Saturday, March 8, 2008

"Kenny's 'Pop-In' Guest Blog": Darryl LaPierre

 It’s a different situation for me as traditionally my customers are Canadian.  I can tell you that years back when the CAFTA was introduced, those companies I dealt with were very pleased with the decreases and then the eventual elimination of duty.  Not to date myself, but that was some time ago and a lot of contacts I dealt with back then when those pleasures about NAFTA were expressed have since retired.  These days, the new generation of decision makers seem to take NAFTA for granted, as something that has always been and will always be.  I got this sense the other day when one of my clients had a part that was made in Germany that they used as a base for their own product.  The value added to the part wasn’t substantial enough to offer the necessary shift to meet NAFTA criteria and the end product, as it was considered for export to the US, was still dutiable.  The rate of duty for this item was 2.3%.  Before the advent of CAFTA / NAFTA a shipper would have looked at 2.3% as a very reasonable rate of duty.  Today, that 2.3% was viewed as highway robbery, a money grab so to speak. 


Keep in mind that NAFTA costs the US Customs Service a good deal of revenue.  US Customs was the number one revenue generator for the feds prior to the imposition of income tax.  That status offered great powers to this service.  They did not like either the fact that they were losing revenue or jeopardizing their hold on power.  As duty rates lowered, US Customs pencil became sharper and sharper.  New programs were instituted to focus on I dotting and t crossing.  In addition, regulations that had previously been ignored had the dust blown off them and were freely being enforced.  These moves were made, in my opinion, to penalize importers and supplement the revenue stream.  The new Generation of decision makers who have taken NAFTA for granted understanding this and the costs involved for maintaining their compliance under Customs regulations.


Now lets move the clock ahead to a time that our future administration considers eliminating the NAFTA.  The opinions will come out and they won’t be positive, or at least from where I’m located. 


Taking a stab at this agreement nationally, consider the US auto makers.  Consider that the pledge to eliminate NAFTA will help the US autoworkers as was pledged just lately in Ohio.  The big three auto makers are losing money hand over fist lately.  They have  enjoyed duty free status since before WWII under the automotive pact trade agreement.  I would assume they are trying to manufacture vehicles at the lowest costs possible given the status quo.  How would the elimination of NAFTA, increasing the costs of manufacturing, bring back good paying jobs to the US?  It would seem to me that it would drive even more of those high paying wages away as an effort to even stay in business.  Keep in mind that the majority of cars and their components are dutiable at 2.5%.   When a company looks at hiring workers at $20.00 or higher / hour in the US or much less abroad, that 2.5% isn’t much of a hurdle.

Thanks, man. You've worked NAFTA since Day 1, eh?

More about Northern Border NAFTA, please. Rivers are still clean, and your nuts aren't vibrating?

More from the North, mon frére...


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