Category Archives: Pacific Islands

Money Coming To A State Near You

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I have mentioned the STEP grants before, but picked up some more detail during the National District Export Council conference in Las Vegas. STEP stands for State Trade & Export Promotion program, though the second “P” got lost somewhere in the acronym. Somehow, the Small Business Administration scarfed up $30 million a year for three years to give grants to the states and U.S. territories to push American exports. This at a time when our country’s primary export promotion agency, the U.S. Commercial Service, is still deeply into austerity. Go figure.

Anyway, the STEP grants can make a major difference in how much money the states and territories can spend to help build exports from their particular turf. And all states like free federal money, so it is puzzling that three states and one territory didn’t even apply for the grants. The laggards were North Dakota, West Virginia, New Jersey and American Samoa. Surely New Jersey must have some interest in export sales! Oh well, more funding for the rest of the country.

The big winners were the big states, but with some amazing exceptions. California won more than $2.5 million and I am already seeing some of it going to work on water technology exports. Pennsylvania got $1.7 million that it will spend on promoting exports of food, energy, medical and wood or building products. SBA emphasized exports to China, for some obscure reason, so many of the grants will focus on that difficult market. Washington won almost $1.6 million, Michigan garnered nearly $1.5 million, and Illinois took in nearly $1.3 million.

And the surprise winner is ... the Northern Marianas

Then came the first real shocker! The Commonwealth of the Northern Marianas Islands was awarded a grant for $1,022,781! If you don’t know the CNMI, it is a group of islands like Saipan and Tinian in the far western Pacific. I have traveled there often on business, and they are known mostly for attracting Japanese tourists to a few resorts and war memorials. Unfortunately, CNMI became known for its sweat-shop textile factories (now gone) and for locating poker machines in every available niche in every store or hotel. There have also been the occasional charges of official corruption. Other than that, the people are delightful and I have some good friends out there. The growth industry is the casinos on Tinian that are attracting well-heeled gamblers from China and Russia. Here’s the official description of the CNMI STEP Grant project:

The project will focus on the achievement of four core goals: 1) Develop CNMI small business export acumen, 2) Provide venues for CNMI small business concerns to develop foreign trade networks and interact with foreign buyers, 3) Solidify CNMI lines of services to export markets, and 4) Develop and market a singular, “Made in the Marianas” brand for export commodities. The CNMI STEP program is intended to encourage eligible small firms to engage in foreign trade business meetings through participation in trade shows, exhibitions, and sales trips. This will allow CNMI small business to begin to implement strategic export business plans.

The other shockers revolved around how little some states received, probably reflecting a lack of imagination in how much they asked for. The one that flew off the page for me was Texas, taking home a paltry $161,711. Texas expects to promote agricultural exports to China, South Korea and the United Arab Emirates with that.

The Hawaii Pacific Export Council is involved in implementing three of the STEP grants. We are a major player in Hawaii’s grant ($485,719), educating would-be exporters and getting them ready to attack foreign markets. HPEC plays a similar role in the Guam ($135,927) and CNMI grants. But the CNMI grant takes the prize for chutzpah!

Where Did You Say It Comes From?

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Coffee wasn’t the only thing that was brewing one morning on Guam. U.S. Customs agents spotted something strange at a warehouse – larger than usual shipments of low-grade coffee from Colombia going in one end of the building. And coffee in new bags marked “Grown on Guam” coming out the other end. Guam, a U.S. territory, had its own separate customs regime back then, so the Colombian coffee entered Guam free of duty. But, as a U.S. territory, Guam could ship its own products duty-free to the U.S. mainland. Thus a scam was born, shipping foreign coffee to Guam, relabeling it as a Guam product and sending it duty-free into the United States. The only problem was, at the time at least, that somebody at U.S. Customs knew that Guam didn’t grow coffee in commercial quantities.

