17.5% tariffs on Mexican tomatoes.

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While we frequently hear “tariff” and “China” in the same sentence, we will likely now start hearing “tariff” and “Mexico” more frequently as the Trump administration has placed near tariffs on imports of fresh tomatoes from Mexico.

A little background – in 1996 the US did not pursue tariffs on Mexican tomAatoes based off assurances from Mexican tomato growers would not sell their tomatoes at articially lower prices. However, last year Florida tomato growers requested the Trump administration to investigate whether Mexican tomatoes were being sold at articially low prices. In February 2019, the Trump administration issued a notice they would withdraw from the 1996 agreement on May 7th if a new deal could not be reached. Since no agreement was reached, Mexican tomatoes are now subject to a 17.5% tariff. If a subsequent investigation finds no unfair pricing, then any tariffs paid will be refunded.

Questions about the tomato tariffs, call/text David Hsu at 832.896.6288 or email at attorney.dave@yahoo.com or dh@gjatradelaw.com.

Trump Effect – workers in Mexico can now organize labor unions.

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Official portrait of President Donald J. Trump, Friday, October 6, 2017. (Official White House photo by Shealah Craighead)

On May 1st, the Mexican government completed passage of a major labor reform bill allowing workers the right to bargain colelctively with employers through independent labor unions, without fear of retaliation or harassment. Workers in Mexico can now vote freely and elect their union representatives.

Part of the impetus for the passage of labor reform is the new trade deal to replace NAFTA. Then-Mexican President Enrique Pena Nieto promised to overhaul labor laws as part of the new USMCA trade deal. Labor reform in Mexico was supported by the Trump administration as a way to improve working conditions in Mexico, lowering the incentive for US manufacturers to move jobs south of the border.

Ironically, the party of labor unions, the House Democrats have not yet agreed to the passage of the USMCA as they believe the enforcement of the new labor laws doesn’t exist. Even more ironic is Democrat President Clinton supported the passage of NAFTA – an agreement that did not provide for any means for workers in Mexico to collectively bargain or organize labor unions. Since 1994 and then-President Clinton’s passage of NAFTA, the average factory worker in Mexico is just over $2.00 an hour.

If you have any questions how the new USMCA will impact your business, call/text David Hsu at 832.896.6288 or by email at attorney.dave@yahoo.com or dh@gjatradelaw.com.

CHS Inc. SEC filing discloses FCPA violations.

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Tell me more about the CHS FCPA violation:
In an August 31, 2018 Form 10-K filing with the United States Securities and Exchange Commission (SEC), CHS Inc. disclosed FCPA violations related to:

“a small number of reimbursements the Company made to Mexican customs agents in the 2014-2015 time period for payments the customs agents made to Mexican customs officials in connection with inspections of grain crossing the U.S.-Mexican border by railcar. We are fully cooperating with the government, including with the assistance of legal counsel, which assistance includes investigating other areas of potential interest to the government. We are unable at this time to predict when our or the government agencies’ review of these matters will be completed or what regulatory or other outcomes may result.”

The full 10-K filing can be found here (link opens in a new window).

Who is CHS?
CHS is a Fortune 100 business based in Minnesota and operates food processing and wholesale, farm supply, Cenex brand fuel, financial services, and retail businesses. CHS employs 12,000 people and are also large operators in grain, soybean and sunflower production and transport.

What is the FCPA?
In short – the Foreign Corrupt Practices Act of 1977 was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. Payments, promises to pay or even authorization for payment is a violation and the definition of a foreign official is also very broad.

What does the FCPA have to do with importers and exporters?
Everything! The FCPA applies to all U.S. persons and many of our clients have FCPA risks without even knowing they do. FCPA violations and penalties are severe and individuals have also been found to be personally liable for violations that were committed by the company. The CHS FCPA violations highlight just some of the risks US based exporters face when doing business (exporting) overseas.

FCPA consultation and audit at no obligation or cost to you.
If you don’t have a FCPA compliance program in place or have not updated your compliance program – call experienced trade and compliance attorney David Hsu at 832-896-6288 or by email at attorney.dave@yahoo.com.

The FCPA penalties and compliance risk to you and your company is high, call David Hsu today.

 

 

USMCA Signed at G20 Summit.

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As expected, the USMCA was signed by President Trump, Canadian Prime Minister Justin Trudeau and Mexican President Enrique Pena Nieto. The new U.S. Mexico Canada Agreement (USMCA) is a replacement for the NAFTA agreement entered in 1994 between the 3 countries.

While the agreement was signed today, each of the legislatures from the three countries will still need to ratify the agreement before it takes effect.

A full text of the agreement can be viewed here.

If you have any questions how the USMCA may impact your business, call experienced trade attorney David Hsu at 832-896-6288 or by email at attorney.dave@yahoo.com.

The NAFTA (USMCA) loyalty oath?

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As has been widely reported, the new NAFTA agreement (USMCA) contains what has been branded a “loyalty oath” among the US, Canada and Mexico.

