March 22, 2012
Commerce Department Lowers Boom on Chinese Solar Producers with Tariff…in Perhaps the Softest Manner Possible
The Commerce Department and the Obama Administration wanted to send a message to China that it knew there was unfair government assistance going to companies in its solar products manufacturing sector and, thus, imposed a tariff this week. However, most analysts and domestic solar producers lambasted the tariff as a shockingly weak attempt to punish Chinese manufacturers with a perceived unfair advantage, at best, and a death knell into insolvency for some badly struggling U.S. producers at worst.
The Commerce Department announced it believed the China's illegal subsidies enabled its solar manufacturers to dump their products in the United States at artificially low prices, hurting American competitors, and responded with the announcement of the tariff. The widely anticipated move had market-watchers predicting it could be set at 20%, perhaps 30%. Instead, Commerce emerged Tuesday with an underwhelming range of 2.9% to 4.3% for the tariff. In essence, the move was not greeted as something that would help U.S. producers in any significant fashion, all while further antagonizing key trade officials in China who have been engaged in escalating trade-based rhetoric battle with their U.S. counterparts. For their part, Chinese officials proclaimed that such a tariff, in the end, would drastically increase prices and decrease availability of solar energy products in the world market.
U.S. manufacturers continually allege that their Asian competitors have been offered subsidies by their government and can no longer compete because they are getting undercut so drastically on pricing and costs. In 2011, BP's solar operation halted its prized Maryland-based solar activities in favor of relocation abroad and a series of bankruptcy filings have come steadily by overleveraged alternative energy manufacturers in the United States over the past six-plus months. Bankruptcy filings have included Stirling Energy Systems, Inc. (Chapter 7 liquidation), Evergreen Solar, SpectraWatt, Inc. and the controversial Solyndra, a California firm with ties to the Obama Administration still being investigated federally for fraudulent business practices. The latest Chapter 11 filing came from Energy Conversion Devices. Another, less acknowledged factor may be oversaturation in the U.S. solar industry, which saw rapid and unsustainable interest during the waning days of the last economic boom.
Brian Shappell, NACM staff writer
CMI Closes March 23
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In a 55-45 vote, the Senate rejected a measure this week that would've reauthorized the Export-Import Bank (Ex-Im Bank) and expanded the agency's borrowing limit.
The reauthorization was submitted as an amendment to the Jumpstart Our Business Startups, or JOBS, Act of 2012, which passed the House earlier this month in a 390-23 vote. As proposed by Senators Maria Cantwell (D-WA), Lindsey Graham (R-SC), Tim Johnson (D-SD) and Richard Shelby (R-AL), the amendment would've extended Ex-Im's charter until 2015, increased the bank's lending capacity from $100 billion to $140 billion and improved transparency by requiring Ex-Im to provide more notice and details to Congress, the public and customers. It required 60 votes to advance.
Prior to the vote on the amendment, Senate Minority Leader Mitch McConnell (R-KY) urged his Republican colleagues to vote against the measure on the grounds that the increase in the bank's borrowing limit is an example of unchecked federal spending, and that the amendment would only hold up the passage of the JOBS Act.
Ex-Im's charter expires in 72 days, and it's expected to reach its borrowing limit even sooner, sometime before the end of March.
"The Senate's failure to renew the Export-Import Bank Charter is a setback for American workers who produce the high-quality goods and services that are in demand around the world," said Ex-Im Chairman and President Fred Hochberg. "Ex-Im Bank increases U.S. jobs, pays for itself and earns money for the U.S. Treasury and, as a result, enjoys strong, bipartisan support. However, delays in renewing the Charter threaten over 1,000 export-related jobs that are supported every workday by Ex-Im Bank financing. Not reauthorizing the Bank places American companies at a serious disadvantage against their foreign competitors. We are already hearing that some customers of U.S. exporters are considering switching their purchases to foreign companies due to the uncertain availability of future Ex-Im Bank financing."
"We will continue to work with House and Senate leadership and I am confident that Congress will ultimately approve a four-year reauthorization of our Charter, but I urge them to act promptly before serious damage is done to American competitiveness," he added.
According to amendment sponsor Cantwell, groups supporting the amendment include the U.S. Chamber of Commerce, the National Small Business Association and the National Association of Manufacturers, among several others.
Jacob Barron, CICP, NACM staff writer
FCIB International Credit Executives (I.C.E.) Conference
Westin Michigan Avenue Chicago • May 2-4, 2012
INNOVATION THROUGH PRACTICAL APPLICATION
Roll up your sleeves and get back to basics during this annual event aimed at helping you become a better professional through practical application.
- Learn hands-on techniques during the Productivity Enhancement Roundtable
- Discover best practices from real-life case studies in the Trade Compliance session
- Get real answers to your toughest day-to-day credit and country issues, obstacles and challenges during the Doing Business in the BRICs session
- Establish new networks and build lasting business relationships
To view the entire I.C.E. conference program, please click here.
