New threat to AGOA benefits' by Kevin Lovell

SUNDAY, 02 OCTOBER 2016

SOURCE: ENCA / ANN (SOUTH AFRICA)

The United States poultry industry has warned that South Africa could once again lose its trade free access for many exports to the market if South African poultry and pork producers get a court injunction to block US chicken imports.

US Poultry and Egg Export Council (Usapeec) president James Sumner said that if the South African Poultry Association (Sapa) and SA Pork Producers Organisation (Sappo) won their court case “it probably would – and should – trigger another out-of-cycle review under Agoa”.

The African Growth and Opportunity Act (Agoa) is the US law which allows eligible African countries to export many products to the US duty-free. It has been particularly beneficial to South African automobile, wine, and fruit exporters.

But South Africa nearly lost its key Agoa benefits last year as a result of an “out-of-cycle” review triggered by US poultry, pork, and beef producers who complained that South Africa was violating Agoa by blocking imports of their products.

South Africa eventually negotiated its continued participation in Agoa by lifting 15-year-old anti-dumping duties for a quota of 65,000 tons of chicken parts a year and also lifted health restrictions which continued to block poultry, pork, and beef imports.

But Sapa and Sappo have now appealed the lifting of the health restrictions on imported US poultry and pork. Sappo CEO Simon Streicher has been quoted in South African media saying his organisation was not convinced the US was doing enough to prevent its pork bringing porcine reproductive and respiratory syndrome (PRRS) into the country.

Streicher told The Poultry Site that South Africa was one of only a few countries in the world where PRRS had been eliminated and Sappo was wary of allowing it back in. He said about 500kg of US pork shoulders had already been blocked since the concession was made because of PRRS concerns.

Sapa is appealing against concessions by the government concerning the standard salmonella protocol for testing imported products, because of the risk of people getting sick if contaminated poultry enters the country.

Sapa CEO Kevin Lovell said Sapa and Sappo’s appeals should not have a negative impact on the Agoa agreement, as it was not an attack on agreed quotas. “All we want is for the United States to follow the same protocols as any other country.”

However, Sumner was convinced that if Sapa and Sappo won their court appeals South Africa’s Agoa participation would once again be challenged. He also acknowledged that because of various problems, the US had so far only met about 10 percent of the 65,000 tons quota and was likely to fall far short of it by the end of the year.

Another major obstacle has been that two major supermarket chains, Pick ‘n Pay and Checkers, have decided not to import US poultry. Jim Wayt managing director of Intervision Foods, one of the US companies exporting poultry to SA, said he was convinced that this was because the supermarkets were trying to avoid public perception of health problems rather than because of any real health concerns.

“If we get a level playing field, rather than a Lovell playing field, we will be able to compete,” he quipped, punning on the name of Sapa CEO Kevin Lovell, who has been the chief opponent of US poultry imports.

Sumner also expressed confidence that the US would eventually be able to meet its quota once it had made the necessary contacts and got back into the market from which it had been excluded for 17 years.

The US could benefit from a possible imposition of tariffs on poultry imports from the European Union (EU), which now enter the South African market tariff-free under the EU-SA free trade agreement. Wayt said he was expecting the South African trade authorities to make a determination on this on 21 October. The protection which SAPA is seeking for what is says has been a surge of EU poultry imports is a 13.4 percent safeguard duty.

One of the major US complaints has been that it is not only competing with South African poultry producers but also with EU producers who had a huge price advantage

Sumner noted that even after the prohibitive anti-dumping duties on US poultry imports had been lifted for the 65,000 tons a year quota, US poultry producers were still paying normal duties of 37 percent versus zero for the EU.

“If South African poultry producers can’t compete with us after that duty, coming on top of our landed transport costs – South Africa is not next door to the US – then its not surprising chicken is so expensive in South Africa,” he said.

He also announced that the World Poultry Foundation would be coming to South Africa soon to discuss proposals for a programme to help and train disadvantaged South Africans to enter the poultry industry. Usapeec is funding that programme.

