yuan artificially low in order to keep China's exports competitive). In fact, I still believe we will not take action on currency. After all, Secretary of State Hillary Clinton's first visit to China earlier this year was primarily devoted to convincing Chinese leaders to continue to buy U.S. Treasury Bonds (upon which we depend to finance our National Debt).
So it is a gutsy move to bring a trade action against China right now. Europe is similarly cautious about starting trade war with China, which is a reason why the U.S. and EU are undertaking this effort jointly. This case, like all WTO cases, will take years to resolve; conceptually there could eventually be some retaliatory measures (retaliatory duties) taken against imports from China, but it will be several years before that happens.
Negotiating Your Ocean Contract Now (back to top) June 2009
This is a busy time for carriers and shippers trying to renegotiate ocean contracts. Here are a few trends we are seeing and some ideas.
Shorter contract terms. Ag exporters (and importers), concerned about what will happen with the economy and demand, are, in some cases looking for contracts of shorter duration. Instead of one year, something shorter, such as six months. Carriers are also concerned, hoping that the economy will pick up and they do not want to be locked into current low rates and preferential terms. So, quite a few contracts being written with six months duration. If you do so, try hard to maintain the option, at your sole discretion, to renew for another six months at the same terms. The carrier may not agree, but I do know of one case where the carrier did, so the shipper had the best of both worlds -- a six month obligation, and an option to extend it if he wants.
"All-in" rates. A few of these are returning. Generally this means that the rate is locked in for the duration of the contract and the carrier cannot impose a general rate increase (GRI) or any surcharges during the term of the contract. Most carrier contract boilerplate allows the carriers to file GRIs and new surcharges and increases in their Service Contract Tariff, on file at the FMC. To protect yourself, you must eliminate this boilerplate, so the carrier cannot unilaterally file increases in its Service Contract Tariff.
Bunker fuel. Even those getting an "all-in" rate with protection from GRIs and surcharges, are agreeing to some flexibility in bunker surcharges. In some cases the carriers are committing to no bunker surcharge increase until third quarter 2009, at which time they will float the surcharge, perhaps using the TransPacific Stabilization Agreement formula. Other contracts allow the bunker surcharge to increase up to some amount, say 25%, but no more, for the duration of the contract.
Force Majeur. This is the clause that protects the carrier and shipper by allowing either party to avoid all contract obligations in case an "Act of God" (something beyond the control of either party). For example, a hurricane, port strike, war, etc. In recent years we have helped shippers gain protections in this clause as well. For example, crop failure, embargos, phytosanitary restrictions, currency devaluations. Now, in the current economic environment, we are suggesting that you insert, in the long list of force majeur items, "precipitous decline in orders," or something similar.
Booking Commitment. With containers getting tight in some parts of the country, we are encountering again carriers' failing to meet booking commitments. You make a booking, you have the cargo ready, you need the box, but the carrier doesn't come through. Or you deliver to the port and the carrier doesn't have room on the ship. We have drafted a provision which is similar to the damages provisions for Minimum Quantity Commitment, if the carrier does not meet its booking commitments, it pays you $300. Of course, the carrier will want the same, in case you do not come through and actually take the container or use the vessel space. But for some of our members who are confident that they will meet their booking commitments, requesting this provision will at the very least put the carrier on notice that it had better come through when it gives a booking.
Lots of Talk -- Freight Infrastructure, HMT and Cargo Fees (back to top) June 2009
A memo is floating around alerting the trade community of a proposal to triple the HMT. This is neither new, nor imminent, nor likely. But it does provide the opportunity to advise you of objectives and various approaches which may ultimately lead to a new fee on cargo, both international and domestic, to pay for infrastructure, not only at ports but throughout the transportation system, throughout the country.
