Express carriers to gain from TPP

   Negotiations for the Trans-Pacific Partnership free trade agreement are entering the homestretch, although whether a deal gets completed by the end of the year remains an open question. These types of multilateral talks are complex, take years to put together and frequently seem to encounter some sort of last-minute stumbling block. And Congress still needs to pass Trade Promotion Authority to give President Obama and his trade representative the negotiating clout to close a deal without the other 11 trade partners worrying that U.S. lawmakers will amend it.
   A TPP pact would have a huge impact on global trade, because the dozen nations it covers represent 40 percent of the world economy.
   Much of the focus has been on achieving reciprocal duty-free access in each market for goods and services, as well as investments, financial services, government procurement and skilled workers. The agreement will also cover areas such as intellectual property, state-owned enterprises, and the environment. 
   Equally important is the attention being given to customs, trade facilitation, non-tariff barriers and supply chain efficiency, including common rules of origin.
   Express delivery companies are particularly interested in setting compliance standards that streamline, harmonize and automate customs procedures, create more transparency for cross-border transactions and improve collaboration between customs authorities—all with the goal of speeding up trade and reducing costs.
   I talked with Eugene Laney, the head of international trade for DHL Express in the United States and chairman of the trade committee for the Express Association of America, to find out the industry’s top TPP priorities.
   Package delivery companies are pressing trade ministers to set a de minimus floor of at least $200—the minimum value at which customs duties are imposed on imported goods. Raising the threshold for going through customs procedures would especially benefit small and midsized enterprises that often ship by parcel carrier, do not have compliance departments to follow the minutia of customs rules, and often avoid international sales because of the additional cost and complexity. E-commerce retailers and others would gain likely customers by being able to accept returns without duty and other customs requirements.
   De minimus is $200 in the United States. Supporters have been unsuccessful in advancing legislation to raise the threshold to $800. The United States looks practically modern compared to the de minimus threshold of $20 in Canada and $50 in Mexico, but badly lags Australia’s $1,000 level.
   In addition to faster border clearance for low-value shipments, a higher de minimus level would allow customs officers to focus enforcement efforts on shipments with higher risk of duty fraud, safety violations, and intellectual property theft. Laney said a lower trigger for filing customs duties also reduces the amount of times a package is touched, and therefore lowers processing costs.
   (Interesting side note: The House member who put forth the last de minimus bill was Rep. Aaron Schock, R-Ill. He’s the playboy politician who received huge media attention for decorating his office in the ostentatious style of the PBS British drama series “Downton Abbey” and then resigned in March amid reports of excessive office and campaign spending.)
   Laney said express carriers want any de minimus threshold to be subject to a periodic review so partner countries can increase it. De minimus hopefully will become part of the ongoing discussions between the United States and European Union for a free trade agreement, he added.
   Next on the express carrier’s agenda is a time limit for customs administrations to clear goods. Companies like DHL want shipments to be released within four hours in the express environment, as is the standard in the three-year-old U.S.-Korea free trade agreement and generally adhered to in the United States and European Union.
   Related to a time-limit for clearance is a reduction in arbitrary and physical inspections. Laney said less developed countries tend to rely more on paper reviews and physical inspections rather than gathering advance electronic data and using risk management software to guide inspectors to shipments of concern. Electronic pre-clearance reduces the need for physical inspections, as well as theft, sabotage and corruption.
   Both items are important because in Asia 14 percent of goods are held or delayed and in Latin America 29 percent of goods are subject to customs delays, according to DHL.
   How does TPP dovetail with the World Trade Organization’s landmark Trade Facilitation Agreement last year that intends to lower bureaucratic barriers to trade?
   Laney explained that the WTO trade facilitation rules basically set the baseline, but TPP can take the customs reforms to the next level and actually implement them in a meaningful way. The trade facilitation agreement, for example, simply says customs administrations should look toward adopting de minimus rules, but it doesn’t give a value.
   Countries may accede to a WTO agreement, but they may not have the resources to modernize their practices, such as migrating from paper to electronic processing. In free trade agreements, countries face real commitments and they are motivated to follow them, Laney said. 
   “It’s critical that these customs procedures proceed in a way that generate transparency, cost cutting, efficiency,” which helps the free flow of goods and economic growth, Laney said.
   Having modern customs procedures “makes your domestic economy more attractive to foreign investors,” he added.
   Meanwhile, the White House and business community are calling on Congress to pass Trade Promotion Authority as soon as possible. Although, TPA only allows Congress to ratify any free trade agreement with an up or down vote on the back end, it does allow the legislature to help set trade priorities on the front end and ensure the government speaks with one voice. Other countries are waiting to present their final offers until TPA is passed and are assured that U.S. lawmakers won’t be able to pick the deal apart.

This column was published in the May 2015 issue of American Shipper.