Given the unstable situation in the European Union and the importance of the region to manufacturing in the United States, especially in the Northeast, recent statistics out of a couple of monthly bellwether studies have to be viewed as a victory—and a bit of an upset at that.
Index results for the recent period from the Federal Reserve Banks of New York and Philadelphia showed surprise increases. New York increased to a level of 20.51 in March from the previous 19.53, while Philadelphia's uptick brought a February 10.2 reading up to 12.5. Both indices exemplified, not to mention foreshadowed, an unexpected mid-2011 manufacturing swoon after the sector had so noticeably carried economic growth pretty much from the end of the recession until said point.
"There also is a very large population affected by the reports, as these are some of the most densely populated cities in the nation. If there is progress in this region, it suggests that manufacturers are seeing gains across a wide variety of consumer sectors," said NACM Economist Chris Kuehl, PhD. "Additionally, growth here is likely to make a more significant dent in the unemployment rate than growth in the energy regions such as the Dakotas."
Kuehl speculated that a big part of the increased gains in manufacturing activity (e.g., now four consecutive months in New York) is increased sales to newer international markets, largely in Latin America. Doing this has, in his estimation, made U.S. exporters less vulnerable to European instability. "There has been some improvement in the prospects for the euro zone, but not enough to bolster the manufacturing sector that much. The fact is that companies in this region have broadened their markets considerably in the last year, and that is starting to pay off," he said.
Brian Shappell, NACM staff writer
The United States is Open for Business
Join Mike Ruby of JPMorgan Chase in this Credit Congress session created to help credit professionals identify the traditional, as well as emerging, trade tools applicable to their export-related portfolios, enabling successful risk mitigation and disciplined growth.
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Click here to get more information about Mike Ruby's session and others.
Enacted in 1974, the Jackson-Vanik amendment was one of many Cold War-era efforts to cool U.S. trade with non-market economies. At the time, it was designed as a direct response to taxes the Soviet Union levied on Jews attempting to emigrate from the country. Now the Soviet Union is no more, and even if it wasn't, the Jackson-Vanik amendment has been waived on an annual basis by every president for the last two decades.
Trade-minded lawmakers have recently proposed repealing the amendment as they seek to take full advantage of Russia's newly-minted World Trade Organization (WTO) membership. Jackson-Vanik stands in the way of establishing permanent normal trade relations (PNTR) between the Unites States and Russia, a goal that must be reached in order for U.S. companies to fully expand into Russia as it lowers tariffs and increases market access according to the terms of its WTO accession agreement.
"In order for U.S. businesses and workers to benefit from Russia joining the WTO, Congress must pass PNTR and repeal the Jackson-Vanik amendment," said Senate Finance Committee Chairman Max Baucus (D-MT). "Russia's entry into the WTO will be a one-way economic benefit that boosts our exports and creates jobs in the United States, so repealing Jackson-Vanik is an absolute no-brainer. Jackson-Vanik served its purpose and helped millions of Jews emigrate freely, but it is now a relic of the past."
Abolishing the amendment, Baucus noted, would also help to cool any lingering bitterness between the U.S. and Russia. "Repealing Jackson-Vanik weakens the ability of the hardliners in Russia to rally anti-American forces," he noted. "Russia is joining the WTO regardless of what the United States does, so we need to take advantage of this one-way opportunity to boost our economy and create jobs here at home while we can."
By "one-way," Baucus means that Russia is the only party that must make concessions, as per the terms of its WTO membership. The U.S. is not required to make any market access or tariff concessions to Russia, but can reap billions in benefits from the concessions made by Russia, as long as Jackson-Vanik is repealed and PNTR is passed.
Just this week, FCIB hosted a "Doing Business in Russia" webinar. To purchase a replay, click here.
Jacob Barron, CICP, NACM staff writer
Make Better Credit Decisions with Industry Credit Groups
Credit groups are an effective management tool. They permit credit professionals of different companies servicing the same customer, regardless of industry or trade, to compare information on collection history and provide a forum for the exchange of data about the most recent payment practices. The purpose of exchanging information is to help group members segregate fiction from fact, so competent and realistic credit decisions about a customer can be made.
Managed and operated by NACM Affiliates nationwide, NACM-Canada and FCIB internationally, credit groups:
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Contact your local NACM Affiliate to learn more about NACM credit groups and to find the group for your industry.
Effective Mar. 20, Washington Mutual officially completed the Chapter 11 bankruptcy restructuring process that spanned nearly three-and-a-half litigious years.
WaMu, which will emerge a much smaller company under the WMI Holdings moniker, confirmed that its bankruptcy plan approved on Feb. 23 indeed has gone effective. It is now planning to begin the payment of nearly $7 billion to creditors (or, in many cases, the hedge funds that bought up assets from creditors who went bankrupt or who were on their way to insolvency during WaMu's lengthy restructure).
