Robust international trade has long been a key factor in the economic equation in Los Angeles and across Southern California. Consider the fact that, according to the Los Angeles County Economic Development Corp., the Los Angeles Customs District leads the nation in two-way trade value, with more than $416 billion in exports and imports moving through the region in 2014 alone.
Now, a critical new federal law promises to make global trade easier, faster, and more secure, encouraging organizations already doing business across our borders to expand their efforts, while giving new motivation to first-time international traders.
After nearly a decade of work among Congress, two presidential administrations, and the business community, the Customs Reauthorization Bill went into effect on March 10. Also known as the Trade Facilitation and Trade Enforcement Act of 2015, the bill opens up new international trade opportunities for U.S. businesses of all sizes by streamlining customs procedures, decreasing the cost to ship internationally, and strengthening trade enforcement at U.S. borders.
While the new trade law will benefit companies all across the country, including small- and medium-size organizations that make lower-value international shipments and accept returned goods with frequency, L.A. businesses, many of which have already gone global, are exceptionally well-positioned to take advantage of a number of major provisions. In particular, fashion, entertainment, and technology companies – all of which play such a central role in the regional and national economy − will find new reasons to consider, or to expand, international trade strategies in light of specific measures that offer trade safeguards and cost-savings. Let’s take a closer look at several provisions:
Increase in the de minimis threshold
Under the law, individuals and businesses can now ship nonrestricted items valued up to $800 without incurring duties and taxes, called the de minimis threshold. This significant increase above the previous $200 limit opens a world of possibilities for companies pursuing new customers and markets around the globe. The increase represents the first in the de minimis cutoff since 1993, and it will be especially important to smaller companies, including some in the fashion and technology sectors that regularly make lower-value cross-border shipments.
E-commerce has transformed the way companies do business, making it possible for the smallest businesses to reach customers in the furthest corners of the world with small and large shipments. The new law and its increase in the de minimus threshold are transforming the way they reach them. It should be noted that nonrestricted items below the de minimis threshold also move more rapidly through the customs clearance process, which translates into an important potential for companies to reach their international customers faster than ever before with more products.
Intellectual property rights and trade enforcement
The new trade law establishes important rules designed to stop counterfeit goods – goods that infringe on intellectual property rights – from entering the United States. For companies in the fashion, entertainment, and technology sectors, these new enforcement procedures are critical, and they mean that the potential benefits of new export opportunities far outweigh the potential problems caused by imports. The law creates a new National IPR Coordination Center to oversee investigations, training, and other enforcement activities. U.S. Customs and Border Protection is also required to provide IPR right holders with samples in order to identify counterfeit goods.
Product returns
The trade facilitation and enforcement law contains provisions that are particularly important to U.S. businesses that ship to customers abroad with the understanding that the products they export might be returned. The law allows for duty-free treatment for any exported goods returned to the United States within three years of being exported. Retail fashion and technology companies will benefit greatly.
The Customs Reauthorization Bill marks a major step forward for U.S. international trade and a critical chance for businesses in Southern California to boost their global plans. Fewer impediments to low-value shipments will translate into real efficiencies for small and medium businesses already exporting to customers around the globe. Lower compliance costs will also spur more imports, including imports of source materials that U.S. companies need to manufacture their products here and to grow their businesses. Finally, increased enforcement measures will protect companies from the threat of counterfeit activity. A streamlined global marketplace promises to connect companies with new customers faster and easier than ever before, and that means a stronger, more productive economy for Los Angeles, and a brighter future for all.
John Cornish is senior vice president and western area general manager for DHL U.S., overseeing all sales, operations, finance, and facilities for the area.
