Record year for US car exports in 2014 at $62 billion

2014 was a record year for US car exports*. Drivers around the world got behind the wheel of $62 billion worth of passenger motor vehicles from the United States last year.

This figure comes primarily from the 2.1 million new American-made cars and trucks exported to other countries in 2014, another record, up 8 percent over the previous year.

Canada was the top recipient, accounting for nearly a quarter of this trade. And although insignificant just a decade ago, in 2014 China ranked second for country-level US car exports, acquiring 18 percent.

In the Near East, Saudi Arabia and the United Arab Emirates were top consumers at $3.9 billion and $2.7 billion, respectively, while US car exports to South Korea jumped by 33 percent to breach $1 billion for the first time last year.

US car exports from 2005 to 2014 by country, region

Source: USA Trade Online

Imports too saw a record year at $155 billion, nearly 2.5 times exports, although the gap between imports and exports is gradually narrowing. It remains to be seen if this trend continues and 2015 results in yet another record year for US car exports.

 

*Schedule B 8703

Final rule on uses of electronic export information in the foreign trade regulations

Released today in the Federal Register:

The Bureau of the Census (Census Bureau) issues this final rule amending the Foreign Trade Regulations (FTR) to reflect changes related to the implementation of the International Trade Data System (ITDS) and subsequent changes to access the Electronic Export Information (EEI). The ITDS was established to eliminate redundant information requirements, efficiently regulate the flow of commerce, and to effectively enforce laws and regulations relating to international trade by establishing a single portal system for the collection and distribution of standard electronic import and export data required by all participating federal agencies. The Automated Export System (AES), which is a part of the Automated Commercial Environment (ACE), will include export information collected under other federal agencies’ authority, which is subject to those agencies’ disclosure mandates. This rule clarifies the confidentiality provisions of the EEI and facilitates the legitimate sharing of export data consistent with the goals for the ITDS. On August 22, 2014, the Census Bureau published this rule on an interim final basis. The Census Bureau is finalizing this rule without change.

China’s impact on the 2014 increase in the US trade deficit

Yesterday the Bureau of Economic Analysis released data on the United States’ balance of trade in 2014. The US posted a deficit in its trade of goods and services in 2014 valued at $505 billion, up from $476 billion in 2013. The increase reflects a $35 billion increase in the goods deficit mitigated by a $7 billion surplus in traded services. From the BEA’s report:

Imports of goods increased $77.5 billion to $2,371.9 billion in 2014. …

  • Capital goods increased $36.8 billion.
    • Other industrial machines increased $6.5 billion.
    • Telecommunications equipment increased $4.3 billion.
  • Consumer goods increased $25.2 billion.
    • Pharmaceutical preparations increased $8.0 billion.
    • Cell phones and other household goods increased $5.8 billion. …

The deficit with China increased $23.9 billion to $342.6 billion in 2014. Exports increased $2.3 billion to $124.0 billion and imports increased $26.2 billion to $466.7 billion.

The US’ $342 billion trade deficit with China in 2014 set yet another record high, as it has nearly every year since the bilateral trade gap surpassed that with Japan in 2000. And this source says that the deficit could increase yet more, as “[e]conomists expect the deficit to widen further in 2015 as strong growth in the United States boosts imports, while weak growth overseas and a rising dollar continue to depress exports.”

The United States increased its imports from China across a swath of product categories last year, with fertilizer imports more than doubling in 2014 over 2013. This is reflected in the goods which experienced the greatest gains in imported value during 2014. Those experiencing the greatest losses are similarly diverse.

