UPS 2020 US Trade Policy Update

2020 UPS® Tradenomics Webcast Series
Annual U.S. Trade Policy Update
May 20, 2020
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Proprietary and Confidential: This presentation may not be used or disclosed to other than employees or customers, unless expressly authorized by UPS. This document is for informational purposes
only. It does not constitute legal advice – please consult with your own legal counsel for such advice. Also, do not rely on this information without performing your own research.
© 2020 United Parcel Service of America, Inc. UPS, the UPS brandmark, the color brown are trademarks of United Parcel Service of America, Inc. All rights reserved.
U.S. Trade Policy
Greg Maddaleni
LCB, JD
Customs Brokerage
Sr. Manager
UPS Customs
Brokerage
Kelly Wilton
LCB
Customs Brokerage
Compliance
Manager
UPS Customs
Brokerage
Catherine Mellor
Public Affairs
Vice President
UPS Public Affairs
Host Panelists
Penny Naas
Public Affairs
Senior Vice President
UPS Public Affairs

2020 UPS® Tradenomics
Webcast Series
3
Previous (recording available)
• February 6 - U.S. Export Compliance Year in Review
• March 12 – Brexit: the transition period
• April 15 – USMCA – Transitioning to the new free trade agreement
Upcoming (more to be scheduled)
• May 20 – U.S. Trade Policy and Trade Implications
• May 27 – Section 301: imminent exclusions expirations & possible renewal
• Sept 24 – Brexit: Transition / new trade agreement update
Link to registration and recordings: http://bit.ly/2020Tradenomics
Dates subject to change

2020 UPS® Canada Customs Brokerage Webinar Series
4
UPS Webinars
• April 15 – CUSMA – Transitioning to the new free trade agreement
• June 23 – Canadian Export Reporting System (CERS)
• Sept 15 – CBSA Assessment and Revenue Management (CARM)
3PM ET, 45 minute duration
Registration:
http://bit.ly/UPSCUSMA
http://bit.ly/UPS_CERS
http://bit.ly/UPS_CARM
Please join UPS’s customs brokerage and public affairs subject matter experts as we
explore how these topics could impact your international trade Dates subject to change

This presentation will be available upon check out to all attendees
as well as a link to the event recording.

This presentation is for informational purposes only.
It does not constitute legal advice - please consult with your own legal
counsel for such advice.
Do not rely on this information without performing your own research.

7
Any questions?
Ask our panelists
using the “Q&A”
function
1 CCS/CES/MES
Credit
Agenda
• Impact of Covid-19 on trade
• U.S. Trade Policy Framework
• “Re-balanced” trade
• China
• USMCA
• Proposed Agreements
• WTO
• 2020/2021
• What’s next
• UPS® Tradenomics

8
• Impact of Covid-19
• China
• USMCA
• Impact of Covid19
• WTO
• 2020/2021
• What’s next
Agenda

1.2%
-2.8%
4.0%
5.5%
1.0%
8.5%
IMF growth projections
Sources: IMF World Economic Outlook, April 2020
Proprietary and Confidential: This presentation may not be used or disclosed to other than employees or customers, unless expressly by UPS.
© 2020 United Parcel service of America, Inc. UPS, the UPS brandmark, the color brown are trademarks of United Parcel Service of America, Inc. All rights reserved.
2.3%
-5.9%
4.7%
2.9%
-3.0%
5.8%
Global Impact
0.1%
-5.2%
3.4%
3.1%
-1.6%
4.1%
1.2%
-7.5%
4.7%
Latin America & Caribbean
United States
Middle East / Central Asia
Europe
Emerging & Developing Asia
Sub-Saharan Africa
Note: 2019 are estimates; 2020 2021 are projections
2019 2021
2020
2019 2021
2020
2019 20212020
2019 2021
2020
2019 2021
2020
2019 2021
2020
2019 2021
2020

The plunge in demand has dramatically reduced global air & ocean
cargo capacity.
-44%
-40%
-54
-29%
-8%
Sources: Seabury
U.S. Exports all modes sourced from U.S. News: Exports collapse as coronavirus freezes
international trade (April 28,2020)
Ocean: US Inbound based on volume imports (per DataMyne for April 1-28 in 2020 and
2019 .
Global Ocean port handlings sourced from Drewry 2Q20 World (Table 2.4)
-4%
Global Air capacity: -38.7%
Global Ocean port handlings: -4%
-37%
Proprietary and Confidential: This presentation may not be used or disclosed to other than employees or customers, unless expressly by UPS.
© 2020 United Parcel service of America, Inc. UPS, the UPS brandmark, the color brown are trademarks of United Parcel Service of America, Inc. All rights reserved.
Intra-APAC
Transatlantic
(Air- Eastbound & Ocean Westbound)
Transpacific
(Eastbound)APAC- Europe
(Westbound)
U.S. Exports
(all modes) -8%
-7%
Shown in % change April YoY

