May 26, 2010 - In Washington, many changes are proposed, but few actually occur.  This could easily apply to the numerous attempts made by the White House and Capitol Hill lawmakers during the past 20 years to reform the country's Cold War-era export control regulations. However, a major push is underway by a determined Obama administration, a largely receptive Congress, and supportive industry to finally change the way federal regulators oversee export licensing procedures and policies.
 
The Obama administration outlined its plan in late April for a significant export control reform, which it says will make the licensing process more efficient for legitimate shipments while keeping the most sensitive U.S.-made technologies out of the hands of terrorist organizations and militaries of rogue nations.
 
The current export control regime hasn't been updated since the demise of the Soviet Union in the late 1980s, resulting in a tangle of rules and processes overseen by a handful of federal agencies, namely:
      · The State Department's Directorate of Defense Trade Controls.
      · The Bureau of Industry and Security at the Commerce Department.
      · The Defense Department's Defense Technology Security Administration.
 
Gates' Frustration. The Obama administration picked Defense Secretary Robert Gates to kick off its export reform agenda in a highly anticipated speech before the Business Executives for National Security forum in Washington on April 20.
 
Within the interagency-based export licensing approval process, the Defense Department is often viewed by the industry as the most conservative and cautious when it comes to approving licenses for U.S.-made dual-use technologies, or items with both commercial and military applications.
 
"The United States is thought to have one of the most stringent export regimes in the world. But stringent is not the same as effective," Gates said in his speech.
 
Gates said the ineffectiveness of these export controls has been demonstrated in recent years by several illicit exports of highly sensitive materials and delays with implementing important homeland security capabilities.
 
The defense secretary noted that the United States reviews "tens of thousands" of license applications for exports to the European Union and NATO countries and in 95 percent of cases approves them. In addition, many individual parts for military equipment require their own licenses.
 
Action Plan. To improve the process, the defense secretary said the administration will first develop a single export control list to make clearer to U.S. companies which items require licenses for export and which do not.
 
 "Items that have no significant military impact, or that use widely available technology, could be approved for export quickly," Gates said. "We envision a more dynamic, tiered control system where an item or technology would be 'cascaded' from a higher to a lower level of control as its sensitivity decreases."
 
The administration's second objective is to develop a single licensing agency, which will have jurisdiction over munitions and dual-use items and technologies and streamline the review process and ensure that export decisions are consistent and made based on the real capabilities of the technology.
 
The process will be supported by a single, unified information technology to "reduce the redundancies, incompatibilities, and waste of taxpayer money that our current system of multiple databases produces," Gates said. "A single online location and database would receive, process, and help screen new license applications and end users."
 
Currently, there are three separate systems that govern U.S. export controls:
      · The Commerce Department's IT system for export controls was set up in 1987 and is in need of significant overhaul.
      · The State Department has only recently started to automate its paper-based licensing system.
      · The Defense Department's system is considered the most modern of the three.
 
Gates said it's important to determine which end users are eligible to receive U.S.-made technologies.
     
The administration plans to roll out the reforms this year and next. While some actions can be made by executive order, the single licensing and enforcement coordination agencies will require congressional action, Gates said.
 
Initial Applause. The United States is the only industrial nation with export controls split among several agencies rather than having this activity concentrated within one agency.
 
Steve Brotherton, managing partner of the Export Controls Practice at law firm Fragomen, Del Rey, Bernsen & Loewy in San Francisco, said other major trading countries have "become much more sophisticated and we've gotten left behind. We've become so archaic."
 
Overall, the industry backs the administration's export control reform after many years of lobbying for changes. Several trade associations, such as the National Association of Manufacturers, National Foreign Trade Council, TechAmerica, and Coalition for Security and Competitiveness, have offered their own recommendations in the past year for reform.
     
Shipper takeaways for U.S. export control reform
 
· Routinely monitor Commerce, State and Defense department Web sites for updates, and check the Federal Register for proposed rulemaking notices.
 
· Engage trade associations and offer input for position papers that will help shape export control reform's direction in Congress and the Obama administration.
 
· Start now to prepare your internal export compliance operations for these changes by contacting qualified and experienced consultants or attorneys for guidance.
 
