Business Beyond the Reef

Auto racing can be very taxing.

India has fought long and hard to play host to a Formula One race and the first Indian Grand Prix is scheduled to run later this month at a brand new track outside New Delhi. If the Indian tax wallahs allow the race to get to the first turn. India’s Central Board of Excise and Customs is refusing to grant the F1 teams a duty exemption for temporarily importing all the equipment needed to run a modern auto race. The teams started flying their gear on an Asian swing a couple weeks back to race in Singapore last weekend and Japan next weekend, with India after that. The logistics put a premium on being able to move massive amounts of kit very, very quickly over international borders. Most countries go out of their way to make it as easy as possible. Not India, which wants to pocket $1.5 million dollars in customs duties.

Fast tax

To make things worse, the Indian state in which the track is located wants to tax the racing teams’ income. They argue that the India race is one of 19 races this year, so they are entitled to tax 1/19th of the teams’ income. Leaving aside the matter of whether all races attract the same amount of income, being the only country on the schedule to do this likely means that India won’t be on the schedule again. Oh, and they want to tax the drivers’ income, too. I don’t know if they have gotten down to the mechanics or the cooks in the hospitality centers.

When I heard about the customs duties, my first thought was that the F1 teams simply need to get an ATA Carnet from the International Chamber of Commerce to solve the problem. India, after all, is one of the more than 75 countries that recognizes carnets as a way to bring goods in temporarily – duty free, say, for showing at trade fairs. But, it turns out, India never signed on to the carnet provision to allow temporary imports of “professional equipment”. This means that the Indian customs people are within their rights, but does enforcing those rights make it wise?

The Indian race organizer says they will pay the customs duties if necessary. Don’t know how the income tax thing will come out. If it can’t be resolved, F1 has plenty of offers to race in other countries. FYI, India screwed participants in the 2010 Commonwealth Games the same way.

Back at the desk (and desktop) after a 3-week odyssey, so here are some odds and ends before I get back to full posts.

Promotion Panels: A week of my trip was devoted to serving as the public member of the annual promotion review panel for the most senior officers of the U.S. Commercial Service, the far-flung commercial diplomats who work for the U.S. Department of Commerce. Grueling and fascinating – and well worth doing if you ever get the chance. Grueling for the hours we put in and the pressure of making career decisions on some very fine people. Fascinating for the many stories of business success and, frankly, derring-do when faced with such happenings as the Arab Spring revolutions or the triple disaster in Japan. These were the Commercial Service’s most senior officers the five panelists were looking at, so they had already gone through years, sometimes decades, of weeding out. Our major decisions tended to be quibbles over relative degrees of walking on water. Did they get their ankles wet? Made you proud that the United States can field such a stellar cast in the commercial sections of American embassies and consulates.

Budget Cuts: Many in Congress and the Administration persist in wanting to cut or eliminate the Commercial Service. What the CS primarily does is not “corporate welfare”, but mostly helping small U.S. businesses get into foreign markets, thus helping them to survive downturns in our own economy. Anybody heard of the National Export Initiative? The CS shouldn’t be seen as optional government spending, but is, in reality, an investment in building the U.S. economy and American jobs. Still, I have heard reports of closing more of both the overseas and domestic offices. I hear that Berne, Switzerland is on the chopping block, as well as Bratislava, Slovakia, plus about a dozen others in small to medium-sized markets for U.S. firms.

And cuts are getting silly, too. While I was in Washington, the Commerce Department announced it would close half of the entrances to the Commerce Building (HCHC below) down by the Washington Monument. Why? They can’t afford to pay the security guards. Sheesh!

Effective October 1, 2011, certain HCHB guard posts will close. These closures are necessitated by current federal budget reduction requirements and will not decrease the security posture for the HCHB, its employees, contractors and visitors.  Guard post closures are as follows:

CLOSED

·         15th Street and Pennsylvania Avenue – This door remains available for emergency exit.
·        15th Street and Constitution Avenue – currently relocated to the 15th Street entrance at the 2nd  corridor – This door remains available for emergency exit.
·         North Courtyard, 15th Street – All north courtyard traffic will enter and exit at 14th Street.
·         South Courtyard, 14th Street – All south courtyard traffic will enter and exit at 15th Street.