Asia outbound freight forwarding outlook
Apr May Jun Jul Aug Sep Oct Nov Dec
Most countries in various level of
lockdowns
Most countries lockdown starts to
ease
Most economic activity resumes Most restrictions lifted, though economy not recovered fullyLockdown Situation
International Travel Minimal International Travel Restricted business travels Some resumption on leisure travel
Industry Verticals
Very strong PPE & high-tech demand
Decreased demand in consumer goods and manufacturing
Most PPE shifts back to Ocean
Normal high-tech demand,
recovery in consumer goods
Market Situation
Capacity Supply
Int’l Passenger (PAX) Flights Minimal PAX schedule.  84% reduction in belly space Some PAX reinstatement.  60% reduction in belly space
More PAX reinstatement.  40%
reduction in belly space
Cargo Flights Significant number of Charters – PAX & freighter aircraft Some Charters (PAX & freighters) plus scheduled freighter capacity
Implications
Air Freight
• Escalated air freight rates
• High rate volatility
• Charter solution to protect service commitment
• Establish regular tonnage commitment with carriers
• Gradually establish rate stability with carriers
• Scheduled charters to protect service during expected surge periods
Ocean Freight
• Continued soft demand on ocean freight
• Blank Sailing from carriers reduces capacity
• Pick Up on demand to stock up for retail peak season
as retail picks up
• Back to normal demand
Rail Freight • Continue to be a viable solution for China to Europe and v.v.
Strong PPE demand, with some shift to Ocean
High-tech demand begins to normalize
Source: UPS GFF Asia

Consumer behavior
E-Commerce
+35%
- Early trends
China
- Return to market
Stimulus
- Bringing back demand

13
and trade policy
• China
• USMCA
• WTO
• 2020/2021
• What’s next
Agenda

U.S. Trade Agenda
“The era of economic
surrender will finally be over.”
Presidential Candidate, Donald Trump
June, 2016
Primary Focus:
• Trade deficits
• Trade Enforcement
• Bilateral Trade Agreements
• Investment in the US
• Re-shoring
• Green-field investment

Section 301 – China tariffs
Cumulative (potential) duties at applicable rates (US$B)
$8.5
$12.5
$32.5
$62.5
$72.5
$82.5
$95.0
$120.0
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
$140.0
List 1
List 2
List 3
List 3
Increase of duties
List 4a
Lists 1,2,3
Suspended
increase
List 4a
Reduction of
duties
List 4B
Suspended
Phase I
Deal
Source: https://www.strtrade.com/f-tariff-actions-resources.html

Phase I implementation
• $77.7B in manufacturing
• $52.4B in energy
• $37.6B in services
• $32B agriculture products
Phase II
• Goal Setting
U.S. - China Relations Today
Phase I and II
Deals
Tariff Exclusions Covid-19
New exclusions granted
Exclusion renewals
• Most set to expire
8/7/2020
PPE Project Airbridge
(expected to wind down
soon)
Responsibility
• Sanctions; Potential
legislation (link)
• New tariffs

From NAFTA to USMCA
Level playing field for private carriers
Commercially meaningful de minimis
thresholds
High-standard commitments on risk
management and document digitalization
Harmonization of and cooperation on pre-
clearance
Reduction in time-consuming and costly
brokerage complexities
USMCA is the next step in the trading relationship between the U.S., Mexico and Canada, building on
the success of the countries’ first agreement negotiated in the ‘90s.
Non-discriminatory
market access
Investment
opportunities and
protections
Gov’t procurement
contracts
NAFTA
USMCA

Other Bilateral Trade Activity
U.S. - UK: first round of talks concluded on May 15
U.S. - EU: talks on hold post Brexit implementation
U.S. – Japan
• Dec 25 2019 “Phase I” bi-lateral trade deal
• Japan reduced tariffs on beef, pork, and other U.S. agricultural
products imports; Japan avoided increased tariffs on cars and auto
parts exports
• Phase 2 negotiations status unclear
U.S. – Brazil: deepen the economic partnership through
expanding the 2011 ATEC*
U.S. – India
• U.S. and India are in the process of negotiating
• U.S. is seeking reduced tariffs, elimination of price caps and
greater market access
• India is pursuing full restoration of its participation in the GSP
U.S. – Kenya: March 17, 2020 – USTR notified Congress
18
Note: Generalized System of Preferences
Going Bilateral
• Choose countries
with good relations
• Choose countries
with trade deficits
• Phased approach:
• Start with
immediate
benefits
• Then “behind the
border” issues
*Agreement on Trade and Economic Cooperation.

