“What’s Geithner Thinking?” Treasury Grants China Direct Access to Buy U.S. Bonds

May 22, 2012 by Leave a comment

In an unprecedented move, in June 2011 the U.S. Treasury Department granted the Chinese government direct-bidder status to purchase U.S. Treasuries direct from the U.S. government,reports Reuters. All other central banks must purchase U.S. Treasuries through primary dealers on Wall Street, which then place bids on their behalf at Treasury auctions.

The People’s Bank of China holds roughly $1.2 trillion in U.S. debt, more than any other entity, and it is now the first foreign government with direct computer access to the U.S. government Treasury auction process. China, however, must sell U.S. Treasuries on the open market.

“It’s a big deal because the Chinese are getting very special treatment,” says Gordon Chang, Forbes columnist and author of the Coming Collapse of China, in an email to The Daily Ticker.

This special treatment does have the potential to save the Chinese government money, but not in transaction and commission costs because primary dealers are prohibited from charging its bidding customers fees. However, China could getting a better deal by keeping its purchases from Wall Street secret.

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Counterfeit Chinese Parts Slipping Into U.S. Military Aircraft: Report

May 22, 2012 by 1 Comment

Counterfeit Chinese Parts Slipping Into U.S. Military Aircraft: Report (ABC News)

Counterfeit electronic parts from China are “flooding” into critical U.S. military systems, including special operations helicopters andsurveillance planes, and are putting the nation’s troops at risk, according to a new U.S. Senate committee report.

A year-long investigation conducted by the Senate Armed Services Committee found more than one million suspected counterfeit parts made their way into the Department of Defense’s supply chainand were bound for use by “critical” military systems, according to the 70-plus-page document released Monday. In addition to Navy helicopters and surveillance planes, the parts were slated to be put into the Air Force’s newest cargo planes.

“The failure of a single electronic part can leave a soldier, sailor, airman, or Marine vulnerable at the worst possible time,” the report says. “Unfortunately, a flood of counterfeit electronic parts has made it a lot harder to prevent that from happening.”

Chinese companies were identified as the “primary source” of the counterfeit goods and the Chinese government was criticized for its alleged disinterest in cracking down on counterfeiting there. The report said that Chinese companies take discarded electronic parts from all over the world, remove any identifying marks, wash and refurbish them, and then resell them as brand-new – a practice that poses a “significant risk” to the performance of U.S. military systems.

But the committee also pointed a finger at the Pentagon and U.S.-based defense contractors that rely on “hundreds of unvetted independent distributors.”

According to the document, the investigation “revealed failures by defense contractors and [the Department of Defense] to report counterfeit parts and gaps in DoD’s knowledge of the scope and impact of such parts on defense systems.”

“Our committee’s report makes it abundantly clear that vulnerabilities throughout the defense supply chain allow counterfeit electronic parts to infiltrate critical U.S. military systems, risking our security and the lives of the men and women who protect it,” said Senate Armed Services Committee ranking member Sen. John McCain (R.-Arizona). “As directed by last year’s Defense Authorization bill, the Department of Defense and its contractors must attack this problem more aggressively, particularly since counterfeiters are becoming better at shielding their dangerous fakes from detection.”

DOWNLOAD: Inquiry Into Counterfeit Electronic Parts in the DoD Supply Chain (WARNING: Large PDF)

A spokesperson for the Department of Defense did not immediately respond to requests for comment on this report, but another spokesperson told CNN the Pentagon was aware of the report and officials “looked forward to reviewing it.”

“The Department takes very seriously the issue about counterfeit parts,” Col. Melinda Morgan said. “We are working aggressively to address this issue…”

Months after the Senate committee launched its investigation, the Pentagon said in November it was moving to protect against counterfeit parts by modifying policies and improving its internal process as well as working more closely with private companies in the industry.

Then, Defense spokesperson George Little noted that “there has been no loss of life or catastrophic mission failure as a result of these parts entering the supply chain.”

Representatives for the Chinese government at its embassy in Washington, D.C., and consulate in New York, New York did not immediately respond to request for comment on this report.

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U.S. Imposes Anti-Dumping Duties On Chinese Solar Imports

May 17, 2012 by Leave a comment

Employees assemble photovoltaic panels at Suntech Power Holdings Co.’s factory in Wuxi, Jiangsu Province, China, in 2011.

The U.S. Commerce Department imposed tariffs of 31 percent to 250 percent on Chinese solar-product imports, siding with companies including SolarWorld AG (SWV) in the U.S. that said the items were sold below the cost of production.

The fees, announced today in an e-mailed statement, add to duties as high as 4.73 percent imposed earlier for getting unfair subsidies from China’s government. SolarWorld had asked for levies of more than 100 percent. Aaron Chew, a New York- based analyst at Maxim Group LLC, said before the decision that tariffs higher than 10 percent would be considered a victory for the U.S. companies.

“Commerce today put importers and purchasers on notice about the consequences of importing illegally subsidized and dumped products from China,” Gordon Brinser, the SolarWorld unit’s president, said in a statement.