US imports from China with greatest percentage increase in 2014

  1. Fertilizers (HS code 31); up 147 percent over 2013; $779 million total value imported in 2014
  2. Meat (02); 91 percent; $25 million
  3. Tin (80); 82 percent; $107 million
  4. Railway stock and traffic signal equipment (86); 68 percent; $783 million
  5. Iron and steel (72); 68 percent; $2.6 billion

US imports from China with greatest percentage decrease in 2014

  1. Arms and ammunition (93); down 24 percent; $162 million
  2. Tobacco (24); 18 percent; $13 million
  3. Lead (78); 18 percent; $5 million
  4. Photographic or cinematographic goods (37); 16 percent; $37 million
  5. Silk (50); 15 percent; $38 million

In terms of total value, however, electronics and machinery imports from China made increased the most, up over $14 billion from 2013. These two categories account for half of all products entering the US market from China. Although the United States imported $1 billion less in laptops and tablets during 2014, cell phone imports increased to $42 billion, up $4 billion from the year prior. Likewise, more imported automotive parts arrived from China, up to $8.3 billion from $7 billion in 2013.

China continues to supply the United States with a large proportion of its imported toys and sporting equipment (82 percent), furniture (49 percent), and footwear (66 percent). China’s share of US footwear imports, however, declined in 2014, losing out to manufacturers in Vietnam, Indonesia, India, and Cambodia.

It remains to be seen if these trends will continue in 2015.

Winter storm Juno closes a number of major ports in the Northeast

So far U.S. Customs and Border Protection has announced the closure of its ports around New York City because of winter storm Juno. Both JKF airport (4701) and the port of New York/Newark (1001, 4601, 4670, and 4671) will have a snow day tomorrow.

Ports around Boston will be closed for at least two days in due to inclement weather. Customs facilities at Boston (0401) and at Logan Airport (0417) will be closed on January 27 and 28. The closure allows two additional days without penalty for the filing of entries and payment of duties and fees.

 

New license code C62 to become available in AES for exports to Cuba

Today, the United States government implemented specific regulatory changes to allow increased trade with Cuba. The changes come into effect tomorrow, about a month after President Obama announced the easing of sanctions on the island nation.

No longer sanctioned for export to Cuba include:

  • Building materials, equipment, and tools for use by the private sector to construct or renovate privately-owned buildings
  • Tools and equipment for private sector agricultural activity
  • Tools, equipment, supplies, and instruments for use by private sector entrepreneurs such as auto mechanics, barbers and hairstylists and restaurateurs
  • Items donated for use in scientific, archaeological, cultural, ecological, educational, historic preservation, or sporting activities
  • The temporary export of certain items by persons departing the United States for their use in scientific, archeological, cultural, ecological, educational, historic preservation, or sporting activities or for their use in their professional research
  • Goods for telecommunications, including access to the Internet, use of internet services, infrastructure creation and upgrades
  • Items for use by news media personnel and U.S. news bureaus engaged in the gathering and dissemination of news to the general public

To accommodate these changes, a new license exception “Support for the Cuban People” (SCP), license code C62, will become available in the Automated Export System. See AESTIR Appendix F at the U.S. Customs and Border Protection website for more details.

The new export regulations also make it easier to send gifts and humanitarian aid to Cuba. The US Department of Commerce revised the note in the Export Administration Regulations that excludes from eligibility consolidated shipments of multiple parcels for delivery to individuals residing in a foreign country. This note required parties exporting multiple gift parcels in a single shipment to obtain individual validated licenses. Now sending multiple gifts in a single shipment is allowed under license exception GFT. According to the U.S. Bureau of Industry and Security, “Although the requirement [for individual validated licenses] is not limited to Cuba, in recent years BIS has received gift parcel consolidation license applications only for Cuba, which are routinely approved. Individuals who wish to send gift parcels to Cuba have had to search for parties that have received consolidation licenses, resulting in an unintended disincentive to donate eligible items to the Cuban people.” Now there will be less hassle.

See the fact sheet of the U.S. Department of Commerce for a breakdown of newly allowed imports and exports from Cuba.

American sanctions against Cuba and the potential for US-Cuba trade

Last month President Obama proposed the easing of American sanctions on Cuba. The policy changes that would have the greatest impact on US-Cuba trade are summed up nicely at Export Law Blog.