Employees, contractors and visitors will enter the HCHB at the Main Lobby Entrance off 14th Street or at the Tunnel Entrance connecting with the Ronald Reagan Building.  Employees may also access the building at the 14th and Pennsylvania Avenue entrance and the Secretary’s Entrance.  Access for physically challenged individuals will continue to be available through the Aquarium Entrance.

The Office of Security regrets any inconvenience caused by these closures and will make every effort to ensure that the available entrances operate as smoothly as possible.

Nominees Dropping Like Flies: President Obama’s nominee for Deputy Secretary of Commerce, Terry Garcia, withdrew his nomination after being caught up for months in the Republican refusal to process nominees through the Senate. Come on, Senators, is his position at the National Geographic Society all that subversive? Perhaps he quit because he heard that Commerce’s remaining entrances will be closed. Can John Bryson, the nominee for Secretary, who can presumably find other things to do, be far behind?

Colleen Hanabusa: I wrote to Colleen Hanabusa, a freshman Congresswoman from Hawaii, urging her to support passage of the free trade agreements with Panama, Colombia and South Korea. Her office responded with a form letter on a totally different subject. ‘Nuff said.

STEP Grants: There is sometimes good news out of Washington. The Small Business Administration was provided $40 million to help the states and territories implement export promotion programs. Competition was fierce, with all but two states going after the money. The Hawaii Pacific Export Council, which I currently chair,  worked with economic development authorities in Hawaii, Guam and the Northern Marianas to come up with winning proposals – and scored in all three cases. Guam was awarded $135,927 and Hawaii won $485,719. The amazing winner, however, was the Commonwealth of the Northern Marianas, raking in $1,022,781! Expect some great new support for fledgling exporters out here in the Pacific!

Early Sunday morning on the Anacostia

Paddling: Linked up with old paddling buddy John Norris in Washington, and he introduced me to his mates at the National Capital Area Outrigger Club. Had a great Sunday morning, paddling about eight miles on the Anacostia and the Potomac with a river view of all the landmarks and monuments.

Blogging on an iPad: Don’t get me wrong, I love my iPad. But blogging on it on the road sucks. I have tried all sorts of apps for WordPress blogs, but only seem be able to do straight text with minimal formatting. Inserting photos is well nigh impossible, and just cutting and pasting from another source is difficult. Even navigation through your own text can be tough. Anybody got any suggestions?

USA Today published an article this past weekend about a movement for Americans to buy American products. The movement, naturally, comes wrapped in the American flag and is made to seem the ultimate in patriotism. The argument appears to be that, if you love your country, you should only buy your country’s products to the maximum extent possible. Hmm, sounds just a wee bit mercantilist, doesn’t it?

And then, on Labor Day, I saw a New York Times report about an apparently forlorn effort to build an entirely made-in-America house? Seems to me that housing is expensive enough already.

Buy it if it is competitive

I do believe in supporting local producers. That Waimanalo corn from around the corner is magnificent! But I also demand quality and a decent carbon footprint. And I do not buy local or American if somebody else’s product delivers higher quality at a more competitive price. I am also acutely conscious of the origins of the products I do buy. That comes from a career as a U.S. commercial officer overseas; I always wanted to see what the competition was up to.

The article is an interview with a guy named Roger Simmermaker, who has written a book about buying U.S. products. He argues, among other things, that we should buy American because Chinese workers don’t pay U.S. taxes. Uh, yeah. Simmermaker apparently hasn’t noticed that U.S. workers, such as those nice people over at Apple or Walmart, do pay U.S. taxes even though they are working with imported products. Nor has he thought through the consequences of his position should other countries decide to only buy products made by people who pay them taxes. All those products that American workers now build for export markets won’t qualify, will they? The tax argument is a plea for extreme protectionism and isolationism – just dressed up in the flag.

USA Today rejoins reality towards the end of the article when they report on a recent study by the Federal Reserve Bank of San Francisco. The Fed found that 55% of the money spent by U.S. consumers on Chinese goods went to pay for U.S.-based services such as marketing, design and all the back-office stuff that makes business possible. And, the Fed reports, we spend surprisingly little on Chinese goods anyway, only 2.7% of U.S. consumer spending. Far less than any popular conception of our spending patterns. In fact, the vast majority of the goods we buy are – you guessed it – Made in America. This sounds like a movement that isn’t needed.

If you truly believe in America, then buy American products that are globally competitive. We’ll do just fine, thank you.