Shipping project cargo by rail is expensive
October 13, 2008 – 11:03 am--> Journal of Commerce Break Bulk
There are three primary growth areas in BNSF Railway’s project cargo business, said Dave Garin, the railroad’s group vice president of industrial products. At the top of the list is equipment related to wind energy.
“We have considerable initiatives in blades, towers and other equipment, and they’re getting bigger and bigger,” Garin said.
As the national gross domestic product tripled capital investment over the past 30 years, investment in public water resources infrastructure decreased by 70 percent. The Army Corps of Engineers has a current backlog of more than 500 projects with a cost of about $38 billion. At current funding levels, it would take 25 years to complete the active projects.
The lack of funding for maintenance dredging has reached crisis proportions. The Harbor Maintenance Tax was created in 1986 specifically to fund dredging projects, but Congress must appropriate the funds annually. More than $1.4 billion was collected and put into the Harbor Maintenance Trust Fund in fiscal 2007, yet only $751 million was allocated to the Corps of Engineers for maintenance dredging.
“Without dredging, many port facilities and navigation channels would be rendered unsafe and non-navigable to users in less than a year,” the American Association of Port Authorities says.
The project cargo industry has largely been spared from negative impact of the nation’s aging inland waterways infrastructure, said Dennis Devlin, director of global projects and energy for BDP Project Logistics. Most project cargo moves inland by truck, and while ports continue to devote more resources to container operations, there are more marine terminals handling project cargo now than there were 10 years ago. The Gulf Coast ports of Houston, New Orleans, Beaumont, Freeport, Galveston and Port Arthur are adding breakbulk capacity or have the ability to do so, and there are many other options on both coasts.
Coordinating container and project shipments can be challenging. Vast amounts of ancillary equipment are needed to support projects, and much of it is containerized, including pipes, valves, pumps and instruments, Devlin said. BDP uses freight process management software from Houston-base HAL Inc. that is specifically designed to track all project-related cargo shipments door-to-door.
Although the nation’s marine ports have kept up with the demands of the breakbulk and heavy-lift industry, when the economy eventually improves, there will be an even greater demand for project cargo that could strain port capacity, said Frank Fogarty, senior vice president of sales and marketing for general stevedoring at Ports America.
Without a secure, ongoing source of funding for maintenance dredging and infrastructure upgrades, some of those ports could be at risk.
“If we don’t improve our infrastructure over time, we will put some ports out of business,” Fogarty said. “Shippers will be forced into less attractive or more expensive ports, and more cargo will have to go over land, further deteriorating our national infrastructure.”
Piping is the second leading growth area as the global boom in pipeline and drilling projects continues. Transmission and drilling pipes are getting longer and heavier, requiring temporary distribution sites across the rail network.�
The third growth category is refinery equipment such as reactors and specialized vessels. Project cargo falls under BNSF’s industrial products freight business, which also includes aircraft parts, military equipment and agricultural and industrial machinery. The industrial products business accounted for 24 percent of BNSF freight revenue in 2007.
Clearance is the biggest challenge in moving project cargo by rail. Finding the right combination of equipment and routes for rail and truck movements of oversize equipment is so difficult that some component manufacturers are designing and fabricating equipment with bridge and sidings clearance restrictions in mind. In some cases, manufacturers and project developers have invested their own funds to modify bridge clearances and other impediments along routes.
“They are making investments of a few hundred thousand dollars, but the equipment costs millions,” Garin said.
Shipping project cargo by rail is an expensive undertaking. Cargo of specified weights and dimensions must travel on specialized trains at slower speeds and often on longer routes. Union Pacific Railroad applies special train charges of $120 per rail mile to any excessive dimensional shipment, with a minimum charge of 200 miles, or $24,000, in addition to regular freight charges. Heavy-duty flatcar, detention, demurrage and other changes also may apply.
Under common-carrier obligations, railroads must accept project cargo, but all of the hurdles and requirements, including car availability, make it difficult for shippers, said Grant Wattman, director of logistics for global engineering and construction firm CH2M Hill and president of the Exporters Competitive Maritime Council, a coalition of project cargo stakeholders.
The already formidable challenge of moving oversize cargo over the highways is further complicated “with the trend of Class 1 railways refusing to accept oversize and overweight cargoes, which will force additional freight to the national highway system,” according to an ECMC report.
The trend is understandable given the disruptions associated with moving project cargo by rail compared with the smooth, profitable flow of containerized cargo. “If I was in their shoes,” Wattman said, “I would do same thing.”
– David Biederman
Wednesday, October 22, 2008
Tuesday, October 21, 2008
Both of our Houston warehouse facilities have been experiencing this increase also, especially with regards to material bound for energy projects.
Some Gulf ports bolstered by steel
October 20, 2008 – 11:49 am-->Journal of Commerce - Breakbulk
Despite a general drop in U.S. steel imports this summer, the Texas ports of Houston, Brownsville, and Beaumont will post increased year-to-year volumes thanks largely to a strong demand for steel used in energy projects in the U.S. and general building projects in Mexico.
But other Gulf ports were down — and some down sharply. The Port of New Orleans was hit hard with a halving of steel imports year-to-year through July 2008. Tampa dropped by nearly two-thirds year-to-year through the fiscal year ending in June.
“August was down more than we anticipated,” said David Phelps, president of the American Institute for International Steel. “But the truth is that the United States needs at least 30 million tons of steel imports a year and we expect to exceed that in 2008, so we’re talking about not a great year for imports but not a bad year either.”
However, AIIS forecasts increased imports in only three of 12 steel categories — structurals; oil- and gas-related pipe and tube; and “all other” pipe and tube — over the next three to five months. Other categories, including hot- and cold-rolled steel, slab and others, are expected to hold steady at best or decrease further.
Year-to-date figures for the country through August were down 10.8 percent, dropping to 21.2 million tons in 2008 from 23.8 million tons in 2007. From July to August this year, steel imports dropped 19.4 percent, or to 2.35 million tons from 2.91 million tons, according to the AIIS. August 2008 imports were down 11.4 percent compared to August 2007.
James M. Baldwin Jr., a former executive with steel carrier Forest Lines, said the current import situation is a function of the volatile global economy rather than anything ports are or aren’t doing. “The Port of New Orleans is really going to be singing the blues now, but it’s the market, not the port,” he said. “I believe we’re going to see an upswing in the fourth quarter, but it’s not going to pay for a real good dinner on a Saturday night.”
Indeed, New Orleans’ steel import tonnage figures have cratered year-to-year. AIIS figures show the port handled 1.8 million tons of imports for the 12 months ending July 2007, opposed to only 872,000 tons through July 2008. “That tells me that the New Orleans region is not seeing much demand for energy-related steel imports,” Phelps said. “Houston, on the other hand, is having a very good year.”
Robert Landry, director of marketing for the Port of New Orleans, said, “The weak dollar is just a real issue for us. “The other issue we are watching is the purchase of domestic mills by foreign concerns. We feel they may step up domestic U.S. production in order to avoid the increased transportation costs of importing steel.”
Despite those trends, Landry said, the port could show a strong fourth quarter. And, he said, “I’m willing to bet that September is one of our strongest months on steel in two years. We’ve had a lot more cargo than anticipated, and I’m very curious to see why that is happening.”
Port of Houston Authority figures show Houston imports up to 3.44 million tons from January through August 2008 from about 3.16 million tons January through August 2007 — a 9 percent increase, and just slightly behind the 2006 import totals for the same months. Nearly 300,000 tons of steel year-to-date were exported from Houston through August 2008, versus about 208,000 year-to-date through August 2007.
Brownsville also is having a very good year, said Antonio “Tony” Rodriguez, the port’s director of cargo services, because the port serves as a major gateway for steel bound for Mexican mills and building projects.
“We expect to be up over 1 million tons year-to-year by the end of the year,” Rodriguez said. “The Mexican economy is doing somewhat better than the American economy right now and there are a lot of big building projects near Mexico City.”
Brownsville saw 2 million tons of steel and other metal move into its port from January through August 2007 and is above that total year-to-date now, Rodriguez said. Exact year-to-year comparisons were not available, but port statistics show that the port is exceeding 2007 in the amount of iron and steel coils shipped as well as iron and steel slabs.