– Remittance levels will be raised from $500 to $2,000 and the remittance forwarders no longer will require a license to forward money to Cuba

– Exports of “building materials for private residential construction, goods for use by private sector Cuban entrepreneurs, and agricultural equipment” will be permitted

– General licenses will be issued for travelers in the 12 current categories of authorized travel…

– Travelers can come back with $400 in goods, of which only $100 can be alcohol or tobacco products

– Banks can open correspondent accounts in Cuban financial institutions to facilitate authorized transactions

– The rules will be revised to make clear that sales of cash against documents of title (e.g., bills of lading) are permitted for authorized exports and to remove the old rule that cash had to be paid prior to the shipment of the goods

In other words, Cuba will remain heavily sanctioned.

However, while the focus is often on what exchanges can’t take place between the United States and Cuba, it is worth noting that some trade can and does occur between the two countries. Although imports from Cuba are not permitted by the US government, certain exports are when accompanied by a license from the Department of Commerce. As a result, American medicine, medical devices, food, and agricultural commodities reach Cuban consumers.

In fact, despite decades of sanctions and narrow allowances for trade, the United States exported nearly $400 million in these goods to Cuba in 2013. This places the US eighth among Cuba’s top trading partners.

Cuba’s top trading partners in 2013

1. China……………….$1,879,420,040

2. Spain……………….$1,312,691,058

3. Canada……………….$938,255,350

4. Brazil………………….$624,791,450

5. Italy……………………$448,898,488

6. Mexico………………..$386,439,329

7. France………………..$370,223,210

8. United States………..$358,217,032

9. Venezuela……………$354,370,465

10. Argentina……………$318,726,085

Source: UNComtrade

Surely there are further gains in trade to be made between Cuba and the United States. Cuba’s top source of wheat is France, across the Atlantic. Argentina is its top source of corn. Cuba gets most of its cars from China, as well as most of its manufactured goods, seconded by Spain. These are goods the United States is more than capable of exporting to Cuba, especially since the two have coastlines only 90 miles apart.

Cuba too, has much to offer the United States. For example, China imports millions of dollars’ worth of Cuban sugar cane and nickel each year. In 2013, Spain acquired $86 million in Cuban cigars as well as $52 million in Cuban rum. And the United Nations trade database shows that in 2013, Canada imported $453 million in “commodities not specified according to kind,” a figure which includes souvenirs brought back by tourists — one in which Americans may yet rival with the allowances to tourism proposed by Obama.

Perhaps the president’s plan to lessen sanctions against Cuba will lead to further trade liberalization and will mark the first step to a more prosperous future for both countries.

Three new license types in AES as of January 2015

Three new license types came into effect in the Automated Export System on January 3rd.

VDC: Commerce Department Voluntary Self-Disclosure
VDS: State Department Voluntary Disclosure
VDO: Other Partner Government Agency Voluntary Disclosure

These codes are only to be used in the event that you are going through a “voluntary self-disclosure,” which is a formal reconciliation of AES filing mistakes with the U.S. Census Bureau.

License types VDC, VDS, and VDO codes should only be used when:

  1. a controlled good is exported without obtaining the required license, permit, or authorization prior to export
  2. a party believes they have violated the export regulations of a federal government agency
  3. a disclosure of the suspected violation has been submitted to the U.S. Census Bureau and the other agency involved, if applicable
  4. AES does not allow the filer to enter or correct Electronic Export Information (EEI) with the original license type

Note that VDO may not be used for shipments involving violations of the International Traffic in Arms Regulations or Export Administration Regulations.

The three new license types are currently available in AESDirect.

Cultural differences and international trade

One of the keys to successful international trade is understanding cultural differences. The Hofstede Center provides an excellent resource for just that, comparing countries along six cultural dimensions.

The chart below contrasts the United States against two of its top trading partners, China and Mexico. (Canada, the United States’ top trading partner, scores similarly.)

US, China and Mexico cultural comparison

Source: The Hofstede Center

The United States is notably higher in individualism than Mexico and China while being lower in power distance. According to the Hofstede Center, this is due to:

– The American premise of “liberty and justice for all.” This is evidenced by an explicit emphasis on equal rights in all aspects of American society and government.