It was the second largest corporate bankruptcy in U.S. history behind Lehman Brothers, which, coincidentally, went into bankruptcy protection mere weeks before WaMu in September 2008 and emerged from the legal process weeks before it this year.
The approved reorganization plan is viewed as somewhat of a small victory for lower-level creditors. Even though most will receive pennies on the dollar as a result of the expense of a drawn-out case, it was a shock to many market-watchers that lower level creditors were able to recoup anything. If nothing else, the cases may have illustrated the versatility and adaptability of the Chapter 11 system as the key take-away from the proceedings.
Meanwhile, weeks after garnering the dubious distinction of becoming the largest Japanese manufacturing bankruptcy in the nation's history, Elpida Memory, Inc. is looking to protect its assets from U.S.-based creditors.
Elpida filed this week in the Third Circuit of the U.S. Bankruptcy Court in Delaware seeking Chapter 15 bankruptcy protection. The lesser invoked chapter has been used to protect foreign-based companies with significant U.S. interests while going through a reorganization process in their country of origin. Elpida listed assets and debts in the U.S. at about $1 billion.
Elpida's initial filing in Japan—a rarity that could become more common amid Japanese economic malaise—included reported liabilities in the neighborhood of $5 billion, far too great to overcome without restructuring. The computer memory chip manufacturer, once a big part of a booming exporting industry dominated by Japan, has had trouble keeping up with foreign counterparts. The bulk of that competition, driven by lower costs, comes from outfits in South Korea. Also not helping Elpida is that its chips are not used for the growingly popular smart phones/devices like the iPhone/iPad and similar products. Additionally, the overvalued yen, which has become a bit of a magnet as investors leave the unstable euro, has made it harder for Japanese-based exporters to compete and threatens Japan's long-held trade strength.
Brian Shappell, NACM staff writer
Best-in-Class Service from NACM's Mechanic's Lien and Bond Services (MLBS)
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For more information on NACM's MLBS, click here.
The House Judiciary Committee approved a bill this week that would tie future regulations to the unemployment rate. The Regulatory Freeze for Jobs Act of 2012 (H.R. 4078), introduced by Rep. Tim Griffin (R-AR), would put a moratorium on new "significant regulations" until the national unemployment rate stabilizes at or below 6%.
Committee members approved the bill by a vote of 15-13, with no Democrats voting in favor.
Chairman Lamar Smith (R-TX) praised the bill, noting that federal regulations fall hardest on small businesses and placed the blame squarely on the shoulders of President Barack Obama. "The Obama administration has quickly turned the United States into a regulation nation. This Administration has adopted an unprecedented amount of costly new regulations, which hinder small business growth and stall job creation," he noted. "According to a study by the Small Business Administration (SBA), regulations cost the American economy $1.75 trillion annually. We need to encourage small businesses to expand, not tie them up with red tape."
Making the issuance of new regulations contingent on the nation's unemployment rate is an unorthodox approach, to say the least, and it's raised more than a few eyebrows from the bill's opponents. "Beyond the absurdity that this bill represents, if enacted, it could have seriously negative consequences," said committee member Rep. Jerrold Nadler (D-NY). "Take, for example, the issue of nuclear power."
Indeed, as drafted the bill would prevent the administration from issuing even regulations that mandate safety rules at nuclear power plants. "If H.R. 4078 were in place, many rules imposing changes similar to those just imposed by the Nuclear Regulatory Commission (NRC) would be delayed until unemployment drops below some arbitrary number," he noted, offering up an amendment to the bill that would've exempted these types of rules from the bill's purview. The amendment was ultimately rejected. "We at least ought to change the name of the bill to the Nuclear Death and Destruction Act of 2012, because that's what the bill's enactment could result in," said Nadler.
The bill now moves to the full House of Representatives for consideration. It has 17 cosponsors.
Jacob Barron, CICP, NACM staff writer
Do You Have It? Introducing the "NEW" Manual of Credit and Commercial Laws—2012 Edition
Now in four separate volumes to meet your specific needs. Buy whatever volumes you need, or get the complete set at a significant savings!
NACM has re-envisioned and revitalized its flagship publication, the Manual of Credit and Commercial Laws. Not only will the new edition continue to provide essential information for credit and finance professionals, it will do so in a highly flexible and more affordable format. In its new form, the Manual of Credit now comprises four volumes that either may purchased separately or as a comprehensive set. Chapters and appendices from the book have been reorganized under the following headings:
• Volume I: General Business Law, Related Statutes and Collections
• Volume II: Commercial and Consumer Credit Topics
• Volume III: Construction Issues
• Volume IV: Bankruptcy and Insolvency Issues
Many sections within the chapters have also been reworked, including those covering cellphone-based collection efforts, FTC rulemaking in terms of decedent estates and data security/breach initiatives at the federal government level.
Click here to visit NACM's online Bookstore for Manual features and updates, and more information about the wide array of resources available to today's credit professionals.
To view past eNews issues or to visit the NACM Archives, click here.