Energy-related steel imports have more than doubled at Beaumont, said John R. Roby, the port’s director of customer service. For the fiscal year ending in August, Beaumont counted 354,525 tons of imported steel, versus 169,798 for the same period last year. “The biggest driver has been pipe to be used in energy projects, particularly LNG projects,” Roby said. “We have a couple of LNG terminals and pipe-coating facility at the port where pipe is coated and then transported.”
At Mobile, James Lyons, director and chief executive of the Alabama State Port Authority, said steel exports are up and “that is a bright light.” Exports through the port will exceed imports this year. “Overall, imports are off a little but with around 600,000 tons in exports and imports we’re having a decent year,” he said. “We’re holding up reasonably well given the economy.”
Estimates of steel and iron imports through Mobile are 307,500 tons for the fiscal year ending Sept. 30, 2008 versus 442,300 tons a year earlier, port statistics show. Imports were nearly 564,000 tons during the 2006 fiscal year. Exports through the port in those same time periods have boomed, from only around 8,000 tons in 2006 to 141,000 tons in 2007 to an estimated 325,000 tons this year.
Tampa, too, saw a sharp decrease in imports through the fiscal year that ended June 30. Steel imports totaled only about 112,000 tons in fiscal 2008, down from 320,000 tons a year earlier. These comparison periods include portions of calendar year 2006 when steel imports were particularly high and do not reflect July or August 2008 tonnage.
“There definitely is a downturn in imports as a result of the construction downturn,” said Wade Elliott, senior director of the marketing division for the Tampa Port Authority. “We have seen an increase in recycled scrap for export.” The authority, which has scheduled the Port of Tampa Steel Conference for Feb. 16-17, 2009, hopes to benefit from expansions by Titan Metals and One Steel Recycling.
Phelps of the AIIS said three major product areas that drive steel demand — automobiles, white goods and residential building — all are weak in the U.S. economy right now, even as oil- and energy-related projects remain white hot.
But it is not just the state of the immediate economy that is impacting imports, he said. Buying habits and inventory levels, coupled with the weakness of the American dollar, have an effect, as do the prices of domestic steel and of transportation.
Generally, steel buyers have a lot of inventory right now, Phelps said. “What we are seeing among buyers is typical when you have very high prices, such as we did in June and July,” he said. “Buyers sat down and took a deep breath, looked at their inventories and said, ‘Unless I need something immediately, I’m sitting on my hands to see where price goes.’ ”
“Steel is cyclical, and if somebody blinks on the buyer side, it could all jump again, just like that,” Phelps continued. “But any deal transacted today on imported (waterborne) steel won’t really arrive until December and January.”
In part, AIIS bases its slowing import predictions on falling imports from Canada, which have just a two- to six-week lag from order to delivery. Statistics show that imports from Canada into the U.S. fell to 463,000 tons in August from 657,000 in July — a good indicator of weakened import orders in the United States. Orders filed at the same time as the Canadian orders but from steel producers in other countries are still in transit on water routes and thus lag deliveries from Canada by three to five months.
Therefore, Phelps believes that weak imports from Canada now — on the two- to six-week delivery cycle — may foreshadow weak waterborne imports — on the three-to five-month cycle — through the rest of this year.
Imports from North American sources represented the largest declines in August, with imports from Canada falling by nearly 30 percent and from Mexico falling 27 percent (to 202,000 tons from 276,000) from July to August, Phelps said.
Based on AIIS forecasts, the trend of imports over the next three to five months will almost certainly drop in several categories, including hot-rolled and cold-rolled sheet, corrosion-resistant steel, wire rod and rebar. Only structurals and stainless steel have decent chances of remaining level.
Over the next two months, according to AIIS estimates, only oil and gas pipe and tube will be up with any degree of certainty, with other pipes and tubes showing a slight tendency to rise. Most other types of steel imports are expected to decline over both the two-month and three- to five-month periods.
John Anton, a steel industry analyst with the consulting firm Global Insight, said prices were the key reason for the rise in exports and the slippage in imports. “There’s a lot of countervailing forces. Imports should be rising because U.S. prices are higher,” he said. “Offsetting that is the fact that total volume will decline because of the weak economy, so imports are being buffeted by opposing forces.”
By Robert R. Frump, with contributions by William Armbruster.
Some Gulf ports bolstered by steel
October 20, 2008 – 11:49 am-->Journal of Commerce - Breakbulk
Despite a general drop in U.S. steel imports this summer, the Texas ports of Houston, Brownsville, and Beaumont will post increased year-to-year volumes thanks largely to a strong demand for steel used in energy projects in the U.S. and general building projects in Mexico.
But other Gulf ports were down — and some down sharply. The Port of New Orleans was hit hard with a halving of steel imports year-to-year through July 2008. Tampa dropped by nearly two-thirds year-to-year through the fiscal year ending in June.
“August was down more than we anticipated,” said David Phelps, president of the American Institute for International Steel. “But the truth is that the United States needs at least 30 million tons of steel imports a year and we expect to exceed that in 2008, so we’re talking about not a great year for imports but not a bad year either.”
However, AIIS forecasts increased imports in only three of 12 steel categories — structurals; oil- and gas-related pipe and tube; and “all other” pipe and tube — over the next three to five months. Other categories, including hot- and cold-rolled steel, slab and others, are expected to hold steady at best or decrease further.
Year-to-date figures for the country through August were down 10.8 percent, dropping to 21.2 million tons in 2008 from 23.8 million tons in 2007. From July to August this year, steel imports dropped 19.4 percent, or to 2.35 million tons from 2.91 million tons, according to the AIIS. August 2008 imports were down 11.4 percent compared to August 2007.
James M. Baldwin Jr., a former executive with steel carrier Forest Lines, said the current import situation is a function of the volatile global economy rather than anything ports are or aren’t doing. “The Port of New Orleans is really going to be singing the blues now, but it’s the market, not the port,” he said. “I believe we’re going to see an upswing in the fourth quarter, but it’s not going to pay for a real good dinner on a Saturday night.”
Indeed, New Orleans’ steel import tonnage figures have cratered year-to-year. AIIS figures show the port handled 1.8 million tons of imports for the 12 months ending July 2007, opposed to only 872,000 tons through July 2008. “That tells me that the New Orleans region is not seeing much demand for energy-related steel imports,” Phelps said. “Houston, on the other hand, is having a very good year.”
Robert Landry, director of marketing for the Port of New Orleans, said, “The weak dollar is just a real issue for us. “The other issue we are watching is the purchase of domestic mills by foreign concerns. We feel they may step up domestic U.S. production in order to avoid the increased transportation costs of importing steel.”
Despite those trends, Landry said, the port could show a strong fourth quarter. And, he said, “I’m willing to bet that September is one of our strongest months on steel in two years. We’ve had a lot more cargo than anticipated, and I’m very curious to see why that is happening.”
Port of Houston Authority figures show Houston imports up to 3.44 million tons from January through August 2008 from about 3.16 million tons January through August 2007 — a 9 percent increase, and just slightly behind the 2006 import totals for the same months. Nearly 300,000 tons of steel year-to-date were exported from Houston through August 2008, versus about 208,000 year-to-date through August 2007.
Brownsville also is having a very good year, said Antonio “Tony” Rodriguez, the port’s director of cargo services, because the port serves as a major gateway for steel bound for Mexican mills and building projects.
“We expect to be up over 1 million tons year-to-year by the end of the year,” Rodriguez said. “The Mexican economy is doing somewhat better than the American economy right now and there are a lot of big building projects near Mexico City.”
Brownsville saw 2 million tons of steel and other metal move into its port from January through August 2007 and is above that total year-to-date now, Rodriguez said. Exact year-to-year comparisons were not available, but port statistics show that the port is exceeding 2007 in the amount of iron and steel coils shipped as well as iron and steel slabs.
Energy-related steel imports have more than doubled at Beaumont, said John R. Roby, the port’s director of customer service. For the fiscal year ending in August, Beaumont counted 354,525 tons of imported steel, versus 169,798 for the same period last year. “The biggest driver has been pipe to be used in energy projects, particularly LNG projects,” Roby said. “We have a couple of LNG terminals and pipe-coating facility at the port where pipe is coated and then transported.”