What is this “loyalty oath”?
In short, the oath says that in the event any USMCA member enters into a free trade agreement (FTA) with a non-market country, the other two remaining countries can leave the agreement and form their own bilateral trade pact.

Why is this clause in the USMCA?
This clause is likely an effort by the US Administration to isolate China economically since neither Canada or Mexico would want to leave the USMCA. This clause is also aimed at limiting the imports from China to Mexico/Canada for shipment into the US duty free.

Is a “loyalty oath” found in other trade agreements?
Currently, no, however this inclusion in the USMCA may be an indication of what will occur in future trade agreements to further isolate China from their trading partners.

Is the “loyalty oath” set in stone?
Right now, no, the disclaimer on the current USMCA text states: “Subject to Legal Review for Accuracy, Clarity, and Consistency Subject to Language Authentication“. Only upon ratification by all countries can we know for sure whether this is in the agreement.

What is a market or non-market economy?
This loyalty oath against non-market economies is likely aimed at China while not specifically named in the agreement. Beijing has asked for recognition as a “market economy” within the World Trade Organization (WTO) since their accession agreement expired in December 2016. If China is branded a “market economy”, this would limit trade remedies such as anti-dumping/countervailing duties to be used against Chinese imports.

What are the non-market economies around the world?
According to the European Union, besides China, the other non-market economies include Vietnam, Kazakhstan, Albania, Armenia, Azerbaijan, Belarus, Georgia, the Democratic People’s Republic of Korea, Kyrgyzstan, Moldova, Mongolia, Tajikistan, Turkmenistan, and Uzbekistan.

Where can I read the full text of the “loyalty oath”
I could not find any news sources that cited the USMCA section.

The exact text of the oath is copied below:

4. Entry by any Party into a free trade agreement with a non-market country, shall allow the other Parties to terminate this Agreement on six-month notice and replace this Agreement with an agreement as between them (bilateral agreement).

The official PDF on the US Trade Representative website can be accessed here: (last accessed October 9, 2018).

https://ustr.gov/sites/default/files/files/agreements/FTA/USMCA/32%20Exceptions%20and%20General%20Provisions.pdf

See Article 32.10 (4)

If you have any questions about NAFTA or the USMCA and how this may impact your business, call experienced trade attorney, David Hsu at 832-896-6288 or by email at attorney.dave@yahoo.com.

Brief Summary of the United States-Mexico-Canada Agreement (USMCA).

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After 13 months of negotiations, the United States, Mexico and Canada have concluded the United States-Mexico-Canada Agreement (USMCA) to replace the 25 year-old NAFTA agreement. This new agreement was reached on September 30th and will not come into force until ratified (estimated to be sometime in early 2019). Below is a brief summary of some of the changes:

Dairy:
Canada to increase US access to Canada’s diary market through an increase in the Tariff Rate Quotas (TRQs) for US milk ,cream and cheese. Outside quota imports to Canada were previously subject to a 300% tariff. Canada will also take steps to eliminate their “Class 6 and 7” milk pricing structure that had the impact of making domestically produced milk more competitive in price than foreign milk.

Poultry, eggs and sugar:
Canada allowed greater access to the US exporters for poultry, eggs and sugar while the US increased their quotas of Canadian sugar and sugar-containing products.

Notice Requirement for Tariff Changes for Certain Goods:
Canada needs to notify the US of any proposed change to Canada’s tariff schedule.

Grain:
The US and Canada will avoid using discriminatory grain grading standards.

Wine, Spirits and Beer:
The new agreement allows the recognition and protection of geographic indications for goods, such as “Tennessee Whiskey” can only be used by US manufacturers and “Canadian Whiskey” can only be used by Canadian whiskey producers. “Tequila” will also only be allowed to be used by Mexican manufacturers.

Textiles:
The USMCA changed the origin rules, providing for a 10% (by weight) de minimis threshold to tolerate the presence of content from outside the region, subject to limits on elastomeric content.

Rules of Origin:
The Rules of Origin increases the de minimis threshold from 7% to 10% of FOB adjusted value.

Automotive Developments:
Revised rules of origin for automotive goods require the following (and most provisions phase-in before 2023):

-The USMCA requires a regional (North American) value content of not less than 75%. Automotive parts will also be subject to regional value content requirements of between 65% and 75%.

-At least 70% of an auto producer’s steel and aluminum purchases must be “North America-originating” for that producer’s vehicles to qualify for USMCA duty-free treatment. Auto producers must keep records of steel and aluminum purchases and certify on an annual basis that it is keeping the required records.

=Auto producers must also comply with a new “Labour Value Content” (LVC) provision for their vehicles to qualify for USMCA treatment. The LVC provision requires that workers who earn at least US$16 per hour must carry out 40 to 45% of an auto producer’s activities (i.e., manufacturing, technology, assembly). Auto producers will need to keep records and certify that they meet these requirements.