Assignment:

Use the AGOA case reported by Lovell (2016), above, to identify and discuss the most significant trade issues and their implications for economic growth and social welfare (on consumers and producers) in both countries concerned (RSA and US), given the rising protectionist sentiments in the US and the UK. In your economic discussion, use a combination of the economic theories and models listed below to identify and analyse the implications of a possible loss of the US’s AGOA benefits to South Africa – especially given the reported developments around meat products:

a. Production possibilities frontier; Trade gains and economic growth (relevant theories and models) (25%)

b. Government Intervention effects from instruments including import and exports (subsidies; tariffs (taxes), quotas, etc.) (25%)

c. Economic Welfare theories (Producer and Consumer Welfare models) (25%)

AGOA CASE STUDY

New threat to AGOA benefits' by Kevin Lovell

SUNDAY, 02 OCTOBER 2016

SOURCE: ENCA / ANN (SOUTH AFRICA)

The United States poultry industry has warned that South Africa could once again lose its trade free access for many exports to the market if South African poultry and pork producers get a court injunction to block US chicken imports.

US Poultry and Egg Export Council (Usapeec) president James Sumner said that if the South African Poultry Association (Sapa) and SA Pork Producers Organisation (Sappo) won their court case “it probably would – and should – trigger another out-of-cycle review under Agoa”.

The African Growth and Opportunity Act (Agoa) is the US law which allows eligible African countries to export many products to the US duty-free. It has been particularly beneficial to South African automobile, wine, and fruit exporters.

But South Africa nearly lost its key Agoa benefits last year as a result of an “out-of-cycle” review triggered by US poultry, pork, and beef producers who complained that South Africa was violating Agoa by blocking imports of their products.

South Africa eventually negotiated its continued participation in Agoa by lifting 15-year-old anti-dumping duties for a quota of 65,000 tons of chicken parts a year and also lifted health restrictions which continued to block poultry, pork, and beef imports.

But Sapa and Sappo have now appealed the lifting of the health restrictions on imported US poultry and pork. Sappo CEO Simon Streicher has been quoted in South African media saying his organisation was not convinced the US was doing enough to prevent its pork bringing porcine reproductive and respiratory syndrome (PRRS) into the country.

Streicher told The Poultry Site that South Africa was one of only a few countries in the world where PRRS had been eliminated and Sappo was wary of allowing it back in. He said about 500kg of US pork shoulders had already been blocked since the concession was made because of PRRS concerns.

Sapa is appealing against concessions by the government concerning the standard salmonella protocol for testing imported products, because of the risk of people getting sick if contaminated poultry enters the country.

Sapa CEO Kevin Lovell said Sapa and Sappo’s appeals should not have a negative impact on the Agoa agreement, as it was not an attack on agreed quotas. “All we want is for the United States to follow the same protocols as any other country.”

However, Sumner was convinced that if Sapa and Sappo won their court appeals South Africa’s Agoa participation would once again be challenged. He also acknowledged that because of various problems, the US had so far only met about 10 percent of the 65,000 tons quota and was likely to fall far short of it by the end of the year.

Another major obstacle has been that two major supermarket chains, Pick ‘n Pay and Checkers, have decided not to import US poultry. Jim Wayt managing director of Intervision Foods, one of the US companies exporting poultry to SA, said he was convinced that this was because the supermarkets were trying to avoid public perception of health problems rather than because of any real health concerns.

“If we get a level playing field, rather than a Lovell playing field, we will be able to compete,” he quipped, punning on the name of Sapa CEO Kevin Lovell, who has been the chief opponent of US poultry imports.

Sumner also expressed confidence that the US would eventually be able to meet its quota once it had made the necessary contacts and got back into the market from which it had been excluded for 17 years.

The US could benefit from a possible imposition of tariffs on poultry imports from the European Union (EU), which now enter the South African market tariff-free under the EU-SA free trade agreement. Wayt said he was expecting the South African trade authorities to make a determination on this on 21 October. The protection which SAPA is seeking for what is says has been a surge of EU poultry imports is a 13.4 percent safeguard duty.