Three years ago Members of Congress began to introduce bills to develop some means of generating revenue to pay for port and freight infrastructure. There are several bills and several approaches. Nothing is going to happen soon, in fact it will likely be another two years before any legislation really moves. There may ultimately be an increase in fees to pay for new freight programs, but not before a great deal of hearings, outreach and debate. For instance, I will be discussing the needs and alternatives on a panel to brief Congressional staff next week, organized by the Coalition for America's Gateways and Trade Corridors.
A. Objective
There is a tremendous freight infrastructure backlog: Navigation channels and harbors are not being dredged to their authorized depths. Ports are congested due to lack of or deteriorating road, rail and bridge access. Canadian and Mexican border crossings are woefully inadequate at many points. Domestic freight movement is hindered by inadequate locks, highways and rail infrastructure.
B. We know what needs to be built, we just don't know how to pay for it.
The existing gas tax we pay at the pump no longer generates sufficient revenue to pay for maintaining existing highways and transit, much less building anything new. The focus of our transportation spending in the past has been on moving people, not on freight. While Harbor Maintenance Tax collections are adequate to pay for all dredging needs, the Office of Management & Budget will only allow about half of the collections to be spent for dredging, which is inadequate. And there are no existing dedicated funds for port landside infrastructure or freight movements around the country.
Every six years Congress attempts to write a massive Transportation Authorization bill, also known as TEA. The purpose is to spend the gas tax revenues. Again, there is not enough being collected now and the focus has always been on passengers -- highways and transit. It is very likely that the next TEA bill, which will be drafted over the coming 2 years, will include new programs: "freight mobility," "freight corridors," "short-sea shipping," all focused on cargo movement. Again, it's easier to spend money than it is to raise it.
Will they increase the gas tax paid at the pump? Probably not -- it would be highly unpopular. Will they impose a new fee on international shipments, or also on domestic shipments? On truckers? On freight shippers? What kind of fee? Will they increase the HMT? Will they expand eligible uses? Will they mandate that existing collections actually be spent? Will they change the HMT to make it a real user fee, in which case it could be imposed on exports? Will they create an entirely new freight fee with a new trust fund? Will it be a fee on containers? Or will it be a fee on the value of all the cargo, whether containerized, dry or liquid bulk, break bulk? These are all questions with which Congress is currently grappling.
C . Proposals
Here are ideas and legislation which have been proposed in Congress thus far:
1. Force OMB to release all Harbor Maintenance Tax collected for the intended use: dredging. Approximately $1.5 billion is collected each year in HMT, yet only half is given to the Corps of Engineers to conduct the dredging. If all the money was released, we could maintain all this nation's navigation channels and harbors. Legislation has been introduced in the last Congress to accomplish this and is being introduced again this Congress.
2. At the height of port congestion at Ports LA and Long Beach two years ago, southern California Congressman Calvert introduced a bill to mandate the collection of a fee based on the value of cargo entering all points of the United States, with the mandate that it be spent within 300 miles of the place where it is collected. The trust fund that would be established to receive all these revenues could also be used to pay for infrastructure at border crossings. He was responding to concerns by various ports, including LA and Long Beach, that the bulk of HMT is collected on imports through their ports, but as those ports require no dredging, the money is spent elsewhere and does not benefit the ports where collected, or importers which use those ports. Thus the Calvert bill would allow this cargo fee to be used for land-side infrastructure, such as rehabilitation of bridges and expansion of highways leading to Ports LA and Long Beach. It would prohibit individual ports from imposing their own infrastructure fees.
3. Congresswoman Richardson is motivated, as is Congressman Calvert, to assist her constituent ports (LA and Long Beach) gain funding to pay for desperately needed road/rail access and expansion. Her bill would triple the HMT, with 1/3 remaining for dredging purposes (going into the Harbor Maintenance Trust Fund for use wherever needed around the country) and the other 2/3 being available for land-side infrastructure, mostly at the ports where collected. This, for the first time, would expand the eligible use of the HMT, beyond dredging, to land-side infrastructure. .