Section 232:
The USMCA requires the US to give a 60-day notice to Mexico or Canada if the US proposes future section 232 measures. Any new measures would not apply for 60 days and Canada and Mexico can “seek to negotiate an appropriate outcome”.

Intellectual Property (Chapter 20):
Main change requires a minimum of ten years of government-granted marketing exclusivity for biologics. Canada currently provides a term of eight years, whereas the U.S. provides twelve years under the Biologics Price Competition and Innovation Act (BPCIA) of 2009.

For copyright protection, the USMCA requires that copyright terms last 70 years following the life of the creator for works, and 75 years for performances and sound recordings. Canada’s current copyright terms are “life of the author plus 50 years” and 70 years, respectively.

Another notable provision is on the exclusion of “fair use” exceptions to copyright law. However, Canada is not required to adopt the U.S.-style notice-and-takedown regime for internet service providers.

Anti-Corruption:
USMCA criminalizes supply and demand sides of bribery transactions and facilitation payments.

What’s next?
The USMCA will need to be signed first and then have to be ratified by the respective countries.

If you have any questions how the new USMCA will impact your business or have questions regarding the new country of origin, IP or any other issues in the USMCA, contact David Hsu at 832-896-6288 or by email at attorney.dave@yahoo.com.

CBP seizes hundreds of fake World Cup soccer jerseys.

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U.S. Customs and Border Protection (CBP) officials in El Paso seized four shipments shipped from China containing counterfeit Mexican national team soccer jerseys. The estimated retail value of these jerseys, if authentic, totals $66,390.

Prior to this seizure, CBP also seized 4 other shipments with Mexico, Germany and Brazil team jerseys totaling $47,340.

The CBP media release claims counterfeit goods harm the competitiveness of legitimate businesses and the items may be of poor quality and contain health and safety hazards to consumers. El Paso has made close to 400 seizures of goods for intellectual property rights violations with a seized MSRP of more than $3.8 million.

If you or someone you know has had their shipments seized by Customs, contact experienced trade attorney, David Hsu at 832-896-6288 or by email at attorney.dave@yahoo.com.

It’s official – US issues trade tariffs on steel and aluminum from the EU, Canada and Mexico.

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The Whitehouse issued two presidential proclamations that placed 25% steel and 10% aluminum tariffs on imports from the European Union, Canada and Mexico.

The full proclamations can be found here for steel and here for aluiminum.

If you have any questions on how these new tariffs will impact your business or what options you may have – contact experienced antidumping attorney David Hsu at 832-896-6288 or by email at attorney.dave@yahoo.com for a free evaluation.

US Customs and Border Protection and Mexican Counterparts sign Memo of Understanding.

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Credit: DHS Official Photo/Jetta Disco)

The Department of Homeland Security (DHS) announced on March 26, 2018, that U.S. Customs and  U.S. Customs and Border Protection (CBP) Commissioner Kevin McAleenan and the Tax Administration Service (SAT) Chief Osvaldo Santin signed a Memorandum of Cooperation (MOC) on customs issues and trade enforcement.

The MOU/MOC included commitments to cooperate on issues such as:

  1. increasing trade and customs compliance;
  2. battling cross-border illicit acitivites;
  3. cargo pre-inspection; and
  4. commitment to work together on unified cargo processing;
  5. collaboration on agriculture safety;
  6. collaboration on agriculture quarantine inspections and;
  7. information sharing.

The official homeland security press release can be found here.

With an ever increasing trade of goods between the US and Mexico, it’s great that CBP and SAT will work together to improve our trade relationship with Mexico.

APHIS Recognizes Mexico as Free of Classical Swine Fever.

pig-alp-rona-furna-sow-63285.jpegClassical swine fever (CSF or sometimes referred to as hog cholera/swine fever/European swine fever) is a highly contagious viral disease of pigs. CSF used to be widespread but many countries had eradicated the disease until it was reintroduced in 1997-199 (CSF was eradicated in the US in the 1970’s). A 1997 outbreak of CSF in the Netherlands involved more than 400 herds and cost $2.3 billion dollars to eradicate with some 12 million pigs killed.

While eradicated in North America, the US is also not immune to the risk as CSF is still endemic in South and Central America. Because of this, the United States Department of Agriculture’s (USDA) Animal and Plant Health Inspection Service (APHIS) previously classified imports of live swine, swine genetics, pork and pork products from Mexico as risky following a 2015 site review.

However, at the request of Mexico’s government, the USDA APHIS has now determined that the risk of CSF through Mexican imports of live swine, swine genetics, pork and pork products is very low. As such, these items can now be saefly imported into the US as long as the imports follow APHIS’ import regulations.

Importations of live swine, swine genetics, pork and pork products must (1) be accompanied by a certificate issued by a Mexican government veterinary officer, (2) must come from swine raised and slaughtered in regions APHIS considers CSF free.

If your company would like more information regarding importation of swine and swine products or other general USDA APHIS concerns, please do not hesitate to contact David Hsu at 832.896.6288 or by email at attorney.dave@yahoo.com.