At Mobile, James Lyons, director and chief executive of the Alabama State Port Authority, said steel exports are up and “that is a bright light.” Exports through the port will exceed imports this year. “Overall, imports are off a little but with around 600,000 tons in exports and imports we’re having a decent year,” he said. “We’re holding up reasonably well given the economy.”
Estimates of steel and iron imports through Mobile are 307,500 tons for the fiscal year ending Sept. 30, 2008 versus 442,300 tons a year earlier, port statistics show. Imports were nearly 564,000 tons during the 2006 fiscal year. Exports through the port in those same time periods have boomed, from only around 8,000 tons in 2006 to 141,000 tons in 2007 to an estimated 325,000 tons this year.
Tampa, too, saw a sharp decrease in imports through the fiscal year that ended June 30. Steel imports totaled only about 112,000 tons in fiscal 2008, down from 320,000 tons a year earlier. These comparison periods include portions of calendar year 2006 when steel imports were particularly high and do not reflect July or August 2008 tonnage.
“There definitely is a downturn in imports as a result of the construction downturn,” said Wade Elliott, senior director of the marketing division for the Tampa Port Authority. “We have seen an increase in recycled scrap for export.” The authority, which has scheduled the Port of Tampa Steel Conference for Feb. 16-17, 2009, hopes to benefit from expansions by Titan Metals and One Steel Recycling.
Phelps of the AIIS said three major product areas that drive steel demand — automobiles, white goods and residential building — all are weak in the U.S. economy right now, even as oil- and energy-related projects remain white hot.
But it is not just the state of the immediate economy that is impacting imports, he said. Buying habits and inventory levels, coupled with the weakness of the American dollar, have an effect, as do the prices of domestic steel and of transportation.
Generally, steel buyers have a lot of inventory right now, Phelps said. “What we are seeing among buyers is typical when you have very high prices, such as we did in June and July,” he said. “Buyers sat down and took a deep breath, looked at their inventories and said, ‘Unless I need something immediately, I’m sitting on my hands to see where price goes.’ ”
“Steel is cyclical, and if somebody blinks on the buyer side, it could all jump again, just like that,” Phelps continued. “But any deal transacted today on imported (waterborne) steel won’t really arrive until December and January.”
In part, AIIS bases its slowing import predictions on falling imports from Canada, which have just a two- to six-week lag from order to delivery. Statistics show that imports from Canada into the U.S. fell to 463,000 tons in August from 657,000 in July — a good indicator of weakened import orders in the United States. Orders filed at the same time as the Canadian orders but from steel producers in other countries are still in transit on water routes and thus lag deliveries from Canada by three to five months.
Therefore, Phelps believes that weak imports from Canada now — on the two- to six-week delivery cycle — may foreshadow weak waterborne imports — on the three-to five-month cycle — through the rest of this year.
Imports from North American sources represented the largest declines in August, with imports from Canada falling by nearly 30 percent and from Mexico falling 27 percent (to 202,000 tons from 276,000) from July to August, Phelps said.
Based on AIIS forecasts, the trend of imports over the next three to five months will almost certainly drop in several categories, including hot-rolled and cold-rolled sheet, corrosion-resistant steel, wire rod and rebar. Only structurals and stainless steel have decent chances of remaining level.
Over the next two months, according to AIIS estimates, only oil and gas pipe and tube will be up with any degree of certainty, with other pipes and tubes showing a slight tendency to rise. Most other types of steel imports are expected to decline over both the two-month and three- to five-month periods.
John Anton, a steel industry analyst with the consulting firm Global Insight, said prices were the key reason for the rise in exports and the slippage in imports. “There’s a lot of countervailing forces. Imports should be rising because U.S. prices are higher,” he said. “Offsetting that is the fact that total volume will decline because of the weak economy, so imports are being buffeted by opposing forces.”
By Robert R. Frump, with contributions by William Armbruster.
Monday, October 20, 2008
Heavy Lift Markets
This article is of particular interest to us here at Dixie Cullen, as we're seeing a greater number of Project Cargo coming through our warehouse facility and are seeing more customers choose the direction of Break Bulk.
Project, heavy-lift markets on solid ground, Drewry’s Page says
October 16, 2008 – 3:28 pm-->By Peter Leach -- Journal of Commerce - Break Bulk
NEW ORLEANS — The project and heavy-lift sectors of the breakbulk shipping industry will fare much better during the current global economic crisis than either the bulk or the container sectors.
Even if breakbulk shipments of such commodities as steel and forest products suffer during the global economic slowdown, demand for vessel space for the components of heavy industrial projects in the developing world will remain strong, Mark Page, director of liner shipping for Drewry Shipping Consultants in London, told The Journal of Commerce’s 19th Annual Breakbulk Transportation Conference here on Thursday.
“It’s a tough time for shipping, but the breakbulk and project cargo sectors should hold up well,” Page said.
Demand will hold up particularly well for the new modern multipurpose vessels that are specially designed to carry project cargo. Demand for the older, less-specialized vessels will probably slow.
What is rescuing project cargo from the global downturn is the continuing growth of markets for projects with long lead times in China, India, the Middle East and Russia, which will continue to grow in 2008 and 23009, Page said.
Although project cargo carriers have been ordering new multipurpose vessels in record numbers in the last few years, there is no danger of overcapacity in this sector. That’s because there has been no scrapping of older vessels in the last few years, and the ratio of new orders to the existing fleet is far lower than the container fleet, for example.
In 2008, the multipurpose vessel fleet is expected to increase by 4 percent, while demand for capacity is expected to increase by 5 percent, Page said.
Project, heavy-lift markets on solid ground, Drewry’s Page says
October 16, 2008 – 3:28 pm-->By Peter Leach -- Journal of Commerce - Break Bulk
NEW ORLEANS — The project and heavy-lift sectors of the breakbulk shipping industry will fare much better during the current global economic crisis than either the bulk or the container sectors.
Even if breakbulk shipments of such commodities as steel and forest products suffer during the global economic slowdown, demand for vessel space for the components of heavy industrial projects in the developing world will remain strong, Mark Page, director of liner shipping for Drewry Shipping Consultants in London, told The Journal of Commerce’s 19th Annual Breakbulk Transportation Conference here on Thursday.
“It’s a tough time for shipping, but the breakbulk and project cargo sectors should hold up well,” Page said.
Demand will hold up particularly well for the new modern multipurpose vessels that are specially designed to carry project cargo. Demand for the older, less-specialized vessels will probably slow.
What is rescuing project cargo from the global downturn is the continuing growth of markets for projects with long lead times in China, India, the Middle East and Russia, which will continue to grow in 2008 and 23009, Page said.
Although project cargo carriers have been ordering new multipurpose vessels in record numbers in the last few years, there is no danger of overcapacity in this sector. That’s because there has been no scrapping of older vessels in the last few years, and the ratio of new orders to the existing fleet is far lower than the container fleet, for example.
In 2008, the multipurpose vessel fleet is expected to increase by 4 percent, while demand for capacity is expected to increase by 5 percent, Page said.
US influence in Latin America wanes
By FRANK BAJAK – Oct 11, 2008 World Trade Magazine
QUITO, Ecuador (AP) — In a matter of weeks, a Russian naval squadron will arrive in the waters off Latin America for the first time since the Cold War. It is already getting a warm welcome from some in a region where the influence of the United States is in decline.
"The U.S. Fourth Fleet can come to Latin America but a Russian fleet can't?" said Ecuador's president, Rafael Correa. "If you ask me, any country and any fleet that wants can visit us. We're a country of open doors."
The United States remains the strongest outside power in Latin America by most measures, including trade, military cooperation and the sheer size of its embassies. Yet U.S. clout in what it once considered its backyard has sunk to perhaps the lowest point in decades. As Washington turned its attention to the Middle East, Latin America swung to the left and other powers moved in.
The United States' financial crisis is not helping. Latin American countries forced by Washington to swallow painful austerity measures in the 1980s and 1990s are aghast at the U.S. failure to police its own markets.
"We did our homework — and they didn't, they who've been telling us for three decades what to do," the man who presides over Latin America's largest economy, President Luiz Inacio Lula de Silva of Brazil, complained bitterly.