4. Freight fee. While improving infrastructure at ports of entry is necessary, freight infrastructure must also be improved throughout the country. The difficulty is developing a means to equitably collect revenue from users of our highways. Members of Congress are currently developing various freight fees for domestic freight movement. These could be fees on truckers, on shippers, unclear. That money would be used to expand highways in order to better serve freight movement -- a departure from our history of focusing highway construction on passenger needs.
D . When Will Congress Act?
The TEA bill will continue to be debated over two years as Congress struggles to find the political will to generate a new revenue source(s). While some Congressional leaders have made brave statements about passing this next TEA bill this year, until they figure out a way to pay for the infrastructure we need, they will punt, perhaps until after the next election in 2010. Thus there will be ample opportunity for input by all interested parties. No doubt that input will depend on whether one will pay any new fee or not, and whether one feels he/she is getting value for the fee paid.
Trade News and Views from Washington, DC (back to top) June 2009
Some Things Don’t Change So Fast I. During the Presidential campaign, candidate Obama called for a complete renegotiation of NAFTA. But as President, he is finding that what looks simple on the campaign trail becomes a lot more complicated when sitting in the Oval Office.
This year, the Teamsters and independent truck operators were able to prevail upon the new Congress to terminate the Bush-era pilot project, under which 100 U.S. trucks deliver deep into Mexico, and 100 Mexican trucks deliver deep into the United States. Predictably, Mexico retaliated with prohibitive import duties on $2.4 billion of U.S. exports – fruit, grapes, wine, Christmas trees and more. In addition, the Mexican trucking association, using NAFTA procedures, is suing the United States for $6 billion in damages.
President Obama, recognizing that termination of the trucking program is a blatant violation of NAFTA mandates, has directed that we reinstate the Bush-era trucking “pilot project.” Will he be able to prevail upon his campaign allies, the Teamsters, to accept the program? Billions of dollars of U.S. exports depend upon it.
Some Things Don’t Change So Fast II. During the campaign, Obama criticized the Bush White House for not taking a tougher stand against China, specifically for failing to designate China as a “currency manipulator.” Now as President, he is taking heat from human rights groups for the recent refusal of his Secretary of Treasury Tim Geithner to name China as a “currency manipulator.” And human rights groups are not happy that in her first foray to Asia, his Secretary of State Hillary Clinton seemed to soft pedal human rights issues in favor of being a salesperson for U.S. Treasury bonds.
What is now clear to the White House is what was clear to the previous occupant – we dare not push China too hard, less they look for someplace else to invest their foreign reserves. If China ceases buying our Treasury bonds, we are in a heap of trouble. Who do you think is really going to own General Motors?
Some Things Don’t Change So Fast III. Remember the fuss about Guantanamo Bay? How we were going to close that prison and talk our allies around the world into taking some of those terrorists into their own prisons? Seems that those allies don’t want those prisoners, no matter who is sitting in the White House. Gitmo remains open and the prisoners remain there.
Some Things Don’t Change So Fast IV. The U.S. quotas on imports of apparel and textiles from China expired at the end of 2008. The Bush White House made it clear they did not intend to renew those quotas. The trade community has wondered if under the new Administration, quotas or a dumping case might be in store against China-sourced apparel/textile during 2009. So far, it hasn’t happened.
Some Things May Change. The House of Representatives has passed the Federal Aviation Administration Reauthorization, including a provision designed to make it easier for the Teamsters to organize FedEx. It’s a long-standing objective for organized labor. If enacted, it could significantly change the cost structure and operations for FedEx. President Bush had always vowed to veto this provision. What will President Obama do once it reaches his desk?
Mexico Trucking Update (back to top) June 2009
Recently Secretary of Transportation Ray LaHood made an important announcement regarding the Mexico trucking dispute and U.S. ag shipments to Mexico.
The Department of Transportation has put together a revised trucking program designed to solve the dispute and delivered it to the White House.