WTO
US Objectives
• Improve transparency
• Reinforce compliance
• Middle income countries
• No more special treatment
Covid-19
• WTO’s authority challenged
• 60+ countries:
• Emergency measures
• Export restrictions
• Ignoring WTO rules
19
Under WTO
60%
Under
direct
treaties
40%
Rules Governing
U.S. Trade with Other Countries
Source: Congressional Research Service: https://fas.org/sgp/crs/row/IN10945.pdf (More than 60%
of U.S. trade is with non-FTA partners and thus relies solely on terms negotiated under the WTO).

20
and trade policy
• China
• USMCA
• WTO
• 2020/2021
• What’s next
Agenda

What is next?
• Accelerated mega trends
• Technology Development
• On-demand Economy
• Digitization
• Commercial
• B2C:
Food and Grocery Deliveries:
Healthcare logistics
– The older generation
• Re-shoring manufacturing
• De-coupling
ConcernsOpportunities
However, these all could change
depending on how COVID-19
pandemic continues to evolve and
affect trade and the world
economy

What traders should potentially anticipate
Implication
Fewer export opportunities
Delays in further tariff reductions
Status quo of current tariffs
Possible non-renewal of some exemptions
New prohibited dealings tariffs or other non-tariff
barriers
Action
Limited impact of Phase I deal
Delays in negotiating a Phase II deal
Maintenance of outstanding tariffs
Scrutiny when it comes to renewing
Sec 301 exemptions
Potential new sanctions related to
China’s response to the pandemic

Company responses to Covid-19 parallel the response to tariffs
Remaining agile
In responding to tariffs
• Finding new ways to source
• Other countries or domestic
Now in responding to Covid-19
• Transferring that agility
• Lowered air/ocean capacity
• PPE challenges

Coronavirus: UPS customers advise proactive supply chain solutions
Diversifying Supplier & Manufacturer Networks
Rather than relying on a few businesses for operations, some shippers noted that they are
looking for alternative, domestic solutions to bridge the gap in the short-term and
potentially become a new, valuable partner long-term.
Several noted a concern for putting all of their eggs in one basket in case their regular,
trusted suppliers falter. As such, they’re beginning to build ‘back-up’ plans and spread their
purchasing around just in case a full pivot is necessary.
24
Source: UPS Marketing Research & Global Customer Insights study, April 2020

UPS® Tradenomics:
The economic impact of trade on your business
25
U.S. Trade Policy
What should I expect
from US Section 301
tariffs?
. . .
. . .
How do I prepare for
USMCA?

2020 UPS® Tradenomics Webcast Series
How Section 301 exclusions and renewals can
impact your bottom line
May 27, 2020
Comments period ends June 8, 2020

Questions and Answers
US Trade Policy Update
• Check Out:
• Feedback / value
• Follow up inquiry or consultation
• For more information contact Greg Maddaleni at gmaddaleni@ups.com

Freight forwarding milestones
Dec Jan Feb Mar Apr
Dec 31: China reported cluster
cases of pneumonia
Jan 11: 1st death in China
Jan 21: 1st case in US
Jan 30: WHO declares global
health emergency
Milestone Events
International Travel None
Lockdown Situation No lockdown
Market Situation
Capacity Supply
Cargo & PAX capacity
Implications
Air Freight
• Escalated air freight rates
• High rate volatility
• Severe capacity constraints
• Increased charter usage
• PAX aircraft being used for cargo
• Backlogs and shipment delays
Ocean Freight
• Soft ocean freight demand
• Blank sailings from carriers causing capacity
reduction
• Rates remain stagnant as carriers cancel GRIs
Jan 23: Wuhan under
lockdown
China-to-US travel restricted
Feb 11: COVID-19 named
Feb 29: 1st death in US
Feb 14: 1st death in Europe
China-to-US cargo capacity
showing drastic, weekly
declines
Feb 11: Total belly capacity
from mainland China reduced
by -58%
Feb 28: China-to-US cargo
capacity down -40%
Europe-to-US travel restricted
Feb 23: Europe lockdowns
begin
Transatlantic cargo capacity
showing drastic, weekly
declines
Mar 13: 60% of belly cargo
capacity removed from
Transatlantic
Mar 27: China-to-US cargo
capacity down -15%
Mar 19: California 1st state to
issue Shelter-in-Place
Mar 24: Britain & India under
lockdown
Apr 2: Global cases top 1
million
Apr 28: US surpasses 1
million cases
Mar 13: US declares national
emergency
Mar 19: First time no new
infections reported in China
Apr 8: Wuhan re-opens
Apr 30: Some US states
begin relaxing Shelter-in-
Place
Apr 17: China-to-US cargo
capacity down -7%
Apr 28: PAX belly capacity
down -78% YoY, but increased
+23% over previous week
Source:
https://www.cnn.com/2020/02/06/health/wuhan-
coronavirus-timeline-fast-facts/index.html; Seabury

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