One of the major US complaints has been that it is not only competing with South African poultry producers but also with EU producers who had a huge price advantage

Sumner noted that even after the prohibitive anti-dumping duties on US poultry imports had been lifted for the 65,000 tons a year quota, US poultry producers were still paying normal duties of 37 percent versus zero for the EU.

“If South African poultry producers can’t compete with us after that duty, coming on top of our landed transport costs – South Africa is not next door to the US – then its not surprising chicken is so expensive in South Africa,” he said.

He also announced that the World Poultry Foundation would be coming to South Africa soon to discuss proposals for a programme to help and train disadvantaged South Africans to enter the poultry industry. Usapeec is funding that programme.

Assignment:

Use the AGOA case reported by Lovell (2016), above, to identify and discuss the most significant trade issues and their implications for economic growth and social welfare (on consumers and producers) in both countries concerned (RSA and US), given the rising protectionist sentiments in the US and the UK. In your economic discussion, use a combination of the economic theories and models listed below to identify and analyse the implications of a possible loss of the US’s AGOA benefits to South Africa – especially given the reported developments around meat products:

a. Production possibilities frontier; Trade gains and economic growth (relevant theories and models) (25%)

b. Government Intervention effects from instruments including import and exports (subsidies; tariffs (taxes), quotas, etc.) (25%)

c. Economic Welfare theories (Producer and Consumer Welfare models) (25%)

Sunland Company began operations on January 2, 2019. It employs 11 individuals who work 8-hour days and are paid hourly. Each employee earns 12 paid vacation days and 7 paid sick days annually. Vacation days may be taken after January 15 of the year following the year in which they are earned. Sick days may be taken as soon as they are earned; unused sick days accumulate. Additional information is as follows.

Sunland Company has chosen not to accrue paid sick leave until used, and has chosen to accrue vacation time at expected future rates of pay without discounting. The company used the following projected rates to accrue vacation time.

New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is partially correct.

Prepare journal entries to record transactions related to compensated absences during 2019 and 2020. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,125.)Compute the amounts of any liability for compensated absences that should be reported on the balance sheet at December 31, 2019 and 2020. (Round answers to 0 decimal places, e.g. 5,125.)

A researcher wants to investigate why some individuals released from prison on parole reoffend whereas others do not. As a starting point, the researcher considers the following probit model: Pr(??=1)=Φ(?0+?1??+?2ln??⁡+?3(??×ln??)), (2.1) where Φ denotes the standard normal cumulative distribution function, ln denotes the natural log and: ??=1 if paroled individual ? reoffends within three years of being paroled (0 otherwise); ??=1 if individual ? is male (0 otherwise); ?? is the number of years since individual ? was paroled. The above model was estimated using data on a sample of convicted individuals who were recently released from prison on parole, whose reoffending behavior was subsequently monitored. The (rounded) parameter estimates obtained (with standard errors in brackets) were ?̂0=0.00 (0.12), ?̂1=0.7 (0.02), ?̂2=−0.5 (0.07),⁡?̂3=−0.5 (0.10). (a) Robin Banks was paroled a year ago. What is his estimated probability of reoffending? (b) Emma Besler (everyone calls her ‘Em’) has an estimated probability of reoffending of 50%. How long ago was she paroled? (c) Based on a hypothesis test at the 5% significance level, could Em’s probability of reoffending be as high as 60%? (d) Estimate the number of years a man must be on parole to be equally likely to re-offend as a woman paroled 12 months ago.

These are all part of one question:

What is Equilibrium? What would Eq look like in real life? Do buyers or sellers want to get to Eq?  

Why do prices change? Do price have to change or can prices stay the same? Who sets the prices in the market?  

Is trade Good or Bad for the US? When a country trades, are there going to be Winners and Losers? Can the US be the winner for all transactions? Why? How?

