March 2020 | Commentary | Checking In

Flexing Muscle on China Trade Compliance

Tags: Legislation, Public Policy, and Regulations, Global Economy, E-commerce

Keith Biondo is the publisher of Inbound Logistics magazine.

The Trump administration is using a novel approach—e-commerce shipment enforcement—to ensure that China complies with Phase 1 of the U.S.-China trade deal signed in January 2020.

Trade compliance intersects with billions of dollars of e-commerce shipments in Operation Mega Flex, which the Department of Homeland Security outlined in late February 2020. Mega Flex targets what U.S. trade negotiators call the "seven deadly structural sins" that would violate China's trade partnership with the United States. Two of those "sins" are intellectual property theft and illicit production and shipments.

Accordingly, parts of the Phase 1 agreement state that China promises to cut harmful shipments to the United States—MDMA, meth, fentanyl and other opiates, fake coronavirus meds, and fake high-end goods such as the iPhone 11 and AirPods—which e-commerce players deliver by the millions.

The partial trade deal does, on paper at least, offer benefits to the United States, says The New York Times. The bulk of the tariffs remain in place but, given compliance history, "enforcing the deal will be difficult," The Times opines.

That's where the e-commerce connection comes in. The Trump administration plans to ensure compliance by holding e-commerce companies, including Amazon, Facebook, Alibaba, AliExpress, Instagram, and eBay, financially responsible for helping China traffic in products that the trade deal forbids.

Operation Mega Flex is a "monthly look under the hood of thousands of Chinese packages that come in by air to the various ports around the country," explains Dr. Peter Navarro, Trump's director of trade and manufacturing policy, to determine violations that have been going on for years.

Why have these violations been going on for so long? Partly because in the past, case law was determined when the U.S. government, and specifically the Department of Justice, "didn't understand the implications of e-commerce," Navarro says. To remedy that, the Trump administration is targeting regulatory laws on the books to align regulations with market realities.

President Trump signed an executive order in January 2020 that levies civil penalties against companies that allow the sale of counterfeit products. Moving forward, the White House is working to bring a "proposal to the Hill" that will rewrite the regulatory laws needed "to hold these e-commerce platforms accountable," Navarro states.

Will compliance be as difficult as The New York Times predicts? Perhaps. But at least Amazon is listening. According to a Reuters report, Amazon recently flexed its own compliance muscle by barring one million bogus coronavirus products from being sold on its marketplace. Voluntarily.






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