Latin America's more than 550 million people now "have every reason to view the U.S. as a banana republic," says analyst Michael Shifter of the Inter-American Dialogue think tank in Washington. "U.S. lectures to Latin Americans about excess greed and lack of accountability have long rung hollow, but today they sound even more ridiculous."
From 2002 through 2007, the U.S. image eroded in all six Latin American countries polled by the Pew organization, especially in Venezuela, Argentina and Bolivia. (The others were Brazil, Peru and Mexico.) People surveyed in 18 Latin American countries rated President Bush among the least popular leaders in 2007, along with President Hugo Chavez of Venezuela and just ahead of basement-bound Fidel Castro of Cuba, according to the Latinobarometro group of Chile.
In three years of presidential elections ending last year, Latin Americans chose mostly leftist leaders, and only Colombia and El Salvador elected unalloyed pro-U.S. chief executives. In May, the prestigious U.S. Council on Foreign Relations declared the era of U.S. hegemony in the Americas over. And in September, Bolivia and Venezuela both expelled their U.S. ambassadors, accusing them of meddling.
Along with the loss in political standing has come a decline in economic power. U.S. direct investment in Latin America slid from 30 percent to 20 percent of the total from 1998 to 2007, according to the U.N. Economic Commission on Latin American and the Caribbean.
The U.S. still does $560 billion in trade with Latin America, but in the meantime other countries are muscling in. China's trade with Latin America jumped from $10 billion in 2000 to $102.6 billion last year. In May, a state-owned Chinese company agreed to buy a Peruvian copper mine for $2.1 billion.
Other countries are also biting into U.S. military sales in the region. Boeing Co. is vying with finalists from France and Sweden for the sale of 36 jet fighters to Brazil. Venezuela's Chavez has committed to buying more than $4 billion in Russian arms, from Sukhoi jet fighters to Kalashnikov assault rifles. In April, Brazil and Russia agreed to jointly design top-line jet fighters and satellite-launch vehicles, and Brazil is getting technology from France to build a submarine.
"Similar deals could have been made with the United States had it been willing to share its technology," said Geraldo Cavagnari, of the University of Campinas near Sao Paulo.
Last month, Russian Prime Minister Vladimir Putin offered to help Chavez develop nuclear power. Even Colombia, the staunchest U.S. ally in South America, isn't limiting its options. After expressing alarm about the Russian warships a week ago, its defense minister, Juan Manuel Santos, promptly headed for Russia himself to discuss "better relations in defense." Chavez says he expects to hold joint Russian-Venezuelan naval exercises as early as November.
Bolivia also is looking to deepen ties with Russia and Iran.
Although the Islamic republic's ambassador has yet to arrive in South America's poorest country, its top diplomat there announced Friday that Iran will open two low-cost public health clinics.
And while Bolivia's only announced Russian hardware purchase is five helicopters for civil defense, Moscow's ambassador told the AP — after Bolivia booted the U.S. ambassador — that Russia has every right to help Latin American nations arm themselves.
"We know of many historical cases of U.S. intervention in Latin American countries," said the diplomat, Leonid Golubev.
Thomas Shannon, U.S. assistant secretary of state for the hemisphere, wouldn't comment directly on whether the U.S. has lost influence in Latin America. But he added that there is no doubt that the U.S. still holds most of the military power in the Caribbean, and said it has no interest in reviving "Cold War rhetoric." Shannon also noted that overall U.S. aid to the region will reach $2.2 billion for 2009, to total more than $14 billion during Bush's presidency.
However, critics point out that roughly half that aid is for the military or counternarcotics, and that Washington sends more money annually to Israel alone. Even U.S. giving has been dwarfed by Chavez's checkbook diplomacy, which easily eclipses U.S. aid between outright gifts and discounted oil.
His largesse has lured several longtime U.S. friends. Honduras' president, Manuel Zelaya, said last month that after pleading with Washington and the World Bank, he accepted $300 million a year from Chavez for agricultural investment to help fight rising food prices.
"Allies, friends, did not help me when I asked," he said.
Costa Rica's president, Oscar Arias, says Venezuela offers Latin America about four or five times as much money as the United States. Costa Rica has become the 19th member of Petrocaribe, through which Chavez sells Caribbean and Central American nations cut-rate oil at very low interest.
The diminished profile of the U.S. in Latin America comes after a history of welcomed influence dating back to President Franklin Roosevelt's "Good Neighbor" policy of the 1930s, which emphasized cooperation and trade over military intervention. There have been major bailouts, such as Washington's $20 billion rescue of Mexico in the 1994 peso devaluation crisis. As former Assistant Secretary of State Otto Reich noted, "We are the assistance bureau of first choice for the region."
But the U.S. has an ugly legacy of covert intervention in countries including Chile, Nicaragua, Guatemala and Cuba. Chile's center-left president, Michele Bachelet, was jailed and tortured by a U.S.-backed military dictatorship in the 1970s. She recently recalled telling Washington's ambassador to Chile an old joke: "Some say the only reason there's never been a coup in the United States is because there's no U.S. Embassy in the United States."
The United States has also long served as chief educator to Latin America's elite. Correa is among its presidents with a U.S. graduate degree — though that didn't stop him from accusing the CIA of infiltrating his military, or refusing to renew a lease for U.S. counterdrug missions to fly out of Ecuador.
With the U.S. facing its own financial crisis, it's unlikely to be able to leverage economic influence in Latin America anytime soon. Sen. Barack Obama's senior adviser on Latin America, Dan Restrepo, acknowledges that his candidate is essentially proposing a symbolic shift in style — albeit adding a special White House envoy for the Americas.
"Barack doesn't see the United States as the savior of the Americas, but as a constructive partner," Restrepo told the AP.
Reich, an adviser to Sen. John McCain who served three Republican presidents in the region, put it even more bluntly.
"No matter who is elected in November, there is not going to be any money for Latin America," he said. "Latin Americans expecting financial resources, any kind of help from the United States, they are barking up the wrong tree."
Associated Press writers Dan Keane in Bolivia, Eduardo Gallardo in Chile and Stan Lehman in Brazil contributed to this report.
By FRANK BAJAK – Oct 11, 2008 World Trade Magazine
QUITO, Ecuador (AP) — In a matter of weeks, a Russian naval squadron will arrive in the waters off Latin America for the first time since the Cold War. It is already getting a warm welcome from some in a region where the influence of the United States is in decline.
"The U.S. Fourth Fleet can come to Latin America but a Russian fleet can't?" said Ecuador's president, Rafael Correa. "If you ask me, any country and any fleet that wants can visit us. We're a country of open doors."
The United States remains the strongest outside power in Latin America by most measures, including trade, military cooperation and the sheer size of its embassies. Yet U.S. clout in what it once considered its backyard has sunk to perhaps the lowest point in decades. As Washington turned its attention to the Middle East, Latin America swung to the left and other powers moved in.
The United States' financial crisis is not helping. Latin American countries forced by Washington to swallow painful austerity measures in the 1980s and 1990s are aghast at the U.S. failure to police its own markets.
"We did our homework — and they didn't, they who've been telling us for three decades what to do," the man who presides over Latin America's largest economy, President Luiz Inacio Lula de Silva of Brazil, complained bitterly.
Latin America's more than 550 million people now "have every reason to view the U.S. as a banana republic," says analyst Michael Shifter of the Inter-American Dialogue think tank in Washington. "U.S. lectures to Latin Americans about excess greed and lack of accountability have long rung hollow, but today they sound even more ridiculous."
From 2002 through 2007, the U.S. image eroded in all six Latin American countries polled by the Pew organization, especially in Venezuela, Argentina and Bolivia. (The others were Brazil, Peru and Mexico.) People surveyed in 18 Latin American countries rated President Bush among the least popular leaders in 2007, along with President Hugo Chavez of Venezuela and just ahead of basement-bound Fidel Castro of Cuba, according to the Latinobarometro group of Chile.
In three years of presidential elections ending last year, Latin Americans chose mostly leftist leaders, and only Colombia and El Salvador elected unalloyed pro-U.S. chief executives. In May, the prestigious U.S. Council on Foreign Relations declared the era of U.S. hegemony in the Americas over. And in September, Bolivia and Venezuela both expelled their U.S. ambassadors, accusing them of meddling.
