Washington Insider-- Monday

Decoupling US Trade From China Will be Hard

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

Lawmakers Call on EPA to Reject Retroactive Small Refinery Exemptions

EPA should deny 52 retroactive small refinery exemption (SRE) requests it has received going back to the 2011 compliance year, according to a bipartisan group of 16 senators led by Sens. Amy Klobuchar, D-Minn., and Joni Ernst, R-Iowa.

“These petitions should not even be entertained because they are inconsistent with the Tenth Circuit decision, Congressional intent, the EPA’s own guidance, and -- most importantly -- the interests of farmers and rural communities who rely on the biofuel industry,” the letter noted.

Retroactive waivers “would only worsen the unprecedented economic challenges facing the biofuels industry and the rural communities that it supports,” the letter added.

The lawmakers also want EPA to explain exemptions for refineries owned by Chevron and Exxon Mobil.


USDA to Allow Online Applications for CFAP

Applications for the Coronavirus Food Assistance Program (CFAP) will now be accepted by USDA’s Farm Service Agency (FSA) via an online portal and the agency said it would now be “leveraging commercial document storage and e-signature solutions” to allow for the completion of applications from home.

Through the online portal, producers can use eAuthentication -- secure USDA login credentials -- to certify eligible commodities online, digitally sign applications and submit directly to the local USDA Service Center. Currently, the digital application is only available to sole proprietors or single-member business entities, FSA noted.

The agency also said that offices can “work with producers to complete and securely transmit digitally signed applications through two commercially available tools: Box and OneSpan.”

As of June 22, USDA has paid out $4.006 billion in CFAP payments to 252,489 producers.

Washington Insider: Decoupling US Trade From China Will be Hard

While President Donald Trump is urging American companies to “ditch China,” many of them can’t get more goods fast enough. There are several reasons, Bloomberg reports.

As an example, Bloomberg follows the container ship Melina, which set sail Wednesday from a Chinese port near Shenzhen with products bound for U.S. households. The report calls the ship a hulking “symbol of how the flow of goods is adapting in a global economy crippled by a pandemic.”

Capable of carrying almost 4,300 containers, she’s “downright petite” in an industry where the biggest ships can handle more than 20,000. However, the Melina is part of a budding fleet of smaller vessels that COVID-19 has thrust into service. These tend to compete on the basis of speed and it will dock in Los Angeles on July 6 after a 12-day journey, which is a week ahead of a larger ship doing the same route, Bloomberg says.

However, speed is costly -- as much as double the cost of standard transpacific service -- which is already rising as the world’s biggest shipping companies scale back capacity perhaps by 25% this quarter and another 10% in the third quarter. The industry expects U.S. retail demand to recover only slowly amid “plenty of fog on the global economic horizon.”

But for now, “shipping demand from some companies remains brisk,” justifying the added import cost of fast delivery from online shoppers for everything “from protective medical gear to baby pools for the backyard.”

Melina is among lines offering express service between China and the U.S., the kind of links that show the difficulty President Trump faces in pushing for a “complete decoupling” of the world’s largest economies and bringing production back home.

“We expect the need for this expedited service to be permanent and actually grow as the share of e-commerce in global trade will continue to grow,” Nissim Yochai, the company’s executive vice president in the Pacific, said from Hong Kong. “This abnormal period will continue as long as the world continues to search for tools to offset the COVID-19 pandemic and to assist people attempting to get out to work and socialize and, of course, consume.”

Striking a balance between global supply and demand is what shipping companies are trying to do constantly, looking months and even years in advance. The pandemic has made that job much harder. One way to do it is to cancel sailings, which they’ve been doing a lot lately. At the adjoining ports of Los Angeles and Long Beach, the main gateway for Chinese imports, 45 trips have been scrapped this quarter, more than four times the number in the second quarter of 2019.

For some U.S. companies on the receiving end of goods, shipping disruptions are starting to subside. For others, they’re just beginning, Bloomberg says.

“We’re not at the point right now where we’ve rebalanced supply to the demand because the demand signals are jumping all over the board,” said Abe Eshkenazi, CEO of the Association for Supply Chain Management.

About 80% of the world’s trade crosses an ocean by ship, and the industry typically has two busy seasons tied to Chinese holidays, the New Year and Golden Week in October. With normal shipping rates double what they were three months ago and air cargo rates still elevated because of a dearth of commercial flights, importers are facing the strains of a peak season now.

A general merchandiser in small-town America that offers free coffee and a bag of popcorn, Rural King is little different than other traditional retailers that experienced recent shortages of toilet paper, paper towels and hand sanitizer, Bloomberg said.

But thanks to a flexible supply chain and close relationships with vendors in China and elsewhere in Asia, the firm has managed to keep most items stocked and is having a good year.

Who knew squirrel feeders would be big sellers in a global health crisis, or plastic pools, Rural King manager told Bloomberg. “And, we just got another shipment of trampolines,” he said, adding that Rural King stores sold 300 in one day recently. Good thing for him he has 100 to 200 suppliers in China, and in Vietnam whom he talks to daily and who are scrambling to help meet the rush. “They are unbelievable with these orders.”

So, we will see. The online retail services system is huge and driven by powerful economic forces that make it extremely difficult to realign, as the Trump administration appears to be finding out. However the changes being proposed are important and should be watched closely by producers as the nation struggles to overcome the coronavirus, Washington Insider believes.

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