· Be prepared to explain to your senior management about the need for making changes to    information systems and organizing seminars to educate employees, especially those involved in logistics and transportation management and sales and marketing, about the changes to U.S. export controls.
 
Some industry officials believe the administration may concentrate the new export licensing and enforcement activities in the Department of Homeland Security, while others recommend the formation of a standalone body within the federal government.
     
Getting Ready.  Export compliance officers, many of whom are the sole individual for this activity in their companies, are taking this reform seriously and dedicating the time to understand and follow it.
     
Freight forwarders are expected to play an important role in guiding small to medium-sized exporters through these reforms.
 
"I definitely see ourselves helping companies understand what they need to do," said Michael Ford, vice president of compliance and quality for BDP International in Philadelphia. "We definitely don't want to see companies stepping away from exporting."
 
Brotherton said that no matter how the reforms shake out forwarders should anticipate the same amount of liability and government focus, if not more so, on their export operations.
 
Trade associations and coalitions are already lining up resources to track and respond to export reforms as they're proposed by the administration and generated through legislation in Congress.
 
"It will become critical for the industry to stay on top of this reform and to be very assertive in providing constructive critique to their legislative representatives and key agency personnel," DiVecchio said. "Complacency will be the death knell for a progressive approach to export controls."

 

 Chris Gillis

May 25, 2010  - The footwear and apparel industries are gaining traction in 2010, but sellers and manufacturers realize they'll have to walk before they run. Seasonal sales will likely spike during the back-to-school and holiday shopping periods, only to retreat in subsequent months.

"I'm not expecting a surge this year, just a couple of percentage points' gain," said Charles Kantz, vice president of logistics and warehousing, at St. Louis-based specialty retailer Baker Footwear Group.

Apparel sales in the first four months of 2010 have followed that roller-coaster trend. For example, sales of women's clothing increased 4.2 percent in March, due in part to an early Easter, but fell 4.1 percent in April year-over-year.

"It's pretty much like that across-the-board," said Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation. "It's the normal seasonal ebb and flow."

Still, barring a major economic setback, 2010 will be better than last year. Apparel sales in the first eight months of 2009 plunged 14 percent compared to the same period in 2008 before recovering late in the year.

Retailers are monitoring consumer attitudes, Kantz said. Until consumers feel confident about the direction of the economy and their personal job situations, they will be cautious in their spending, and retailers will be cautious in placing orders.

Like other products produced in China, a surge in footwear sales late last year and in early 2010 caught factories in the manufacturing giant by surprise. About 87 percent of all footwear consumed in the U.S. is manufactured in China.

Labor shortages ensued, pushing up wages and prices, said Matt Priest, president of the Footwear Distributors and Retailers of America. The labor shortage has abated with the lull in the market, but it could resurface if demand spikes again later in the year, he added.

Like most shippers, footwear and apparel importers have struggled to get space on vessels this year. Carriers in 2009 lost an estimated $15 billion worldwide. Finding that it was less costly to lay up their vessels rather than run them with low load factors, carriers reduced capacity about 10 percent.

When U.S. and European retailers in late 2009 suddenly decided to replenish their dwindling inventories, demand for vessel space in Asia exceeded supply. The capacity shortage was especially pronounced in early 2010 before the Chinese New Year celebration in February.

Kantz said some of his containers were "rolled," or bumped to later sailings, at Chinese ports before and after the New Year celebration, because vessels were overbooked.

Now, carriers are restarting services they had suspended during the winter months, and say the space crunch should dissipate by June, Kantz said.

Carriers this spring pressed hard for rate increases in the service contracts that run from May 1 until April 30, 2011. Importers expected the increases because freight rates in some cases had dropped below $1,000 per 40-foot container.

The volatility, Kantz said, is bad for shippers as well as carriers because it leads to capacity shortages and service lapses. "Let's get to one rate and keep it there," he said. Time-sensitive, service-oriented shippers require dependable service and rate stability, he said.

Shippers also are concerned about capacity limitations in the motor carrier industry, where, like on the ocean side, a significant amount of capacity was idled during the recession. If U.S. imports continue to increase, motor carriers may be hard-pressed to satisfy demand, Kantz said.

Intermodal rail, he said, may be his next option. Capacity is available, rates are lower than in the truckload sector and rail service and reliability appears to have improved. "I'm feeling better about intermodal," Kantz said.