Part 1 Tax arbitrage

Products, Inc., Singapore (PI Asia) and Products, Inc. US (PI North America) are part of an affiliated group of companies, all of which have common ownership. These affiliates do business in Singapore and the US, respectively, and have regular transactions with each other. On such transaction involves assemblies that PI Asia produces and sells to PI North America. PI Asia purchases materials and labor from unrelated third parties for S$1000, incurs additional expenses of S$1000 and sells the partially completed assemblies that it produces to PI North America. PI North America incurs additional expenses of $500 to finish production and sells the completed product to unrelated customers for $2500.  

The average exchange rate is USDSGD 1.2500. Assume the corporate income tax rate in Singapore is 17%, and in the US, 25% (combined state and federal).

Transfer pricing

1a. What price should PI Asia charge to minimize the total tax liability for the affiliated group of companies?

b. What is the general rule about the transfer price that minimizing taxes when a company from a low tax jurisdiction sells a product to a related company in a high tax jurisdiction?

Revenue and cash receipts journals; accounts receivable subsidiary and general ledgers

Transactions related to revenue and cash receipts completed by Crowne Business Services Co. during the period April 2–30 are as follows:

Required:

1. Insert the following balances in the general ledger as of April 1:

After completing the recording of the transactions in the journals in part 3, total each of the columns of the special journals, and post the individual entries and totals to the general ledger. Insert account balances after the last posting. When posting to the general ledger, post in chronological order. However, if there is more than one entry on the same date, be sure to post transactions from the revenue journal before posting transactions from the cash receipts journal.

If an amount box does not require an entry, leave it blank. In CNOW, Journal pages begin with “J”, Cash Receipts begin with “CR” and Cash Receipts begins with “R”. For example journal/ Cash Receipts/ Cash Receipts, page 1/36/40 respectively. POST. REF. is simply J1, CR36, and R40.

2. Insert the following balances in the accounts receivable subsidiary ledger as of April 1:

After completing the recording of the transactions in the journals in part 3, post to the accounts receivable subsidiary ledger in chronological order, and insert the balances at the points indicated in the narrative of transactions. Determine the balance in the customer's account before recording a cash receipt. If an amount box does not require an entry, leave it blank. In CNOW, Journal pages begin with “J”, Cash Receipts begin with “CR” and Cash Receipts begins with “R”. For example journal/ Cash Receipts/ Cash Receipts, page 1/36/40 respectively. POST. REF. is simply J1, CR36, and R40.

3. Prepare a single-column revenue journal (p. 40) and a cash receipts journal (p. 36). Use the following column headings for the cash receipts journal: Fees Earned Cr., Accounts Receivable Cr., and Cash Dr. The Fees Earned column is used to record cash fees.

4. Using the two special journals and the two-column general journal (p. 1), journalize the transactions for April. Post to the accounts receivable subsidiary ledger, and insert the balances at the points indicated in the narrative of transactions. Determine the balance in the customer’s account before recording a cash receipt.

5. Total each of the columns of the special journals and post the individual entries and totals to the general ledger. Insert account balances after the last posting.

If an amount box does not require an entry, leave it blank.

6. What is the sum of the customer balances?
$

Does the sum of the customer balances agree with the accounts receivable controlling account in the general ledger?
   

7. Would an automated system omit postings to a controlling account as performed in step 5 for Accounts Receivable?

Revenue and cash receipts journals; accounts receivable subsidiary and general ledgers

Transactions related to revenue and cash receipts completed by Crowne Business Services Co. during the period April 2–30 are as follows:

Required:

1. Insert the following balances in the general ledger as of April 1:

After completing the recording of the transactions in the journals in part 3, total each of the columns of the special journals, and post the individual entries and totals to the general ledger. Insert account balances after the last posting. When posting to the general ledger, post in chronological order. However, if there is more than one entry on the same date, be sure to post transactions from the revenue journal before posting transactions from the cash receipts journal.

If an amount box does not require an entry, leave it blank. In CNOW, Journal pages begin with “J”, Cash Receipts begin with “CR” and Cash Receipts begins with “R”. For example journal/ Cash Receipts/ Cash Receipts, page 1/36/40 respectively. POST. REF. is simply J1, CR36, and R40.