Along with the loss in political standing has come a decline in economic power. U.S. direct investment in Latin America slid from 30 percent to 20 percent of the total from 1998 to 2007, according to the U.N. Economic Commission on Latin American and the Caribbean.
The U.S. still does $560 billion in trade with Latin America, but in the meantime other countries are muscling in. China's trade with Latin America jumped from $10 billion in 2000 to $102.6 billion last year. In May, a state-owned Chinese company agreed to buy a Peruvian copper mine for $2.1 billion.
Other countries are also biting into U.S. military sales in the region. Boeing Co. is vying with finalists from France and Sweden for the sale of 36 jet fighters to Brazil. Venezuela's Chavez has committed to buying more than $4 billion in Russian arms, from Sukhoi jet fighters to Kalashnikov assault rifles. In April, Brazil and Russia agreed to jointly design top-line jet fighters and satellite-launch vehicles, and Brazil is getting technology from France to build a submarine.
"Similar deals could have been made with the United States had it been willing to share its technology," said Geraldo Cavagnari, of the University of Campinas near Sao Paulo.
Last month, Russian Prime Minister Vladimir Putin offered to help Chavez develop nuclear power. Even Colombia, the staunchest U.S. ally in South America, isn't limiting its options. After expressing alarm about the Russian warships a week ago, its defense minister, Juan Manuel Santos, promptly headed for Russia himself to discuss "better relations in defense." Chavez says he expects to hold joint Russian-Venezuelan naval exercises as early as November.
Bolivia also is looking to deepen ties with Russia and Iran.
Although the Islamic republic's ambassador has yet to arrive in South America's poorest country, its top diplomat there announced Friday that Iran will open two low-cost public health clinics.
And while Bolivia's only announced Russian hardware purchase is five helicopters for civil defense, Moscow's ambassador told the AP — after Bolivia booted the U.S. ambassador — that Russia has every right to help Latin American nations arm themselves.
"We know of many historical cases of U.S. intervention in Latin American countries," said the diplomat, Leonid Golubev.
Thomas Shannon, U.S. assistant secretary of state for the hemisphere, wouldn't comment directly on whether the U.S. has lost influence in Latin America. But he added that there is no doubt that the U.S. still holds most of the military power in the Caribbean, and said it has no interest in reviving "Cold War rhetoric." Shannon also noted that overall U.S. aid to the region will reach $2.2 billion for 2009, to total more than $14 billion during Bush's presidency.
However, critics point out that roughly half that aid is for the military or counternarcotics, and that Washington sends more money annually to Israel alone. Even U.S. giving has been dwarfed by Chavez's checkbook diplomacy, which easily eclipses U.S. aid between outright gifts and discounted oil.
His largesse has lured several longtime U.S. friends. Honduras' president, Manuel Zelaya, said last month that after pleading with Washington and the World Bank, he accepted $300 million a year from Chavez for agricultural investment to help fight rising food prices.
"Allies, friends, did not help me when I asked," he said.
Costa Rica's president, Oscar Arias, says Venezuela offers Latin America about four or five times as much money as the United States. Costa Rica has become the 19th member of Petrocaribe, through which Chavez sells Caribbean and Central American nations cut-rate oil at very low interest.
The diminished profile of the U.S. in Latin America comes after a history of welcomed influence dating back to President Franklin Roosevelt's "Good Neighbor" policy of the 1930s, which emphasized cooperation and trade over military intervention. There have been major bailouts, such as Washington's $20 billion rescue of Mexico in the 1994 peso devaluation crisis. As former Assistant Secretary of State Otto Reich noted, "We are the assistance bureau of first choice for the region."
But the U.S. has an ugly legacy of covert intervention in countries including Chile, Nicaragua, Guatemala and Cuba. Chile's center-left president, Michele Bachelet, was jailed and tortured by a U.S.-backed military dictatorship in the 1970s. She recently recalled telling Washington's ambassador to Chile an old joke: "Some say the only reason there's never been a coup in the United States is because there's no U.S. Embassy in the United States."
The United States has also long served as chief educator to Latin America's elite. Correa is among its presidents with a U.S. graduate degree — though that didn't stop him from accusing the CIA of infiltrating his military, or refusing to renew a lease for U.S. counterdrug missions to fly out of Ecuador.
With the U.S. facing its own financial crisis, it's unlikely to be able to leverage economic influence in Latin America anytime soon. Sen. Barack Obama's senior adviser on Latin America, Dan Restrepo, acknowledges that his candidate is essentially proposing a symbolic shift in style — albeit adding a special White House envoy for the Americas.
"Barack doesn't see the United States as the savior of the Americas, but as a constructive partner," Restrepo told the AP.
Reich, an adviser to Sen. John McCain who served three Republican presidents in the region, put it even more bluntly.
"No matter who is elected in November, there is not going to be any money for Latin America," he said. "Latin Americans expecting financial resources, any kind of help from the United States, they are barking up the wrong tree."
Associated Press writers Dan Keane in Bolivia, Eduardo Gallardo in Chile and Stan Lehman in Brazil contributed to this report.
Friday, October 10, 2008
** Basic Knowledge Required for Trading in Natural Resources
- Do You Understand the Flow of the Transactions and the Abbreviations? -
Mr. Tatsuya Oishi, President, Focus Business Produce, Inc.. with the Japan External Trade Organization
The TTPP Newsletter of September 2008 reported the frequent occurrence of trouble in transactions involving recycled materials, metal materials and other resources through the TTPP. To help keep you out of trouble over resource transactions and avoid unnecessary risks, I will explain the general flow of transactions in the resource trade and the main abbreviations used at that time.
International transactions in metal/mineral resources and food resources are characterized by the following three points: First, the sums involved are huge. For example, in term contracts (long term contracts continuing for a fixed period such as several months), sums of tens to hundreds of millions of yen are often seen. Second, specialized brokers or agents often act as intermediaries. Third, due to the large volumes, at the time of FOB contracts, space in specialized ships is sometimes arranged.
Resource transactions used to be generally conducted by specialized businesses.
In recent years, due to the increase in demand, easing of regulations, establishment of infrastructure and spread of the Internet, the environment is being laid enabling more traders to participate in resource transactions.
Along with the increased opportunities, beginners in the resource trade are exposed to greater risk of scams and other dangers.
Therefore, both the seller and the buyer have to reduce the risks by exercising greater caution in procedures compared with general container-based transactions. Seen from another perspective, it means that the seller determines how reliable the buyer is based on the buyer's familiarity with the complicated procedures of the resource trade. Let us introduce an example of the flow of a resource transaction.
[1] Buyer : Sends an LOI and BCL.
[2] Seller: Sends an FCO.
[3] Buyer : Signs the FCO and returns it to the Seller.
[4] Seller: Sends a draft contract to the Buyer.
[5] Buyer : Signs the draft contract and returns it to the Seller.
[6] Buyer : Requests a POP from the Seller.
[7] Buyer : Opens an SBLC or BG.
[8] Seller: Sets a PB.
[9] Seller: Loads and ships the product in accordance with the contract terms.
(Sometimes allows Buyer to witness shipment.) [10] Buyer: Sends payment in accordance with the contract terms.
The hardest things for beginners to understand are abbreviated terms such as LOI, BCL and FCO. Let us explain them next.
1) LOI = Letter of Intent This is a letter by which the Buyer expresses its intent to buy the product. It describes the name of the product, the product specifications and country of origin, quantity, term of the purchasing contract, desired price, terms of transaction (FOB, CFR, CIF, etc.), desired shipment date, method of payment and valid period of LOI.
On the other hand, the Seller's side will sometimes ask for disclosure of the Buyer's bank's name, bank account number, etc. and for its understanding of a "soft probe" so as to investigate the Buyer's ability to pay. A "soft probe"
means the procedure of contacting the Buyer's bank through the Seller's bank to briefly investigate the Buyer's ability to pay.
2) BCL=Bank Comfort Letter (Bank Capability Letter) This is a letter issued by the Buyer's bank to the Seller and certifies that the Buyer has sufficient ability to pay for the transaction in question. The BCL may be demanded by the Seller at the stage of the LOI, the time of signing the contract, etc. Several cases are possible.
