An update from MGTA

Midwest Global Trade Association

World Trader

From the President

By Adam Redlin, MGTA President

Adam RedlinIt’s summer again in Minnesota! As we look forward to a weekend of grilling and time on the water, I want to take a moment to reflect on some of our recent successes. On May 28, we hosted a member happy hour at The Tangiers; I was happy to see many new faces and such a strong turnout with nearly 40 in attendance. Events such as this one provide an excellent opportunity to connect with other members of the trade community, and provide exposure to other segments of the industry. Creating a strong networking environment is one of the keys to our success as an organization, so I encourage everyone to attend one of the networking lunches or happy hours if you have a chance. Have a fun and safe Independence Day. I look forward to seeing you at the Golf Event on August 13; if you have not already registered, take the time to do so now at our website.

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Upcoming Events

MGTA Member Networking Lunch — "Assists"

July 14, 2015
11:30 am to 1:00 pm

Cooper Irish Pub
1607 Park Place Boulevard
St. Louis Park, Minnesota 55416


View Details and Register Online

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MGTA Golf Tournament — Sponsorship

August 12, 2015
Noon to 7:00 p.m.

Crystal Lake Golf Course
16725 Innsbrook Dr
Lakeville, Minnesota 55044

View Sponsorship Opportunities and Register Online

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MGTA 13th Annual Golf Tournament

August 12, 2015
Noon to 7:00 p.m.

Crystal Lake Golf Course
16725 Innsbrook Dr
Lakeville, Minnesota 55044


View Details and Register Online

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Mid-Year Parcel Review

By Jakub Kowalczyk, Branch Manager of the Eagan, MN-based office of Purolator, Inc., and a member of the MGTA’s Communications Committee

July 1 is the 182nd day of the year and marks the halfway point of 2015. With this milestone, many organizations are taking the time to look what has worked in the first half of the year and what needs to be adjusted to meet year-end goals. By taking a look at the impact of the 2015 rate increase, the changes in dimensional weight and the impact of lower fuel cost, you can make a significant impact in 2015 and 2016.

DATA

The first step is that you must collect data. There are many types of data to collect and the data format and availability will vary. Most carriers and/or TMS (Transportation Management Software) will have access to following:

  • Actual Weight
  • Shipment Dimensions and/or billable weight
  • Zone distribution
  • On Time Performance
  • Damage ratio
  • Cost (and discounts received)
  • Accessorial Charges

Knowing what you’re spending, your most-used services, and what your parcel distribution looks like will help you make the most informed decisions. A small impact in your most-used service could have a far bigger impact than a large savings in seldom-used services. Surcharges and fees that are added to the transportation cost can also have a significant impact to your bottom line. It’s your data; use it to sort out what is important to you.

General Rate Increase (GRI):

In January, the major US-based carriers announced their annual GRI of 4.9%. While this increase has been in line with previous GRIs, many organizations overlook surcharges and fees that are not included in the GRI. Because the 4.9% rate increase is not linear in any fashion, organizations must have the data and characteristics to know the impact.

  • Weight – Lower weight packages could have an increase as much as 6.4% along with minimum charges increasing 5.6%. All higher than the 4.9% aggregate.
  • Accessorial Fees & Surcharges – These are frequently overlooked and in some studies are about 38% of transportation total costs. The increase in these charges can range from 4.4% up 16% in additional to the GRI.

Dimensional Weight:

Dimensional weight pricing was introduced in 2015 and the cost of shipping any package will be based in part on the item’s volume — the amount of space it takes up on a truck. Depending on the zone, the change could mean an increase in shipping costs of up to 30%.

  • Take a close look at your product mix and packaging procedures. You are likely to find numerous opportunities for cutting down on materials and reducing shipment dimensions.

Fuel Surcharge (FSG):

As fuel costs steadily declined, so did the fuel surcharge. Many carriers saw a decline in revenue generated by the surcharge. In February, the major carriers announced changes in the fuel table. This should impact all shippers unless a specific fuel surcharge table is part of their contract. Since 99% of shippers do not have a contracted FSG table, most will experience an increased cost on top of the GRI, the accessorial increases and the changes to the dimensional rule for ground shipments.

Conclusion:

With six months of data at your disposal, knowing your shipment characteristics and how that impacts your bottom line, you have the tools to impact the remainder of 2015 and 2016.

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Midwest Poultry Epidemic Affects Trade

By Kylle Jordan, Consulate General of Canada

Since December 2014, more than 37 million chickens and turkeys have either died or been killed to keep a recent wave of avian influenza (H5N2) from spreading. Three states—Iowa, Minnesota, and Wisconsin—declared states of emergency. Layoffs took place at poultry farms, and the industry initially warned that there may not be enough surviving turkeys to fill tables at Thanksgiving (though evidence now suggests that is no longer a concern). The federal government released $330 million in emergency funds, and in Minnesota, the National Guard was called out.