He acknowledged that such a program is a part of NAFTA and that "we need to do it." He thinks the proposal now at the White House will meet Congressional concerns about safety. He mentioned that it would include checking the mechanical standards for the trucks themselves, regulation of the maximum hours of service for drivers, and stricter driver license checks, and possibly checks on the process for obtaining a license. He hopes to have the program reinstated (and Mexican duties on U.S. exports repealed) by "the early part of the summer."
He also specifically acknowledged that the Mexican tariffs on the 90 items (largely agriculture) have had a significant impact -- they have caused producers and suppliers to press their representatives to reconsider termination of this program.
Analysis:
The real question of course is whether Congress and Mexico will agree to this new plan.
First, it is widely presumed that Congressmen may really be less concerned about the safety of the Mexican trucks and drivers, than they are supporting the Teamsters' in their vehement opposition to the competition that this Mexican companies represent. So, will the Teamsters accept it, and what if they won't?
Second, if the proposed DOT plan is so tough on the Mexican truckers (by establishing standards higher than those imposed on US truckers), then Mexico wont accept it, and they won't lift the tariffs.
But progress seems to be in the works, the Administration is going to try to sell this to both the Teamsters and the Mexican government, and possibility of relief from the Mexico duties by this summer, is encouraging -- and not a moment too soon (and already too late for ag being harvested now!).
Automated Export System (AES) Revisions (back to top) July 2008
On June 2, 2008 the Census Bureau published the final regulations to revamp the Automated Export System (AES). The Final Rule makes the following changes to the AES program:
• Requires electronic submission of export data for all shipments where at Shipper’s Export Declaration (SED) is currently required.
• Refers to the export information on the Shippers Export Declaration as the Electronic Export Information (EEI). There is no change to the export information currently required.
• Requires pre-departure filing of the EEI for all exports. This is the centerpiece of the new AES program – all exporters must file the EEI and receive an Internal Transaction Number (ITN) a minimum of 24 hours prior to vessel loading UNLESS the exporter is an approved post-departure filer (see next bullet). For air cargo, the deadline is two hours prior to “wheels up;” for track cargo the deadline is one hour prior to arrival of the truck at the U.S. border; and for rail cargo, the deadline is two hours prior to the time the train arrives at the U.S. border.
• Authorizes exporters that have been previously approved for “post-departure filing” (formerly known as Option 4) to continue to file EEI up to 10 days after the vessel sails.
• Maintains the moratorium placed on new applications for post-departure filing approval. In other words, Census will not accept new applications for post-departure filing at the current time. It is unclear when, or if, the moratorium will be lifted.
• Significantly increases penalties for violations, including failure to file, delayed filing, false or fraudulent reporting or misuse of AES. Criminal and civil penalties of up to $10,000 per violation may be imposed under the new rules, including $1,100 for each day of delayed filing.
• Delegates enforcement authority to the Department of Homeland Security’s Custom & Border Protection (CBP).
• Includes provisions for voluntary self-disclosure to the Census Bureau of suspected or actual violations, and allows such voluntary self-disclosure to be a mitigating factor in determining what penalties may apply.
The changes became effective on July 2, but will not be enforced until September 30, 2008.
For further information, contact Kathy Beaubien at Kathy@federalrelations.com.
Battle Lines Form Around New US Trade Regulations (back to top) July 25, 2008
The Trade Enforcement Act of 2008 (H.R. 6530), sponsored by Rep. Charles Rangel (D-NY), House Ways and Means Committee Chairman, and Rep. Sander Levin (D-Michigan), Chairman of the Trade Subcommittee, proposes to "actively open markets by eliminating foreign barriers to U.S. goods and services exports and strengthen the United States' ability to address unfair and illegal trade practices."
While domestic manufacturers support the bill, it has raised concerns for importers (including domestic manufacturers which use imported components) since sections of the bill could generate increased anti-dumping and countervailing-duty petitions.
The bill would:
• Require Congressional approval for a change in a country's non-market economy (NME) status.
• Require the application of countervailing duties to both China and other NMEs.
• Establish a "congressional trade enforcer" to examine barriers to U.S. exports and call on the Executive branch to file complaints or cases against trading partners.