3) FCO=Firm Corporate Offer (Full Corporate Offer) This is a formal offer by which the Seller proposes details of the transaction and the final price. If the Buyer accepts these terms, it signs the offer and returns it to the Seller. Next, the Seller sends a draft of the contract.
Depending on the transaction, the two parties will sometimes enter negotiations on concluding the contract directly without going through the FCO process.
4) POP=Proof of Product In the same way as the Seller thinks the Buyer's ability to pay is important, the Buyer finds it important to determine if the Seller really owns the products in question or has the right to deal in them. A document proving the ownership or right of trade of the product is called a "POP".
Specifically, this includes an export license issued by an official organization, a warehouse receipt and certification of results of inspection by an independent third party certification organization. However, it is essential to determine if the documents are genuine.
Further, as a method to ensure a more reliable progress in the process, sometimes a POF (Proof of Funds/document proving the Buyer's ability to pay) and POP are exchanged between the Seller's and the Buyer's banks.
5) BG=Bank Guarantee, SBLC=Stand By Letter of Credit, PB=Performance Bond
- A BG is, as the name implies, a bank guarantee. The bank guarantees that the Buyer will pay the debt to the Seller.
- An SBLC differs from a usual L/C (Letter of Credit) in that it is a special letter of credit with no terms requiring attachment of a bill of lading (type of clean letter of credit) and is considered a bank guarantee issued in the form of a letter of credit.
- In the event the Buyer defaults on its debt, in both a BG or SBLC, the issuing bank guarantees payment to the Seller.
- A PB is a proof of performance. It guarantees payment to the Buyer of a fixed percentage of the export price (for example, 2%) in the event of the Seller defaulting on the contract to export to the Buyer as contracted for. Due to this, if the Seller defaults on the contract, the Buyer can be compensated for the expenses required up to that point. Specifically, this is set by the
Seller for the Buyer in the form of a BG or SBLC.
There may be various other variations in the flow of transactions. Further, technical terms and other specialized terminology unique to the industry/ resource will also be used. Therefore, the most important point in resource transactions is sufficient understanding of the products. Can you completely understand the processes involved in a transaction proposed by a seller and do you really have a grasp over the potential risks behind the transaction? If you find this difficult, I recommend you should not let yourself get involved in such a transaction or you leave it to experts such as specialized trading companies.
Above, I explained part of the basic knowledge required for resource transactions. In actual transactions, be sure to check by yourself the flow of transactions and terminology unique to the individual industry and remember that only you are responsible for the transaction.
===============================================================================
*******************************************************************************
TTPP News Back Numbers
http://www3.jetro.go.jp/ttppoas/mailnews/index.html
*******************************************************************************
- Do You Understand the Flow of the Transactions and the Abbreviations? -
Mr. Tatsuya Oishi, President, Focus Business Produce, Inc.. with the Japan External Trade Organization
The TTPP Newsletter of September 2008 reported the frequent occurrence of trouble in transactions involving recycled materials, metal materials and other resources through the TTPP. To help keep you out of trouble over resource transactions and avoid unnecessary risks, I will explain the general flow of transactions in the resource trade and the main abbreviations used at that time.
International transactions in metal/mineral resources and food resources are characterized by the following three points: First, the sums involved are huge. For example, in term contracts (long term contracts continuing for a fixed period such as several months), sums of tens to hundreds of millions of yen are often seen. Second, specialized brokers or agents often act as intermediaries. Third, due to the large volumes, at the time of FOB contracts, space in specialized ships is sometimes arranged.
Resource transactions used to be generally conducted by specialized businesses.
In recent years, due to the increase in demand, easing of regulations, establishment of infrastructure and spread of the Internet, the environment is being laid enabling more traders to participate in resource transactions.
Along with the increased opportunities, beginners in the resource trade are exposed to greater risk of scams and other dangers.
Therefore, both the seller and the buyer have to reduce the risks by exercising greater caution in procedures compared with general container-based transactions. Seen from another perspective, it means that the seller determines how reliable the buyer is based on the buyer's familiarity with the complicated procedures of the resource trade. Let us introduce an example of the flow of a resource transaction.
[2] Seller: Sends an FCO.
[3] Buyer : Signs the FCO and returns it to the Seller.
[4] Seller: Sends a draft contract to the Buyer.
[5] Buyer : Signs the draft contract and returns it to the Seller.
[6] Buyer : Requests a POP from the Seller.
[7] Buyer : Opens an SBLC or BG.
[8] Seller: Sets a PB.
[9] Seller: Loads and ships the product in accordance with the contract terms.
(Sometimes allows Buyer to witness shipment.) [10] Buyer: Sends payment in accordance with the contract terms.
The hardest things for beginners to understand are abbreviated terms such as LOI, BCL and FCO. Let us explain them next.
1) LOI = Letter of Intent This is a letter by which the Buyer expresses its intent to buy the product. It describes the name of the product, the product specifications and country of origin, quantity, term of the purchasing contract, desired price, terms of transaction (FOB, CFR, CIF, etc.), desired shipment date, method of payment and valid period of LOI.
On the other hand, the Seller's side will sometimes ask for disclosure of the Buyer's bank's name, bank account number, etc. and for its understanding of a "soft probe" so as to investigate the Buyer's ability to pay. A "soft probe"
means the procedure of contacting the Buyer's bank through the Seller's bank to briefly investigate the Buyer's ability to pay.
2) BCL=Bank Comfort Letter (Bank Capability Letter) This is a letter issued by the Buyer's bank to the Seller and certifies that the Buyer has sufficient ability to pay for the transaction in question. The BCL may be demanded by the Seller at the stage of the LOI, the time of signing the contract, etc. Several cases are possible.
3) FCO=Firm Corporate Offer (Full Corporate Offer) This is a formal offer by which the Seller proposes details of the transaction and the final price. If the Buyer accepts these terms, it signs the offer and returns it to the Seller. Next, the Seller sends a draft of the contract.
Depending on the transaction, the two parties will sometimes enter negotiations on concluding the contract directly without going through the FCO process.
4) POP=Proof of Product In the same way as the Seller thinks the Buyer's ability to pay is important, the Buyer finds it important to determine if the Seller really owns the products in question or has the right to deal in them. A document proving the ownership or right of trade of the product is called a "POP".
Specifically, this includes an export license issued by an official organization, a warehouse receipt and certification of results of inspection by an independent third party certification organization. However, it is essential to determine if the documents are genuine.
Further, as a method to ensure a more reliable progress in the process, sometimes a POF (Proof of Funds/document proving the Buyer's ability to pay) and POP are exchanged between the Seller's and the Buyer's banks.
5) BG=Bank Guarantee, SBLC=Stand By Letter of Credit, PB=Performance Bond
- A BG is, as the name implies, a bank guarantee. The bank guarantees that the Buyer will pay the debt to the Seller.
- An SBLC differs from a usual L/C (Letter of Credit) in that it is a special letter of credit with no terms requiring attachment of a bill of lading (type of clean letter of credit) and is considered a bank guarantee issued in the form of a letter of credit.
- In the event the Buyer defaults on its debt, in both a BG or SBLC, the issuing bank guarantees payment to the Seller.
- A PB is a proof of performance. It guarantees payment to the Buyer of a fixed percentage of the export price (for example, 2%) in the event of the Seller defaulting on the contract to export to the Buyer as contracted for. Due to this, if the Seller defaults on the contract, the Buyer can be compensated for the expenses required up to that point. Specifically, this is set by the
Seller for the Buyer in the form of a BG or SBLC.
Above, I explained part of the basic knowledge required for resource transactions. In actual transactions, be sure to check by yourself the flow of transactions and terminology unique to the individual industry and remember that only you are responsible for the transaction.
===============================================================================
*******************************************************************************
TTPP News Back Numbers
http://www3.jetro.go.jp/ttppoas/mailnews/index.html
*******************************************************************************
Tuesday, October 07, 2008
Managing Your Customs Brokers
by Ruth Rodriguez, Attorney
If you are an importer, you probably rely heavily on customs brokers. You may not have the inclination or the resources to clear your own entries. Customs brokers can be indispensable for classification and other compliance areas. Some brokers also provide other services, including logistics and shipping. Brokers are highly trained professionals, having been vetted and licensed by US Customs and Border Protection (CBP). Using customs brokers (or other professionals, like customs attorneys) can help convince enforcement authorities that you are using reasonable care. Customs brokerage has existed as a profession for centuries, preceding the founding of our nation and proving itself essential to international commerce.