2. Insert the following balances in the accounts receivable subsidiary ledger as of April 1:

After completing the recording of the transactions in the journals in part 3, post to the accounts receivable subsidiary ledger in chronological order, and insert the balances at the points indicated in the narrative of transactions. Determine the balance in the customer's account before recording a cash receipt. If an amount box does not require an entry, leave it blank. In CNOW, Journal pages begin with “J”, Cash Receipts begin with “CR” and Cash Receipts begins with “R”. For example journal/ Cash Receipts/ Cash Receipts, page 1/36/40 respectively. POST. REF. is simply J1, CR36, and R40.

3. Prepare a single-column revenue journal (p. 40) and a cash receipts journal (p. 36). Use the following column headings for the cash receipts journal: Fees Earned Cr., Accounts Receivable Cr., and Cash Dr. The Fees Earned column is used to record cash fees.

4. Using the two special journals and the two-column general journal (p. 1), journalize the transactions for April. Post to the accounts receivable subsidiary ledger, and insert the balances at the points indicated in the narrative of transactions. Determine the balance in the customer’s account before recording a cash receipt.

5. Total each of the columns of the special journals and post the individual entries and totals to the general ledger. Insert account balances after the last posting.

If an amount box does not require an entry, leave it blank.

6. What is the sum of the customer balances?
$

Does the sum of the customer balances agree with the accounts receivable controlling account in the general ledger?
  

7. Would an automated system omit postings to a controlling account as performed in step 5 for Accounts Receivable?

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Revenue and cash receipts journals; accounts receivable subsidiary and general ledgers

Transactions related to revenue and cash receipts completed by Crowne Business Services Co. during the period April 2–30 are as follows:

Required:

1. Insert the following balances in the general ledger as of April 1:

After completing the recording of the transactions in the journals in part 3, total each of the columns of the special journals, and post the individual entries and totals to the general ledger. Insert account balances after the last posting. When posting to the general ledger, post in chronological order. However, if there is more than one entry on the same date, be sure to post transactions from the revenue journal before posting transactions from the cash receipts journal.

If an amount box does not require an entry, leave it blank. In CNOW, Journal pages begin with “J”, Cash Receipts begin with “CR” and Cash Receipts begins with “R”. For example journal/ Cash Receipts/ Cash Receipts, page 1/36/40 respectively. POST. REF. is simply J1, CR36, and R40.

2. Insert the following balances in the accounts receivable subsidiary ledger as of April 1:

After completing the recording of the transactions in the journals in part 3, post to the accounts receivable subsidiary ledger in chronological order, and insert the balances at the points indicated in the narrative of transactions. Determine the balance in the customer's account before recording a cash receipt. If an amount box does not require an entry, leave it blank. In CNOW, Journal pages begin with “J”, Cash Receipts begin with “CR” and Cash Receipts begins with “R”. For example journal/ Cash Receipts/ Cash Receipts, page 1/36/40 respectively. POST. REF. is simply J1, CR36, and R40.

3. Prepare a single-column revenue journal (p. 40) and a cash receipts journal (p. 36). Use the following column headings for the cash receipts journal: Fees Earned Cr., Accounts Receivable Cr., and Cash Dr. The Fees Earned column is used to record cash fees.

4. Using the two special journals and the two-column general journal (p. 1), journalize the transactions for April. Post to the accounts receivable subsidiary ledger, and insert the balances at the points indicated in the narrative of transactions. Determine the balance in the customer’s account before recording a cash receipt.

5. Total each of the columns of the special journals and post the individual entries and totals to the general ledger. Insert account balances after the last posting.

If an amount box does not require an entry, leave it blank.

6. What is the sum of the customer balances?
$

Does the sum of the customer balances agree with the accounts receivable controlling account in the general ledger?
  

7. Would an automated system omit postings to a controlling account as performed in step 5 for Accounts Receivable?