Us trade policy update

2019 UPS® Tradenomics Webinar Series
U.S. Trade Policy Update
April 17, 2019
Today’s webinar will begin shortly

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. Proprietary and Confidential: This presentation may not be used or disclosed to other than employees or customers, unless expressly authorized by UPS.
© 2019 United Parcel Service of America, Inc. UPS, the UPS brandmark, the color brown and photos are trademarks of United Parcel Service of America, Inc. All rights reserved.
U.S. Trade Policy Overview
Presenters
• Host
• Greg Maddaleni, LCB
• Customs Brokerage
Sr. Manager
• Panelist
• Amgad Shehata
• Senior Vice
President, UPS
Global Public Affairs
• Panelist
• Kelly Wilton, LCB
• Customs Brokerage
Compliance Manager

Agenda
3
Any questions?
Ask our panelists using the “Q&A” function
1 CCS/CES/MES Credit
Trade Policy Update
• President Trump’s Trade Policy Framework
• North American Free Trade Agreement (NAFTA)
and U.S.-Mexico-Canada Agreement (USMCA)
• Brexit and UK-EU Trade Fallout
• U.S.-EU Trade Negotiations
• U.S.-China Trade Talks
• WTO Global E-Commerce Discussions
• Trade Forward

Please note
THIS PRESENTATION WILL BE AVAILABLE UPON CHECK OUT TO ALL ATTENDEES AS WELL AS A LINK TO THE EVENT RECORDING.

Please note
THIS PRESENTATION 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.

The politics of global
trade are trickier than
ever before.
Public Affairs is pushing
for UPS priorities in
multiple trade
agreements, while being
sensitive to governments
and
their leaders’ concerns.
6

President Trump’s
Trade Policy Framework:
How does the president think about trade?
7
• Focus on the bilateral trade deficit – especially in
manufactured goods & agriculture
• View that America has been cheated for years by trading
partners
• Preference for tariffs to achieve policy goals
• Skepticism of effectiveness of multi-party trade agreements
(e.g, TPP)
• Focus on enforcement
• Emphasis on driving new business activity and investment to
the United States
• Pursuit of trade cases at the WTO, despite publicly criticizing
the WTO dispute resolution process and its ability to confront
certain practices
• Stay Informed
• React Quickly
• Explore Options
• Document Changes
UPS® Tradenomics

From NAFTA to USMCA
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 (NAFTA).
• NAFTA provided for:
• Non-discriminatory market access for goods & services
• Investment opportunities and protections
• Ability to compete for major government procurement contracts
• USMCA builds on that to include:
• New digital trade and labor provisions
• Commercially meaningful de minimis thresholds & level playing
field
• Harmonization of and cooperation on pre-clearance
• Reduction in time-consuming and costly brokerage complexities

USMCA – What’s Next
UPS will continue to advocate for an updated agreement
to meet the realities of modern, cross-border trade.
State of Play
• The Agreement was signed by the three heads of state on
November 30 at the G-20 Summit in Argentina.
• Next up: Ratification. The parties’ legislatures must approve the
agreement for entry-into-force.
• Canada and Mexico will only begin work on ratification once the
U.S. has completed domestic procedures. Canadian elections on
October 21, 2019 may also factor into the timing.
• U.S. Congress must give an up or down vote and pass
implementing legislation – the desired timing by the Trump
Administration is April/May, but will more likely happen in
September.
• President Trump has threatened to withdraw from NAFTA to
encourage swift ratification.
• The U.S. Administration has tried t advance a harmful reciprocal
de minimis regulatory change in the U.S., which UPS and a
coalition of other likeminded companies are countering.
• Rules of origin could impact customers
• Check to see whether impacted
• New de minimis benefits going into Canada and
Mexico
• Streamlined processes for importing into Mexico
• Certificate of Origin may be made by Importer,
Exporter, or Producer
• Certificate of Origin need not be on the CF-434: no
prescribed format
UPS® Tradenomics

Brexit Advocacy
• Despite several attempts, Prime Minister Theresa May has not
succeed in getting the Withdrawal Agreement she negotiated
with the EU approved by the UK Parliament.
• May’s deal has been voted down three times, but Members of
Parliament have not yet found an alternative.
• The UK obtained an extension from the European Council
until October 31 to delay Brexit deadline and finalize its
ratification of the Withdrawal Agreement, except that the
Withdrawal Agreement may enter into force sooner if the
parties complete their ratification procedures before that date.
• Should the UK still be an EU Member State on May 22, it will
be under an obligation to hold elections for the European
Parliament, otherwise the granted extension will cease by
May 31.
• UPS has been working to avoid a scenario where current
trade, customs and other UK-EU arrangements would end
overnight (so-called “hard Brexit”). Such an exit would be
especially hard on SMBs.
• The ideal outcome would be a transitional agreement based
on status quo (until the end of 2020), followed by a long-term
solution for road and air transport connectivity. and air
transport connectivity.
• Rules for importing to/exporting from the UK
will change
• Not yet clear in which ways
• No definitive timeline
UPS® Tradenomics