But none of this means that you give your customs broker carte blanche. A customs broker is your agent. When the customs broker makes a mistake, it is your mistake. When the customs broker violates the law, the law presumes that the customs broker is acting at your company's behest.
Hiring a customs broker does not insulate you from liability. It only extends the avenues for enforcement officials to tag your company for errors and violations. If errors and violations are uncovered, the importer-broker relationship may turn adversarial, with one party blaming the other. Some customs brokers feel that they owe a greater allegiance to CBP than to the importer. In the end, if you chose the wrong broker, you (not your broker) can lose out on the duty-free savings from programs that you did not know about, you are likely to pay hundreds of thousands, or even millions of dollars, in fines and penalties, and you are likely to pay similar amounts in administrative costs and fees to resolve the violations.
Thus, a hands-off approach is calamitous. You must remain actively involved with everything your customs broker does on your behalf. The best way to do this is to limit the number of brokers you hire, restrict the terms and duration of the powers of attorney you grant, create Standard Operating Procedures (SOPs) for your brokers, and supervise and audit broker performance.
Limit the Number of Customs Brokers. Use a customs broker as liberally as you need to, but limit the number of brokerage firms you hire. Having too many brokers is a sign that you do not control your brokers.If you do not know how many brokers you are using or who they are, you may be in even bigger trouble. There are ways, with the help of an attorney, to find out who is making entries on your company's behalf.Once you know who your customs brokers are, trim them to a manageable number. Find out what each broker is doing on your company's behalf. You may discover that you are paying more than one broker to do the same task. You may also find a disparity in the fees you pay different brokerage firms. You may find out that there are individuals and departments within your company that hire customs brokers when they have no authority to do so. All this information will enable you to negotiate for better terms with the brokers you do retain, and to create company policies limiting who can hire brokers.With all this information in hand, start revoking the powers of attorney of customs brokers that you do not need.
Sign Better Powers of Attorney. Revisit the contracts and powers of attorney for those brokers you intend to retain. It is tempting to sign the "industry standard" power of attorney or contract, but the terms and conditions may not serve your company well. There may be exculpatory clauses, limitations of damages, and other language that is suspect. Many importers sign unlimited powers of attorney. That is a big mistake. This is your power of attorney. You are the principal. You decide what the customs broker can and cannot do when representing you. Also consider limiting the duration of your powers of attorney. Avoiding "standard" forms will benefit both parties. It will force you into a dialogue with your broker, and the expectations of both parties will be revealed with clarity and reduced to writing.
Create Standard Operating Procedures (SOPs) for your customs brokers to follow. Make sure that your brokers are contractually obligated to follow your SOPs. How much, if at all, you involve your broker in developing your SOPs is a matter of choice and comfort level.
Audit your customs brokers for compliance with your SOPs. No one in your company should ever say anything like, "We don't worry about that (e.g., classification). That's what we have a broker for." There are many ways to audit your customs brokers, and your review does not have to be incredibly intrusive or prolonged. But in the end, be brutally honest in grading your customs brokers. Your customs brokers should certainly not be reluctant to cooperate, having agreed to your SOPs.
Get a good lawyer Hire a seasoned lawyer to help your company foster a mutually beneficial relationship with your customs brokers, someone who is responsible primarily for protecting your company's interests.
---------------------GRVR Attorneys has represented both customs brokers and importers for two decades. Several of our attorneys have also passed the customs broker exam and have worked in logistics and transportation.
by Ruth Rodriguez, Attorney
If you are an importer, you probably rely heavily on customs brokers. You may not have the inclination or the resources to clear your own entries. Customs brokers can be indispensable for classification and other compliance areas. Some brokers also provide other services, including logistics and shipping. Brokers are highly trained professionals, having been vetted and licensed by US Customs and Border Protection (CBP). Using customs brokers (or other professionals, like customs attorneys) can help convince enforcement authorities that you are using reasonable care. Customs brokerage has existed as a profession for centuries, preceding the founding of our nation and proving itself essential to international commerce.
But none of this means that you give your customs broker carte blanche. A customs broker is your agent. When the customs broker makes a mistake, it is your mistake. When the customs broker violates the law, the law presumes that the customs broker is acting at your company's behest.
Hiring a customs broker does not insulate you from liability. It only extends the avenues for enforcement officials to tag your company for errors and violations. If errors and violations are uncovered, the importer-broker relationship may turn adversarial, with one party blaming the other. Some customs brokers feel that they owe a greater allegiance to CBP than to the importer. In the end, if you chose the wrong broker, you (not your broker) can lose out on the duty-free savings from programs that you did not know about, you are likely to pay hundreds of thousands, or even millions of dollars, in fines and penalties, and you are likely to pay similar amounts in administrative costs and fees to resolve the violations.
Thus, a hands-off approach is calamitous. You must remain actively involved with everything your customs broker does on your behalf. The best way to do this is to limit the number of brokers you hire, restrict the terms and duration of the powers of attorney you grant, create Standard Operating Procedures (SOPs) for your brokers, and supervise and audit broker performance.
Limit the Number of Customs Brokers. Use a customs broker as liberally as you need to, but limit the number of brokerage firms you hire. Having too many brokers is a sign that you do not control your brokers.If you do not know how many brokers you are using or who they are, you may be in even bigger trouble. There are ways, with the help of an attorney, to find out who is making entries on your company's behalf.Once you know who your customs brokers are, trim them to a manageable number. Find out what each broker is doing on your company's behalf. You may discover that you are paying more than one broker to do the same task. You may also find a disparity in the fees you pay different brokerage firms. You may find out that there are individuals and departments within your company that hire customs brokers when they have no authority to do so. All this information will enable you to negotiate for better terms with the brokers you do retain, and to create company policies limiting who can hire brokers.With all this information in hand, start revoking the powers of attorney of customs brokers that you do not need.
Sign Better Powers of Attorney. Revisit the contracts and powers of attorney for those brokers you intend to retain. It is tempting to sign the "industry standard" power of attorney or contract, but the terms and conditions may not serve your company well. There may be exculpatory clauses, limitations of damages, and other language that is suspect. Many importers sign unlimited powers of attorney. That is a big mistake. This is your power of attorney. You are the principal. You decide what the customs broker can and cannot do when representing you. Also consider limiting the duration of your powers of attorney. Avoiding "standard" forms will benefit both parties. It will force you into a dialogue with your broker, and the expectations of both parties will be revealed with clarity and reduced to writing.
Create Standard Operating Procedures (SOPs) for your customs brokers to follow. Make sure that your brokers are contractually obligated to follow your SOPs. How much, if at all, you involve your broker in developing your SOPs is a matter of choice and comfort level.
Audit your customs brokers for compliance with your SOPs. No one in your company should ever say anything like, "We don't worry about that (e.g., classification). That's what we have a broker for." There are many ways to audit your customs brokers, and your review does not have to be incredibly intrusive or prolonged. But in the end, be brutally honest in grading your customs brokers. Your customs brokers should certainly not be reluctant to cooperate, having agreed to your SOPs.
Get a good lawyer Hire a seasoned lawyer to help your company foster a mutually beneficial relationship with your customs brokers, someone who is responsible primarily for protecting your company's interests.
---------------------GRVR Attorneys has represented both customs brokers and importers for two decades. Several of our attorneys have also passed the customs broker exam and have worked in logistics and transportation.
Monday, October 06, 2008
Understanding and Complying with the New Foreign Trade Regulation (FTR) Requirements:
Starting October 1, 2008, the Census Bureau will require mandatory filing of export information through the Automated Export System (AES) or through AESDirect for all shipments where a paper Shipper’s Export Declaration is required. Penalties may be imposed for the delayed filing, failure to file, false filing of export information, and/or using the AES to further any illegal activity. Also, all AES filers will face new filing deadlines by mode of transportation for reporting export information. For more information, visit www.census.gov/foreign-trade/aes.
