More substance and detail are needed in guidelines the Interagency Labor Committee intends to follow for enforcing the U.S.-Mexico-Canada Agreement's free-trade labor rules, commented retail, manufacturing and business groups as posted Monday in docket USTR-2020-0028. The treaty took effect July 1, giving Mexican workers collective bargaining rights for the first time, plus protecting them against retaliation for joining unions or refusing to join. The committee, co-chaired by Labor Secretary Eugene Scalia and U.S. Trade Representative Robert Lighthizer, has the authority under USMCA’s “rapid response labor mechanism” to rescind a product's duty-free status or bar its import if it finds the goods were manufactured in a facility with serious labor violations. It’s charged with deciding if “sufficient, credible evidence” exists of a “denial of rights” at a facility that would trigger the “good-faith invocation of enforcement mechanisms,” said interim “procedural guidelines” in a June 30 notice. But there’s concern with the “lack of clarity” in the guidelines about what constitutes “sufficient, credible evidence” because it’s not a “well-understood evidentiary standard in the U.S.,” commented the National Retail Federation. “This ambiguity may invite the filing of frivolous, fraudulent, or malicious claims to injure the reputation of an employer or burden the employer for anti-competitive purposes.” NRF also urged the committee to require in the guidelines that petitions and associated reviews “not stray beyond what is mandated” in USMCA. The committee should explicitly say it won’t accept petitions that include claims other than denial of rights allegations for joining unions or participating in collective bargaining talks, it said. Adding such clarifications “will keep the guidelines consistent” with USMCA, ensuring the committee’s “review processes and resources are used as intended,” said NRF. Amend the guidelines to require that a targeted facility “be notified within 14 days” that a petition of wrongdoing has been filed, said the National Association of Manufacturers. “This would ensure that manufacturers are aware of potential enforcement actions against their business partners.” NAM, like NRF, also wants the committee to define the standard of “sufficient, credible evidence” of a violation, and to “delineate clearly how the committee will review petitions and make final determinations.” Additionally, create “a detailed process” enabling a factory accused of denying workers' rights to file an appeal within 30 days, especially “for cases in which the complainant party does not act in good faith,” NAM said. It defined lack of good faith as including petitions submitted frivolously. The committee’s “determinations” process “requires greater elaboration” lacking in the June 30 guidelines, said the U.S. Council for International Business. The guidelines are silent about how the committee “makes a finding, whether by a vote or some other method, and if there is a right to dissent,” it said. There's also nothing spelled out about the rights of a company facing allegations of wrongdoing in its factories, “including the ability for the company to present its own evidence as well as challenge allegations made by a petitioner,” it said. “Under no circumstance should a company be left out of the process for determinations.”
The Commerce Department's Bureau of Industry and Security added 38 Huawei affiliates to the entity list and refined a May amendment to its foreign direct product rule, further restricting the Chinese company's access to U.S. technology. BIS said the direct product rule also applies to transactions where U.S. software or technology is “the basis” for a foreign-made item produced or purchased by Huawei, or when such an entity is “a party to such a transaction.” Secretary of State Mike Pompeo said Huawei "has continuously tried to evade" the previous changes to the foreign direct product rule. The telecom gearmaker didn't comment.
Tencent Holdings is “in the process of seeking further clarification from relevant parties in the U.S.” about President Donald Trump’s Aug. 6 executive order banning U.S. transactions with the WeChat parent company after Sept. 20 on national security grounds (see 2008070032), said Chief Financial Officer John Lo Wednesday on a quarterly investor call. “Based on our initial reading and subsequent press reports, the executive order is focused on WeChat in the United States and not our other businesses in the U.S.,” said Lo. The White House didn’t comment Thursday.
Delisting Tencent Music Entertainment (TME) shares from the New York Stock Exchange is “not the only option” if President Donald Trump’s Aug. 6 executive order takes effect barring WeChat parent Tencent Holdings from doing business in the U.S. after Sept. 20 (see 2008070032 or 2008070061), said TME Chief Strategy Officer Tony Yip on a quarterly investor call Monday. It's "premature" to comment because the July 24 report from the President’s Working Group on Financial Markets on alleged Chinese threats to U.S. national security lists “alternative" remedies to an outright ban, he said. “We are evaluating all options” to be sure that when “further policy” directives come out, “we will be acting in the best interest of our shareholders to protect long-term value,” he said. The White House didn’t comment Tuesday. The stock closed 1.2% lower Tuesday at $15.50.