The Commerce Department said a final determination on the tariffs would be made in early October. U.S. customs agents will collect a deposit or bond on solar cells made in China in the 90 days before today’s decision.

SolarWorld said its Hillsboro, Oregon-based U.S. unit can’t compete with Chinese exporters, including Suntech Power Holdings Co. (STP), the world’s largest solar-panel maker, and Trina Solar Ltd. (TSL) unless tariffs are imposed. Suntech was told to pay 31.22 percent, Trina’s levies were set at 31.14 percent and others were told to pay duties ranging from 31.18 percent to 249.96 percent.

Shares Rise

U.S.-based solar-product companies rose in New York trading after the announcement. First Solar Inc. (FSLR) climbed 94 cents, or 6.7 percent, to $14.92, and SunPower Corp. (SPWR)added 51 cents, or 10 percent, to $5.59.

Opponents of the punitive tariffs, such as the Washington- based Coalition for Affordable Solar Energy, which includes Westinghouse Solar Inc. (WEST) and more than 100 other companies, claim the levies would cost U.S. jobs.

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High hopes for jobs and TV’s ‘Made in the USA’

May 11, 2012 by Leave a comment

By Hal Weitzman in Chicago Financial Times
Much of Element Electronics’ factory in Canton, a suburb west of Detroit, is empty. But on a single production line, about 45 workers are assembling the first televisions made in the US by an American company in decades.

So far, it is a small operation, but Element’s attempt to bring TV manufacturing back from Asia to the heart of America’s rust belt is a powerful example of reshoring, the trend of jobs once outsourced to low-cost emerging economies being brought back to the US.

Reshoring is causing great excitement in the US. Companies such as General Electric and Caterpillar have been touted as high-profile examples of the trend. Since 2009 GE has announced plans to create 11,000 manufacturing jobs.

In an election year, reshoring has also become a potent political symbol, a counterweight to those who say the US is in decline or that current economic policies are not working.

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Procter & Gamble P&G to Relocate Beauty HQ to Singapore Asia

May 11, 2012 by 4 Comments

Procter & Gamble Co will move its skin care, cosmetics and personal-care headquarters from Ohio to Singapore and the president of the group will leave rather than move.

The relocation, which is expected to take two years, comes as P&G wants to run the business out of Asia where it sees the biggest growth opportunity. It was announced less than three months after P&G unveiled a restructuring plan aimed at saving $10 billion and helping the world’s largest household products maker expand faster in emerging markets.

Cincinnati-based P&G’s brands include CoverGirl makeup, Olay and SK-II skin-care products and Secret deodorant.

Virginia Drosos, 49, chose to retire rather than uproot her family, which includes two teenagers, according to a P&G spokesman. Drosos has been with P&G since 1987.

Deb Henretta, group president of P&G’s Asia and global specialty channel, will take over as group president of global skin care, cosmetics and personal care.

Henretta, 51, joined P&G in 1985.

Henretta’s current position will be filled by Hatsunori Kiriyama, P&G’s vice president of Japan, marking the first time P&G has had an Asian leader as president of Asia. He will be responsible for all of Asia except Greater China, which will continue to be run by Shannan Stevenson.

Kiriyama will take over as president of Asia July 1, Henretta will take on her new role on Aug. 1, and Drosos will retire on Sept. 1, P&G said.

 

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Fed clears China’s first US bank takeover

May 10, 2012 by Leave a comment

The United States opened its banking market to China’s biggest bank ICBC, for the first time clearing a takeover of a US bank by a Chinese state-controlled company.

Just days after high-level US-China economic talks in Beijing, the Federal Reserve approved an application from Industrial and Commercial Bank of China to buy a majority stake in the US subsidiary of Bank of East Asia.

The transaction will make ICBC the first Chinese state-controlled bank to acquire retail bank branches in the United States.

ICBC has been the most aggressive of China’s “big four” banks in expanding abroad.

Outside China, it operates subsidiary banks in Asian countries and has branches in a number of countries including Germany, Japan and Singapore.

According to the Fed, the bank has total assets of roughly $2.5 trillion.

ICBC will buy up to 80 percent of the US unit of the Hong Kong-based Bank of East Asia, which operates 13 branches in New York and California.

As part of the deal, ICBC and two state-backed financial firms — China’s sovereign wealth fund, the China Investment Corporation (CIC), and Central Huijin Investment — will be recognized as bank holding companies, regulated as commercial US banks.

The Fed said the takeover may not occur before May 15, or later than three months from Wednesday.

The broad expansion of China’s footprint in the US market comes amid a series of financial reforms in China that could begin to open the lucrative market to US firms.