South Korea is gearing up for the same sort of thing. With the South Korea-European Union free trade agreement coming into effect next month and the South Korea-US FTA potentially on the horizon (if the troglodytes at either end of Pennsylvania Avenue don’t kill it again), the Korean Customs Service (KCS) is wisely anticipating trouble. Not from coffee necessarily, but from most any product that would derive an advantage from appearing to be a Korean product heading for the EU or the United States when the tariffs come down. KCS will focus on companies with a history of transshipping products, rather than on trying to catch every possible individual shipment. Transshippers are well known through customs and shipping documentation and there are many legitimate reasons for transshipping products, such as consolidating shipments to a single consignee. The documentation provides a baseline for what is normal in their business activities, making it easier to spot shipments that don’t fit the norm. KCS will monitor transshipments in Korea at each step of the process: entry, unloading, transportation, shipping, and departure.

While I strongly favor any agreement that brings down trade restrictions, one has to recognize the downside of trade agreements whenever they create a situation in which trade conditions for all sources are not scrupulously the same.  Free trade agreements, by definition, create less-than-favorable competition for any party that is not in the agreement. That, in turn, leaves plenty of room for unintended consequences and provides incentives for some smooth operators to attempt fraud – such as intentionally mislabeling the origin of their products to gain an advantage. The preferred solution is to have trade agreements open to all, creating most-favored-nation conditions (i.e., every country is the most favored nation), but that is not always obtainable – witness the Doha Round. Then you go to bilateral or multilateral agreements while acknowledging that this is a “second-best” solution. At least Korea realizes what is coming and is taking steps to stop the fraud.

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Guam has a fine climate for coffee and it is a fairly common plant on the island. People roast it for home use, but there really isn’t any commercial production that I am aware of. Maybe some local coffee shops have Guam coffee.

Saipan, just to the north of Guam, does export coffee though I don’t think they have sufficient local supply to sell a purely Saipan coffee. Marianas Coffee Company imports beans from the world’s major coffee regions and then roasts them and packages them on Saipan. Since there is processing, this is not transshipment, but a genuine Saipan product. I have had their coffee and recommend you grab a cup if you ever have the chance.

 

Soft Opening

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Try our export portal

I gotta tell you about a great new website. I’m biased, of course, because I have a bit to do with it. It’s the newly-launched site of the Hawaii Pacific Export Council – an organization that I currently chair. It’s an exclusive bunch because we are all appointed to by the U.S. Secretary of Commerce for our expertise in international business and our dedication to helping small companies break into international marketing. The Hawaii Pacific Export Council (HPEC) is only one of 56 such councils around the United States, and 30 out of about 1800 volunteers that serve on these councils to help their communities. Collectively, the export councils are known as DECs, or District Export Councils, a hangover from long ago when they were founded and the U.S. Department of Commerce was organized nationally into districts. The districts no longer exist, but the acronym sticks.

Each of the 56 councils approaches their task differently, though all work closely with their local Commerce office – in our case, the one in Honolulu. HPEC tries to help fledgling exporters in Hawaii, Guam, the Commonwealth of the Northern Marianas and American Samoa. That makes us the largest DEC geographically, though most of our territory is very wet. It also makes us aware of the need to use modern electronics to “bridge” the gaps between our very far flung island communities. Our friends in the Minnesota DEC developed a wonderful website, so we asked about modifying it for use out here in the Pacific. We ended up doing what amounts to a licensing deal with Minnesota – and we are gleefully “localizing” the resulting site for use in Hawaii and the American Pacific territories. We are only part way there and you will still find stray references to Minnesota.

The HPEC site provides an incredible variety of information of use to exporters, would-be exporters, or anyone doing research on business around the world. It is truly an export portal, linking the user to some of the very best in global business information. If you need to know how to get your company started in international marketing, it’s there. Where to get free export counseling. Avoid international scams. Figure out financing possibilities. Get a leg up on trade restrictions. Explore free market research worldwide. Fill out trade documents. Check duty rates. Get export training. It is all there. And much, much more.

I think my favorite part of the site is “Newspapers of the World”. If you have a trip coming up, take a look at the local papers where you are going, and get up to date like a local. Cool.

After the site is more fully developed, we will likely accept sponsors and advertisers as long as they are related to the site’s subject matter. HPEC is also a 501(c)3 non-profit, so if any of you wish to make a charitable donation, please get in touch.

It is a soft opening because we still have a lot of content to build out, but there is plenty already there for you to use. A couple mornings ago, I went on the site and found more than 200 simultaneous users. Somebody is hearing about it somewhere. I can’t wait to see the numbers when we officially launch the new site!