• Reverse a prior court decision by amending the Tariff Act to explicitly state that the International Trade Commission will evaluate injury from dumped imports without regard to whether any other imports will replace them or whether any benefit to the domestic industry will occur.
• Limit presidential discretion to ignore recommendations by the ITC in safeguard cases involving China.
Critics of the bill claim:
• It would hurt U.S. manufacturing competitiveness.
• Contains provisions that are arguably World Trade Organization-illegal.
• Would prompt retaliation against U.S. exports.
• Would allow certain questionable procedures used by US trade agencies to continue (for example "zeroing" which eliminates any negative dumping margins by ignoring any foreign price that is higher than the weighted-average U.S. price for a product before calculating a dumping margin, thus inflating duty amounts.)
Forecast:
The bill has been referred to and awaits action in the House Ways & Means Committee. It is unlikely the bill will reach the full House or Senate for a vote this year. We see this bill as providing advance notice of the trade agenda to be pursued by Congressional leadership in the House in 2009. However, we do not believe the Leadership of the Senate Finance Committee will agree to many of the provisions of Chairman Rangel’s proposed Trade Enforcement Act.
For further information contact Peter Friedmann at OurManInDC@FederalRelations.com
Crisis in Transportation Funding (back to top) July 28, 2008
The Highway Trust Fund, which is used to finance maintenance of the US Interstate Highway System and certain other roads, as well as mass transit, is facing a crisis of monumental proportions. The Bush Administration and the Congressional Budget Office forecast that revenues for the Highway Account will fall short of meeting SAFETEA-LU commitments by more than $5.0 billion during FY 2009, the last year of SAFETEA-LU authorizations.
If additional revenues are not found, state highway funds may face as much as a 40% cut in FY 2009. This is a huge problem considering that current spending is already at 40% of the level needed (which is estimated to be at least $225 billion a year) according to the National Surface Transportation Policy and Revenue Study Commission, which was created by SAFETEA-LU. This problem is not helped by the fact that high gas prices are keeping more and more people off the road, or moving them to more fuel-efficient vehicles, further slashing the funds available to rebuild the nation's aging highway system and expand mass-transit options. A report issued by the Transportation Department in July showed that over the previous seven months, Americans have reduced their driving by more than 40 billion miles.
In response to this crisis, the National Surface Transportation Policy and Revenue Study Commission, in a report it issued to Congress earlier this year, recommended that the federal gas tax should increase 25 to 40 cents per gallon over the next five years and then be indexed for inflation. This change would most likely be made as part of the next six-year highway authorization bill which is set to be debated starting in 2009. The gas tax is currently at 18.3 cents per gallon on gasoline and 24.3 cents per gallon of diesel fuel. The Mass Transit Account receives a portion of the motor fuel taxes, usually 2.86 cents per gallon, as does the Leaking Underground Storage Tank Trust Fund, usually 0.1 cent per gallon. The General Fund receives 2.5 cents per gallon of the tax on gasohol and some other alcohol fuels plus an additional 0.6 cent per gallon for fuels that are at least 10 percent ethanol. The Highway Account receives the remaining portion of the fuel tax proceeds.
In the meantime, the House and Senate have both made several attempts to pass legislation that would temporarily address this crisis by adding $8.16 billion back to the highway trust fund to cover the $8.16 billion was removed from the trust fund in 1998 and was used for other purposes. This legislation has been held up, however, by some Members of Congress who are concerned this bill will increase the budget deficit without providing a long-term solution.
Outlook
Regardless of whether Congress is able to pass legislation that would add the $8.16 billion back to the highway trust fund, the question of how to pay for transportation funding in FY10 and for the six years covered by the new transportation authorization bill will be issue #1 in Congress. Not only will funding be the most important issue, it will also be the most contentious, and it could prolong debate on the new transportation bill well into 2010 or beyond.
For further information contact Ray Bucheger at Ray@FederalRelations.com.