11
• The U.S. and EU have begun to lay the groundwork for a
regulatory cooperation effort for some key industrial products or
sectors.
• They are working toward Three Zeroes, based on the July 2018
agreement: zero tariffs, zero non-tariff barriers and zero subsidies
on industrial goods outside the auto sector.
• Malmström and Lighthizer have met several times to discuss
trade.
• The EU last week received an approved mandate of limited scope
to engage in negotiations.
• Notably, the U.S. agreed to hold off on any auto-industry tariffs
during negotiations. Congress remains critical of talks because EU
has said it will not negotiate on agriculture, keeping the trade deal
to industrial goods.
• Trade talks between the U.S. and Japan kicked off on Monday this
week in DC as negotiators from both sides consider a free trade
agreement – a deal that President Trump and USTR Lighthizer
have strongly pushed, backed by threats to impose tariffs on
Japanese autos as part of a Section 232 investigation.
U.S.-EU Trade Negotiations
• Which commodities to be included?
• Too early to know full extent
• Negotiating objectives include “apparel”
and “retail” as part of “industrial goods”
• Sec 232 and Sec 301 duties will have to go away
(exemption for all commodities) before EU will
negotiate seriously
UPS® Tradenomics
Other
factor:

U.S.- China Trade Negotiations
• The Trump Administration wants:
• To reduce $375.2 billion trade deficit in goods (2017)
• To counter China’s IP practices, Made in China 2025, and
other trade and investment tactics
• The Xi Administration wants:
• Continued market access to the U.S. and growth
• To counter Trump’s tariffs and to set a trade framework that
benefits Chinese expansion
Section 301
The U.S. has imposed additional import tariffs under Section 301 of
the Trade Act of 1974 following a USTR investigation, which
concluded that China is engaged in unfair trade practices.
July 6 – 25% tariff on approximately $34B worth of
Chinese goods (818 products)
August 23 – 25% additional tariffs on approximately
$16B more (284 products)
September 24 - 10% additional tariffs on a new list
of $200B in consumer goods with additional will remain at
10% (and not increase to 25% “until further notice”)
U.S.-CHINA IMPORTS V. TOTAL IMPORTS PER COUNTRY (2018
GOODS & SERVICES)
$522.9 B, 18%
$2,903.3 B
U.S. - Imports from China
Total U.S. Imports from World
$187.5 B, 9%
$2,351.1 B
China - Imports from U.S.
Total China Imports from World
Sources:
https://globaledge.msu.edu/countries/china/tradestats
https://www.bea.gov/data/intl-trade-investment/international-trade-goods-and-services
https://ustr.gov/countries-regions/china-mongolia-taiwan/peoples-republic-china
U.S. Tariffs on China
(estimated)
$267B $250B
Total: $517B (Goods)
Might Impose
(estimated)
Amount Tariffed
(estimated)
China Retaliatory Tariffs on the U.S.
(estimated)
$60B
Might Impose
(estimated)
Total: $170B (Goods)
$110B
Amount Tariffed
(estimated)

U.S.- China Trade Negotiations
90 Days of Negotiations proved difficult, but
both sides remain optimistic as talks continue:
• Talks between the two sides launched December 1 at
G-20 Summit in Argentina.
• The focus is on structural reform issues around forced
technology transfer, intellectual property protection,
non-tariff barriers, and cyber intrusions and cyber
theft; plus services and agriculture trade.
• USTR Lighthizer and Treasury Secretary Mnuchin
visited Beijing on March 28-29 for a new round of
principal-level trade talks.
• Beijing announced that it would continue to suspend
its retaliatory tariffs indefinitely as a gesture of good
will. The U.S. has also delayed the increase of tariffs
until further notice.
• Following Vice Premier He’s visit to Washington on
April 3, President Trump expressed optimism that the
two sides are moving towards an “epic” deal, which
they aim to finalize within the next 4 weeks – but no
formal summit with President Xi has been
announced.
13
• Companies have gone through hoops to
minimize the current tariffs
• Explore First Sale
• Verify HTS numbers
• Tariff Engineering
• Supply Chain changes
• Duty Drawback
• Maintaining these “hoops” could have long term
positive impacts
• Could be ready if there is another spike in duties
UPS® Tradenomics

WTO Engagement
Toward a Global E-Commerce Framework:
• 70+ economies at the World Trade Organization’s (WTO) 11th Ministerial
Conference in Buenos Aires (December 2017) agreed to negotiate a new e-
commerce framework.
• This was in large part due to the support lent by a U.S. private-sector group
in which UPS participates to push for policy improvements that will
positively impact all areas of the global e-commerce ecosystem.
• There is a collective, global push for effective, synchronized
e-commerce outcomes between the WTO, the World Customs Organization
(WCO), and the Organization for Economic Cooperation and Development
(OECD).
• All this has culminated to a January 2019 announcement at the World
Economic Forum in Davos, 76 WTO economies – the EU and 48 other
members of the WTO – will begin negotiations to put in place global rules
on electronic commerce.
• The goal is to have a binding legal agreement on trade rules that facilitate
cross-border trade in electronic and physical goods and services by MC-12
Decmeber 2020.
14
• In order for a customer to reap the benefits
of the eCommerce engagement, the broker
needs to align to framework that is
providing those benefits
UPS® Tradenomics

15
Trade Forward:
The trade landscape has been
contentious, but progress is
being made on multiple fronts.
UPS is taking a leadership role
in advocating for a trade
landscape that benefits
Enterprise & SMBs
When it’s easier to trade –
more trade happens
Questions and Answers

Thank you for your participation!
U.S. TRADE POLICY UPDATE
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