– Within American organisations, hierarchy is established for convenience, superiors are accessible and managers rely on individual employees and teams for their expertise.

– Both managers and employees expect to be consulted and information is shared frequently. At the same time, communication is informal, direct and participative to a degree.

– The society is loosely-knit in which the expectation is that people look after themselves and their immediate families only and should not rely (too much) on authorities for support.

– There is also a high degree of geographical mobility in the United States. Americans are the best joiners in the world; however it is often difficult, especially among men, to develop deep friendships.

– Americans are accustomed to doing business or interacting with people they don’t know well. Consequently, Americans are not shy about approaching their prospective counterparts in order to obtain or seek information. In the business world, employees are expected to be self-reliant and display initiative. Also, within the exchange-based world of work we see that hiring, promotion and decisions are based on merit or evidence of what one has done or can do.

In contrast, China and Mexico favor closer relationships with business partners and group loyalty.

A category China scores highly in is pragmatism.

China scores 87 in this dimension, which means that it is a very pragmatic culture. In societies with a pragmatic orientation, people believe that truth depends very much on situation, context and time. They show an ability to adapt traditions easily to changed conditions, a strong propensity to save and invest, thriftiness, and perseverance in achieving results.

On Mexico’s high score in indulgence:

People in societies classified by a high score in indulgence generally exhibit a willingness to realize their impulses and desires with regard to enjoying life and having fun. They possess a positive attitude and have a tendency towards optimism. In addition, they place a higher degree of importance on leisure time, act as they please and spend money as they wish.

Learn about the cultures of more countries at The Hofstede Center website.

(hat tip to China Law Blog)

Netherlands first in 2014 globalization rankings; Syria last

Last month DHL released its “Global Connectedness Index” for 2014. The index provides a proxy for each country’s level of globalization.

To make the index, nations are measured along four pillars.

  1. trade: merchandise and services
  2. capital: foreign direct investment and portfolio equity
  3. information: international internet bandwidth, telephone call minutes and trade in printed publications
  4. people: foreign born population, tourists and number of international students

Using these measures, DHL concludes that Europe is the world’s most globally connected region with nine of the ten most connected countries. European countries average the highest scores with regard to trade and
people flows. North America leads in capital and information flows.

Nonetheless, the most remarkable change is occurring outside of the advanced economies in Europe and North America. Emerging economies are now involved in a majority of international transactions. The ten countries where global connectedness increased the most in the last few years are all outside of the West. However, emerging economies still lag in terms of international capital, information, and flows of people. Latin American countries experienced some of the largest average increases in global connectedness; the Middle East and North Africa, the greatest decline.

Physical distance between countries is becoming less of a factor in connectivity, a reversal of the long-term trend of trade regionalization. In fact, all international trade, capital, information, and people flow took place over a greater distance than that of a decade ago.

DHL states that although global connectivity increased since its last report, trade growth is sluggish, capital flows have yet to recover to pre-2008 economic crisis levels, and that the overall depth of global connectedness remains limited. There is still plenty of potential in the international economy. Read the whole report here.

Below are countries listed by their level of globalization, ranked by their score on DHL’s “Global Connectedness Index.”

DHL Global Connectedness Index

Source: Pankaj Ghemawat and Steven A. Altman, “DHL Global Connectedness Index 2014,” Deutsche Post DHL, November 2014.

“Snowvember” closes Buffalo, New York port for third consecutive day

For the third consecutive day, U.S. Customs and Border Protection has announced the closure of the port in Buffalo, New York. Commerce in the area remains immobilized after being hit with over 70 inches (1.8 meters) of snow.

The port of Buffalo is one of the most important conduits of trade between Canada and the United States.

Customs has extended the deadline for entry summaries and duty payments until the port reopens.

Snowvember strands trucks in Buffalo, New York

Credit: governorandrewcuomo on Flickr