Environmental Agenda on Capitol Hill – A Brief Outlook for the 111th Congress (back to top) August 7, 2008
Clearly the environmental agenda will be driven in part by whom the next President is. With Democratic majorities in the House and Senate, legislation addressing a number of critical environmental issues will garner significant attention. That being said, to put this in context, we feel that bread and butter issues (or perhaps more aptly, guns and butter issues) will take up most of the attention on Capitol Hill, especially in the early part of 2009, and as the new President and new Congress address problems with the economy, gas and oil supply/price, and housing, not to mention deciding what to do about the US presence in Iraq, and put in place policies that will further protect the US from terror attacks.
Taking this into account, following are selected environmental initiatives we expect to be addressed in 2009, including legislation that promotes cleaner air, cleaner water, and preservation of our natural resources.
• Global Climate Change: Protecting the environment has become synonymous with combating global climate change, which will be the top environmental priority for Congress and the next president, and the most high-profile. While climate change encompasses a broad array of issues, including energy efficiency and conservation; investing in next generation bio fuels and clean energy technology; enhanced fuel economy standards; confronting deforestation; and promoting carbon sequestration, the end goal is the same: to reduce emissions of carbon dioxide and other harmful pollutants that pollute our nation’s air and water resources.
• Support Creation of a Green Job Corps: There is some support for an energy-focused youth jobs program for disconnected and disadvantaged youth, providing participants with service opportunities to improve energy conservation and efficiency of homes and buildings in their communities, while also providing practical experience in important career fields of expected high-growth employment. The proposal will require support from a wide range of environmental organizations and business community in order to make this plan a reality.
• Mining Law Reform: Legislation reforming Mining Law includes recognition of public land values other than mining; protection of the nation’s special places (historic sites, national parks, wild and scenic rivers, wilderness areas, and Native American cultural sites) and their surroundings; ending the practice of land patenting (handing over public land to mining companies); requiring that mined land be restored to pre-mining conditions; and requiring that water is protected. This is an issue that will only see progress if it is pushed by a broad coalition of interests. The biggest hurdle to achieving any significant changes to our nation’s mining laws is Senate Majority Leader Harry Reid, who is the son of a gold miner and has stalled mining reforms in the 110th Congress.
• Clean Water Restoration Act: This legislation that would restore the broad jurisdiction of the Clean Water Act and reaffirm the original intent of Congress, which is to provide the broadest possible protection to the nation’s waters, received hearings in the House and Senate but was not voted on in either chamber. This legislation could be a focus of Congress and the next President as they work to reinvigorate the drinking water standards that have been weakened over the last eight years and update them to address new threats, while also helping high-growth regions with the challenges of managing their water supplies. The debate over this legislation will highlight the need for protecting national treasures like Grand Canyon National Park and the Great Lakes from threats such as industrial pollution, water diversion, and invasive species.
• Funding for Private Land Conservation: The Wetland Reserve Program, Conservation Security Program and the Conservation Reserve Program help landowners protect and restore wetlands, grasslands, forests, and other wildlife habitat, and assist them with sustainable environmental planning and best land management practices. Funding for these programs must compete with numerous other federal funding priorities; support for this program is critical for increased funding.
• Funding for Public Outdoor Recreation Areas: The Land and Water Conservation Fund supports land acquisition and development of public outdoor recreation areas and facilities. The program is intended to create and maintain a nationwide legacy of high quality recreation areas and facilities and to stimulate non-federal investments in the protection and maintenance of recreation resources across the United States. Congress has authorized up to $900 million annually in funding for this program, but that level of funding has only been provided one time. Adequate funding for this program must compete with numerous other federal funding priorities which means that support for this program from environmental groups and the business community is critical for increased funding.
• Funding for Clean Drinking Water: The Clean Water State Revolving Fund funds water quality protection projects for wastewater treatment, non-point source pollution control, and watershed and estuary management. This fund can be used to help communities across America by restoring better federal financing for water and wastewater treatment infrastructure. Funding for this program must compete with numerous other federal funding priorities; support for this program is critical for increased funding.