To protect a $265.6 billion-a-year industry and with the sources still unknown, the poultry sector has laid blame upon farm workers and wild waterfowl. What is known is that it was spotted first in British Columbia, hopped cross-border to Washington and Oregon, and then began to move inward across the continent. The outbreak exploded when it reached Minnesota, the center of the turkey industry, and Iowa, one of the centers of the egg industry.

The potential losses from this epidemic include not only individual farm businesses—that is, the income of farm families, and of their workers and their families—but also the businesses they use, from feed dealers to equipment sales and service to slaughterhouse and packing workers to the cafe in the local town.

Beyond that, there is an international ripple effect as well. Each of the top 10 importers of US poultry products (and 75 countries in total) has either banned imports or restricted them in some way. Those restrictions extend beyond meat and eggs to breeding stock—which means that, if the epidemic continues, other countries will see cuts in their poultry supply, too. As an example, Canada has already banned poultry imports from 15 US states (link for more information).

While the rate of infection in the US avian influenza outbreak appears to have slowed, the economic effects will be felt well into 2016. As a recent example, the magnitude of the bird flu outbreak in egg layers forced breaker egg prices to increase by 220% to more than $2/dozen in May 2015. Among the 75 countries with a full or partial ban on US-produced poultry, USDA Global Agricultural Trade System (GATS) data reveals a decline in US exports of 13 percent from January to April 2015. Turkey exports to these trade partners were down 14 percent and broiler exports were down 13 percent.

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The Trans-Pacific Partnership Trade Agreement

By Todd Vollmers, Attorney, Thompson Hall Santi Cerny & Katkov

Many US companies, from Small and Medium-sized Enterprises (SME’s) to large multinationals, rely on exports and/or imports as an important part of their business. Although large companies are often associated with doing business internationally, SME’s actually make up the vast majority of US firms engaged in international trade (97%), even though they account for a much smaller percentage of the total value of US trade (~30%).

The US is currently negotiating the Trans-Pacific Partnership (TPP) trade agreement with 11 other countries (Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam), which together would constitute the single largest export market of goods and services for the US. In addition, it has been reported that China has stated that it would like to join the TPP negotiations as well, and the Obama administration has indicated that it is open to that possibility under certain conditions. Even without China, however, the TPP countries include some of the fastest growing economies in the world, and currently account for about 40% of total Gross Domestic Product (GDP) worldwide. According to the International Trade Commission, in 2014 US exports to the TPP countries totaled $727 billion, and imports from the TPP countries $881.9 billion. For the agricultural sector the TPP countries were even more important, since the $58.8 billion in US agricultural exports to those countries represented 85% of all US agricultural exports in 2013.

While the specific provisions of the TPP are not currently public, reports indicate that the legal agreements being negotiated as part of the TPP will cover almost all areas of commercial relations between the TPP countries. Some of the areas where significant agreement has supposedly already been reached are:

Customs: key elements of the customs text establish customs procedures that are more predictable and transparent so goods are released from customs control as quickly as possible.

Market Access for Goods: tariff elimination, including tariff phase-out schedules covering more than 11,000 commodity categories for each TPP country, and other substantial obligations beyond each country’s current World Trade Organization (WTO) obligations, are part of the text in addition to elimination of non-tariff trade barriers. Import and export licensing, and agricultural export competition and food security proposals are also being discussed.

Intellectual Property: reinforcement and further development of the existing WTO Trade-Related Aspects of Intellectual Property (TRIPS) Agreement rights and obligations covering trademarks, patents, copyright and related rights, trade secrets, and enforcement of intellectual property rights are part of the text.

E-Commerce: significant progress has been reported on measures concerning customs duties in the digital environment, authentication for electronic transactions, and consumer protection. 

SME’s: the proposed TPP includes its own chapter specifically on SME’s, and there are indications that the TPP will try to eliminate informational challenges cited by smaller companies (e.g. with easier access to foreign tariff schedules/regulations that affect imports to that country).

In connection with the TPP, there have been a lot of stories in the first half of 2015 about the Trade Promotion Authority bill, or so-called “fast-track” trade bill, being pushed through the US House of Representatives (it had already been passed in the US Senate). Since 1974, administrations of both parties have sought fast-track trade legislation, which is a legislative procedure that provides for Congress’ involvement and approval of any US trade agreement negotiated by the administration, but with Congressional approval limited to a simple up or down vote and without amendment. Supporters of free trade agreements, and the TPP in particular, have been pushing for passage of the fast-track trade bill but in a vote on June 12, 2015 for all practical purposes the fast-track trade bill was defeated in the House by a vote of 302-126, and it remains to be seen how and when it can be resurrected and win the necessary votes.