Some tech merchandise of Chinese origin sent to Mexico for minimal handling and then exported to the U.S. is eligible for tariff treatment under the U.S.-Mexico-Canada Agreement on free trade, said Customs and Border Protection in a ruling Friday. Jose Fierro, an El Paso customs broker, requested the ruling less than a week after USMCA took effect July 1. The broker said a client contracted with a Mexican maquiladora final assembly facility for logistical services, and inquired if USMCA treatment would apply. Workers at the maquiladora facility will provide sorting, picking and packing services on the goods, which will be exported to the U.S. "in the same condition as they were imported into Mexico," Fierro told CBP. The goods include computing products of various sorts and a broad variety of goods, including smart speakers, Bluetooth headphones, smartwatches and fitness trackers.
The Office of the U.S. Trade Representative seeks comment by Aug. 20 whether to extend for another year new List 4A Section 301 tariff exclusions on Chinese imports that are set to expire Sept. 1. Each exclusion will be evaluated independently, said the agency Monday. The focus will be whether, despite the first imposition of the additional duties, the particular product remains available only from China.
Imports at major U.S. retail container ports are on pace to finish 2020 with their lowest annual volume in four years, reported the National Retail Federation Monday. “Retailers are being careful not to import more than they can sell,” it said. “Shelves will be stocked, but this is not the year to be left with warehouses full of unsold merchandise.” U.S. ports handled 1.61 million 20-foot-long cargo containers or their equivalents in June, up 4.9% from May, but down 10.5% from June 2019, said NRF. It’s estimating July was down 10.2% year over year, and is forecasting monthly declines from 2019 will average 8.5% August through December. That would bring 2020 to 19.6 million containers, a 9.4% decline from 2019 and the lowest annual total since 19.1 million containers traveled through U.S. ports in 2016, said NRF.
Australia's new digital trade agreement with Singapore is the “most ambitious digital trade rules” Australia has ever negotiated, that government said. The deal includes provisions on e-commerce and is expected to make it “easier for [Australian] exporters to do business,” Trade Minister Simon Birmingham said: It will help Australian companies “reach more customers and further tap into the Singaporean market.” The pact will cut costs for Singapore companies exporting to Australia, Singapore said.
Sonos, whose exclusion from the List 4A tariffs was granted in March (see 2005110034), is diversifying its supply chain into Malaysia even amid COVID-19 delays, said Chief Financial Officer Brittany Bagley on a quarterly call Wednesday. The company planned to have “significant” U.S.-bound production from Malaysia ramped up by Dec. 31. Due to pandemic-related government restrictions on manufacturing in Malaysia, reaching scale will take until mid-2021, Bagley said. “Essentially all” Sonos products subject to 7.5% tariffs fall under the exemption, which was retroactive to Sept. 1, but expires Aug. 31. Sonos began the process of seeking refunds. Revenue fell 4% in fiscal Q3 ended June 27 to $249.3 million. Gains were offset by higher freight costs to increase inventory levels and fill back orders to meet “higher-than-expected” demand. Most of Sonos’ physical retail partners were closed for in-store sales during much of Q3, said the shareholder letter. The majority have reopened but with capacity and other restrictions. It’s confident it can continue to scale its direct-to-consumer channel, up 299% in the quarter, “over time.” On the transition to the S2 operating system, which left many legacy product owners angry, CEO Patrick Spence said there's “no churn" and “millions” of homes have converted. The wireless multiroom audio company, which last week settled with Lenbrook over a patent infringement lawsuit (see 2007300059), remains confident about its patent fight with Google at the International Trade Commission, said Chief Legal Officer Eddie Lazarus. There are “quite a few companies” in the multiroom audio space that Sonos believes are infringing its patents, “and we're in touch with many of them.” The stock closed 18.3% lower Thursday at $14.29.
ViacomCBS plans to launch a streaming service internationally in early 2021, with a focus first on Australia, Latin America and the Nordic countries, it said Thursday. It said programming on the subscription VOD service will include some Showtime series, CBS All Access originals, Paramount movies, content from such networks as MTV and Comedy Central, and originals from ViacomCBS International Studios. It said that rollout parallels the ongoing expansion outside the U.S. of distribution of its Pluto TV free streaming service.