• Authorization and Funding for National Park System Trail Initiative: Congressional authorization will be sought for a Trail Initiative program, which invests in diverse front country and backcountry recreation trail systems inside the parks; fully empowers the National Trails System; leverages the work of volunteer-based trail maintenance; creates a trail sustainability fund; and works to better connect land and water trails with surrounding communities.
• Authorization and Funding for Next Generation of Park Professionals: Congressional authorization and funding will be pursued for a proposed Next Generation of Park Professionals program, which will develop a national Skill-Based Field Ranger Corps that will get more rangers out in the field, hiking, skiing, climbing, mountain biking or paddling among park visitors. In the short term, these rangers will better serve park visitors. In the longer term, the Next Generation of Park Professionals will help make National Parks more relevant to Americans and connect the parks to their lives.
• Funding for National Landscape Conservation System: Advocates will seek an adequate budget, an accountable management structure, increased public awareness, and the ability to leverage local volunteers for the Bureau of Land Management's National Landscape Conservation System, which highlights 26 million acres of some of the best recreational, cultural, scientific, and natural resources in the American West.
For further information contact Peter Friedmann at ourmanindc@federalrelations.com.
Foster Care Receives a Boost from Congress (back to top) August 8, 2008
Congress is turning its attention to improving foster care for our nation’s children in need. The Fostering Connections to Success Act (H.R. 6307) sponsored by Rep Jim McDermott (D-WA), member of the Ways & Means Committee, aims to assist children in foster care in developing or maintaining connections to family, community, support, health care, and school. This bill quickly passed by the House. In the Senate, Sen. Max Baucus (D-MT), Chairman of the Finance Committee, has included the text of the House passed bill, into a new Senate bill he has introduced. While these bills addresses many aspects of the foster care system, one important component of the legislation deals with foster care on Indian lands. Following is a summary of the Indian foster care provisions.
The bill would:
• Authorize Indian governments to apply to Health and Human Services (HHS) for money
• Create and administer foster care systems and the supporting case management, training and data collection activities that come with it. This would do away with the old system of states deciding if Indian governments should be allowed to create a foster care system and if so, how much funding they would receive.
• Provide reimbursement for foster care services to foster care families (creating a bigger incentive for Indian families to apply to be a foster care family).
• Allow for the Indian government to create its own standard of choosing foster care families that can based on the beliefs and traditions of that Indian tribe. This means that someone could be acceptable to be a foster parent under state standards but not under Indian standards due to the differences between the state and Indian governments and the traditions of each.
• Allow for the Indian government to apply to HHS for an exemption of certain federal requirements needed in order to receive funding, thus making it easier for the Indian government to create and administer a foster care system, as long as those exemptions would be in the best interest of the child.
• Require that Indian governments be given the same evaluating and funding requirements that the states have, so the federal government can’t do what state governments had the ability to do, which was fund Indian foster care systems at a much lower level than its own systems.
• grant Indian government the permission to perform background checks on potential foster care parents using the Indian Child Protection and Family Violence Prevention Act as an alternative to TITLE IV standards.
• Allow all Indian children placed into foster care under Indian or state foster care programs to have their case revisited.
• Allows all Indian foster children in Indian or state programs to continue to receive benefits under their current foster care program until a new system is put into place, if a new system does get put into place.
• Allow Indian governments to receive a direct allocation from the federal government for Chafee Independent Living funds.
Forecast:
When Congress enacts this foster care legislation, the transfer of foster care authority to tribal governance would take place starting October 1, 2010. The bill has broad bi-partisan support and is expected to pass Congress handily this fall of 2008. However, this bill only addresses specific problems within the current system. Complete overhaul of our approach to foster care is being widely discussed. It is possible likely that comprehensive foster care reform legislation may be introduced during the 111th Congress.
For further information, contact Peter Friedmann at ourmanindc@federalrelations.com.