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Growth in the Global Trade Compliance Career Field

By Kevin Johnson, Import & Export Logistics Manager, Best Buy

In the last 15 years, Global Trade Compliance has developed into a full-fledged career field due to the growth in international business, import-export, and supply chain. However, most people are unfamiliar with what trade compliance is, what it involves, and how one can begin a career in this expanding field. Companies that are active in international business and depend on their products moving across geographic borders often employ a trade compliance team, consisting of one to several dozen employees, with varying trade compliance expertise.  

Trade compliance is concerned with moving shipments in and out of countries and complying with rules and regulations of the sending and receiving countries. In the United States, companies must be in compliance with the US Customs and Border Protection (CBP), the Office of Foreign Asset Control (OFAC), and the Bureau of Industry and Security (BIS). Additionally, health care companies, especially medical device companies, must deal with the US Food and Drug Administration (FDA). Companies doing business in other countries are subject to those rules and laws, accordingly.

Global trade compliance departments are generally staffed with positions of expertise. For example, teams often consist of export or import specialists; regional experts, such as the Asia-Pacific (APAC) or EMEA (Europe, the Middle East and Africa); specific skill sets such as a licensed customs broker or knowledge covering hazardous waste, licensing, country of origin, the Food and Drug Administration (FDA), and the North American Free Trade Agreement (NAFTA). The company’s products, industry, the country or countries it does business with, and its particular needs, will often dictate the make-up of the trade compliance department.

Most trade professionals begin their careers by stumbling into the industry. Often one is employed in transportation, supply chain, or procurement, fills a trade compliance need on-the-job and builds his/her expertise from there. Continuing education is an integral part of a trade professional’s success, where subject matter expertise must be constantly updated and applied. Topics include: country of origin, export controls, classifying products, licensing, making customs entries, free trade agreements, Customs Trade Partnership Against Terrorism (C-TPAT), Export Classification Control Number (ECCN), and the Export Administration Regulation (EAR), etc. Local community colleges, trade associations such as the Midwest Global Trade Association (MGTA), state and federal trade organizations, as well as national, private and not-for-profit organizations offer trade compliance and import-expert-related seminars and classes.

Global Trade Compliance is an exciting and growing career field. As technology continues to facilitate global business’ expansion, this field will not only be in demand, but also require those with the appropriate skill set, knowledge, and trade compliance expertise to sustain its inevitable proliferation.

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Country of the Month: Qatar

This article was compiled using information from bbc.com and the CIA.

Qatar, a former pearl-fishing center and once one of the poorest Gulf states, is now one of the richest countries in the region, thanks to the exploitation of large oil and gas fields since the 1940s.

Dominated by the Thani family for almost 150 years, the mainly barren country was a British protectorate until 1971, when it declared its independence after following suit with Bahrain and refusing to join the United Arab Emirates.

In 1995, Crown Prince Hamad bin Khalifa deposed his father to become emir and during his reign introduced some liberal reforms.

Press freedom was extended and the Qatari satellite TV station Al-Jazeera has become one of the most important broadcasters in the Arab world.

The 1999 elections for a 29-member municipal council were the first in which Qatari women were allowed to vote and stand for office.

A constitution providing for limited democratic reforms came into force in 2005. The new basic law provided for a legislature — the Advisory Council — with 30 elected members and 15 members appointed by the emir.

The population is small. Foreigners, including laborers attracted by a construction boom, outnumber natives. Oil money funds an all-embracing welfare state, with many services free or heavily subsidized, but the treatment of migrant workers is frequently criticized by rights groups.

Possessing more than 15% of the world's proven gas reserves, Qatar has ambitions to become an energy giant and uses its wealth to pursue regional and global ambitions. Since the outbreak of regional unrest, however, Doha has prided itself on its support for many of these popular revolutions, particularly in Libya and Syria.

In mid-2013, HAMAD transferred power to his 33-year-old son, the current Amir TAMIM bin Hamad — a peaceful abdication rare in the history of Arab Gulf states. TAMIM has prioritized improving the domestic welfare of Qataris, including establishing advanced healthcare and education systems and expanding the country's infrastructure in anticipation of Doha’s hosting of the 2022 World Cup.

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Do you know an MGTA member who was recently promoted or hired to an import/export company? Know of a member who recently got married or had a new addition to the family? Share the good news with your industry colleagues by emailing Kylle Jordan.

July –
August 2015

From the President

Upcoming Events

Mid- Year Parcel Review
By Jakub Kowalczyk, Purolator, Inc.

Midwest Poultry Epidemic Affects Trade
By Kylle Jordan, Consulate General of Canada

The Trans-Pacific Partnership Trade Agreement
By Todd Vollermers, Thompson Hall Santi Cerny & Katkov

Growth in the Global Trade Compliance Career Field
By Kevin Johnson, Best Buy

Country of the Month: Qatar
By Thierry Ajas, Randstad Professionals

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