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Sears Avoids Class Action Over Made-in-USA Claim

March 29, 2012 by 1 Comment

By JACK BOUBOUSHIAN

CHICAGO (CN) – A federal judge declined to certify a class against Sears which alleged the department store falsely advertised its Craftsman line of tools as “Made in the U.S.A.” to charge higher prices.
In multidistrict litigation, plaintiffs claim that the department store Sears, Roebuck & Company deceptively advertised its line of Craftsman tools as manufactured in the U.S., when in fact many of the tools are foreign-made.
Of the seven cases involved in the multi-district litigation, four were voluntarily dismissed, one was remanded to California state court, and one settled after the court declined to certify a class.
In the last remaining case pending before the Northern District of Illinois, Jeffrey Greenfield claimed that he bought a Craftsman ratcheting screwdriver from a Florida Sears store in 2004. He said he recalled in-store signage that stated: “Craftsman Quality, Guaranteed for life, Made in the USA, only $19.95.”
In fact, Greenfield alleged that, in 2000, 20 percent of Craftsman products were not made in the U.S., a percentage that rose to 70 percent by 2005. “Sears chose not to make it known that such a high percentage of its tools were not made in the U.S.A., despite the actual knowledge that its customers believed Craftsman products were made in the U.S.A., because such a disclosure would force Sears to reduce the profit margin on its Craftsman line of products,” Greenfield’s complaint stated.

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Made in USA (Again): Why Manufacturing Is Coming Home

March 26, 2012 by 2 Comments

Eric Markowitz | Inc.com staff

Mismanaged supply chain decisions sent manufacturing overseas. But the industry has changed direction.

Returning to America: Zentech Manufacturing, a contract manufacturer based in Baltimore, is seeing more and more companies return their manufacturing to America.

When Anton Bakker launched his company, Offsite Networks, in 1999, he had no intention of manufacturing overseas. But a few years later, when his company began taking on larger orders, he began looking for cheaper supply alternatives.

That’s when he went to China.

By the early 2000s, Chinese contract manufacturers had become increasingly equipped to handle the type of advanced manufacturing that Offsite was producing—point-of-sale hardware for store loyalty programs, like high-tech printers and scanners. So in 2004, the company, which is based in Norfolk, Virgnia, canceled contracts with domestic suppliers and moved 90 percent of its manufacturing to suppliers based in China, Malaysia, and Tokyo. For the most part, Bakker was satisfied.

“The scale drove us to look for more competitive, cost-effective products,” Bakker says. “I had a difficult time doing that domestically. We found that the products were just not competitive in terms of pricing, and we could find them at less than half the price overseas.”

That narrative—of outsourcing, offshoring, and finding cheaper suppliers overseas—is not a new story.

But then something unexpected happened. In 2011, Offsite Networks moved their manufacturing back to America, finding a domestic supplier, Zentech Manufacturing, based in Baltimore, to carry out the company’s orders.

So what changed?

Bakker tells me the company returned for a variety of reasons. It was becoming more affordable to manufacture locally, he says, and American technology had improved rapidly. This meant that labor costs, which had initially driven Bakker to find cheap work overseas, were a smaller percentage of total costs. Meanwhile, an increase in other costs—like shipping, for instance—had increased. In other words, it was cheaper to manufacture locally.

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U.S. to appeal WTO ruling against meat labels

March 25, 2012 by Leave a comment

Reuters
By Doug Palmer and Rod Nickel | Reuters

WASHINGTON/WINNIPEG (Reuters) – The United States said on Friday it would appeal a World Trade Organization ruling against a law requiring country-of-origin labels on all meat sold in grocery stores, a move that disappointed Canada and Mexico, both of which want the law changed.

The meat labels became mandatory in March 2009 after years of debate. U.S. consumer and mainline farm groups supported the requirement, saying consumers should have information to distinguish between U.S. and foreign products.

Big meat processors opposed the provision, which they said would unnecessarily boost costs and disrupt trade.

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US govt sets new tariffs on China solar panels

March 21, 2012 by Leave a comment

The low cost of labor, coupled with the massive scale of production at its 14,000-person plant, have enabled China's Suntech to become the global industry leader in solar power in just a decade

MARCY GORDON | AP Business Writer - WASHINGTON

The Commerce Department is imposing new import fees on solar panels made in China, finding that the Chinese government is improperly giving subsidies to manufacturers of the panels there.

The Commerce Department said Tuesday it has found on a preliminary basis that Chinese solar panel makers have received government subsidies of 2.9 percent to 4.73 percent. Therefore, the department said, tariffs in the same proportions will be charged on Chinese panels imported into the U.S., depending on which company makes them.

The tariff amounts are considered small, but the decision could ratchet up trade tensions between the U.S. and China. Several U.S. solar panel makers had asked the government to impose steep tariffs on Chinese imports. They are struggling against stiff competition from China as well as weakening demand in Europe and other key markets, just as President Barack Obama is working to promote renewable energy.

“Today’s announcement affirms what U.S. manufacturers have long known: Chinese manufacturers have received unfair … subsidies,” Steve Ostrenga, CEO of Helios Solar Works in Milwaukee, said in a statement. The company is a member of a group called the Coalition for American Solar Manufacturing.

On the other side, some U.S. companies argue that low-priced Chinese imports have helped consumers and promote rapid growth of the industry.

The new tariffs are low, making the Commerce Department decision “a relatively positive outcome for the U.S. solar industry and its 100,000 employees,” said Jigar Shah, president of the Coalition for Affordable Solar Energy. “However, tariffs large or small will hurt American jobs and prolong our world’s reliance on fossil fuels. Fortunately, this decision will not significantly raise solar prices in the United States.”

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