It is imperative you understand these new requirements to avoid possible penalties and seizure of your commodities. To this end, the U.S. Census Bureau’s Foreign Trade Division and the U.S. Commercial Service are offering a series of webinars designed to educate U.S. exporters on these new regulations. Webinar topics will be divided into five modules:
Data Elements covers the mandatory, conditional and optional fields in AES.
Filing Requirements covers who, what, when, and how to file export transactions.
Parties to an Export Transaction & Their Responsibilities covers each party’s responsibility as it relates to a standard export and routed export transactions.
AES Overview provides highlights of the AES.
Informed & Enforced Compliance covers topics such as penalties, mitigation, voluntary self-disclosure and corrections. Register at www.export.gov/logistics/aes/doc_eg_aes.asp
Starting October 1, 2008, the Census Bureau will require mandatory filing of export information through the Automated Export System (AES) or through AESDirect for all shipments where a paper Shipper’s Export Declaration is required. Penalties may be imposed for the delayed filing, failure to file, false filing of export information, and/or using the AES to further any illegal activity. Also, all AES filers will face new filing deadlines by mode of transportation for reporting export information. For more information, visit www.census.gov/foreign-trade/aes.
It is imperative you understand these new requirements to avoid possible penalties and seizure of your commodities. To this end, the U.S. Census Bureau’s Foreign Trade Division and the U.S. Commercial Service are offering a series of webinars designed to educate U.S. exporters on these new regulations. Webinar topics will be divided into five modules:
Data Elements covers the mandatory, conditional and optional fields in AES.
Filing Requirements covers who, what, when, and how to file export transactions.
Parties to an Export Transaction & Their Responsibilities covers each party’s responsibility as it relates to a standard export and routed export transactions.
AES Overview provides highlights of the AES.
Informed & Enforced Compliance covers topics such as penalties, mitigation, voluntary self-disclosure and corrections. Register at www.export.gov/logistics/aes/doc_eg_aes.asp
Friday, October 03, 2008
AN UNTAPPED MARKET
September 8, 2008 J. JOSEPH GRANDMAISON Shipping Digest Online
September 8, 2008 J. JOSEPH GRANDMAISON Shipping Digest Online
Most Americans reading this column probably aren’t doing business in Africa. That is a shame because export opportunities in Africa are real and growing, and U.S. companies ought to be entering these markets now as African countries are developing their infrastructure and industries.
Over the years that I have served as a board member of the Export-Import Bank of the United States and have spoken with government and business leaders from all over Africa, it has become clear to me that too few U.S. companies are marketing in Africa. African contracts are often awarded to competitors from other countries at least in part because no U.S. companies have bid on them. That is unfortunate because Americans have a reputation for providing superior quality and for upholding their contracts. African project sponsors and other buyers are favorably disposed to U.S. companies – when there are some.
Here are the facts: The African continent is growing economically because of political stability and economic reforms in many countries. In 2006, the economy of all of sub-Saharan Africa increased 5.5 percent. In fact, 23 African countries expanded at a rate faster than 5 percent, and only Zimbabwe failed to grow.
Since the inception of the African Growth and Opportunity Act, U.S. trade with sub-Saharan Africa has increased from $29 billion in 2000 to more than $71 billion last year. AGOA provides beneficiary countries in sub-Saharan Africa with liberal access to the U.S. market and also contributes to better market opportunities for U.S. companies. In 2007, U.S. exports to sub-Saharan Africa totaled $14.4 billion, which is more than double the amount in 2001. Today 40 sub-Saharan African countries are eligible for AGOA benefits. AGOA is fostering an improved business climate in Africa and expanded U.S.-African trade.
Africa’s strong economic growth is producing a rising demand for equipment and services, as well as consumer products. Some of the sectors with substantial potential include oil field development, electric power generation, transportation, health care, telecommunications, computers and software.
Ex-Im Bank, the official export-credit agency of the U.S., has a congressional mandate to assist U.S. exports to sub-Saharan Africa, and we have increased our financing for these exports. We have seen a shift in demand for our products from short-term export-credit insurance (typically used for raw materials, spare parts and consumer products) to medium-term credit and long-term project and structured finance (typically used for capital goods and services).
In fiscal 2007, Ex-Im Bank authorized $442 million in transactions to 18 sub-Saharan African countries. Much of this financing assisted Boeing’s exports to African airlines, but it also supported exports of U.S. equipment and technology to African oil field and oil-storage projects, manufacturing and fishing companies, among others.
One market serving as a model for Ex-Im Bank financing in Africa is Nigeria. With oil sector revenue and the reform of its banking sector in 2006, Nigeria’s economy is growing considerably. Development of the power and transportation sectors, including ports, roads and airports, is particularly urgent.
To help U.S. exporters in Nigeria, Ex-Im Bank established a special delegated authority facility that now includes 14 Nigerian banks. This facility is making $1 billion in financing available for Nigerian buyers of U.S. goods and services.
The Nigerian model has been emulated with Ex-Im Bank’s new special delegated authority for the African Export-Import Bank, which can now provide up to $40 million in Ex-Im Bank-backed short-term and midterm financing. This facility serves as a marketing tool to promote the purchase of U.S. goods and services virtually throughout the continent.
Earlier this year, Ex-Im Bank also opened for medium-term financing in the public and private sectors in Angola, where opportunities in the oil, gas and mining sectors are enormous. We want more U.S. exporters to take advantage of these developments.
We advise companies to focus on markets where opportunities for their sectors are greatest. The U.S. Foreign and Commercial Service, www.export.gov/africa, is an excellent resource, and its Country Commercial Guides are invaluable. We also recommend participation in the Corporate Council on Africa’s 2008 U.S.-Africa Infrastructure Conference in Washington, D.C., on Oct. 6-8, 2008, http://www.africancl.org/.
Lastly, we invite those U.S. exporters seeking financing for their African contracts to contact Ex-Im Bank, www.exim.gov/products/special/africa. We can do more for U.S. exporters in Africa. We’ll help you realize the opportunities in this vast untapped market.
J. Joseph Grandmaison is a board member of the Export-Import Bank of the United States.
Wednesday, October 01, 2008
Wood Importers' Alert -- New Declaration Requirement
GRVR Attorneys - Oct Newsletter
The latest Farm Bill imposes new requirements on wood importers, a group that may be much larger than you might think. Importers of plants and plant products are now required to certify that their products do not come from illegally harvested trees or plants. Specifically, importers must file a declaration regarding the species and country of origin. The world's forests are being cut down illegally to supply the US domestic market. (See, for example, Brazil's government has been named as the worst illegal logger of Amazon forests by one of its own departments). US wood and furniture manufacturers, environmental groups, and labor unions inserted into the Farm Bill an amendment to the Lacey Act, our country's oldest wildlife protection statute.
Customs and Border Protection and the Agriculture Department's Animal Plant Health Inspection Service (APHIS) will enforce the new law. Importers must start filing declarations by December 15, 2008, unless federal regulators and industry representatives can negotiate an extension or a tiered phase-in, which appears likely. Flooring, furniture, paperboard and plywood are clearly covered, but the new law may cover importers of many other products containing wood or plant material. The law does not specify how importers should certify their products, but it is clear that violators face huge penalties and the danger of shipment seizure.
GRVR Attorneys - Oct Newsletter
The latest Farm Bill imposes new requirements on wood importers, a group that may be much larger than you might think. Importers of plants and plant products are now required to certify that their products do not come from illegally harvested trees or plants. Specifically, importers must file a declaration regarding the species and country of origin. The world's forests are being cut down illegally to supply the US domestic market. (See, for example, Brazil's government has been named as the worst illegal logger of Amazon forests by one of its own departments). US wood and furniture manufacturers, environmental groups, and labor unions inserted into the Farm Bill an amendment to the Lacey Act, our country's oldest wildlife protection statute.
Customs and Border Protection and the Agriculture Department's Animal Plant Health Inspection Service (APHIS) will enforce the new law. Importers must start filing declarations by December 15, 2008, unless federal regulators and industry representatives can negotiate an extension or a tiered phase-in, which appears likely. Flooring, furniture, paperboard and plywood are clearly covered, but the new law may cover importers of many other products containing wood or plant material. The law does not specify how importers should certify their products, but it is clear that violators face huge penalties and the danger of shipment seizure.
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