Washington Retail Insight - March 3, 2006

Volume 11, Number 4
March 3, 2006

In Today's Edition:

• Political Fallout Bigger Threat to Retail Cargo than Port Takeover

• FTC Says Gift Card Fees, Expiration Dates Must be Disclosed

• NRF Urges Support for Vietnam WTO Membership

• Congressional Outlook

• NRF Events

Political Fallout Bigger Threat to Retail Cargo than Port Takeover

     A proposal to hand over management of some terminals at certain U.S. ports to an Arab-controlled company wouldn't affect retail cargo directly, but political fallout from the plan has the potential to create disruption, according to the March Port Tracker report released this week by NRF and Global Insight.

     A change in top-level port management would not be likely to result in a change in the day-to-day managers on the docks or in the longshoremen handling cargo. But a number of Democrats and Republicans in Congress have vowed to block the move, ignoring the fact that most U.S. container terminals are already run by foreign companies. Some legislative proposals would prohibit foreign ownership of terminal operating companies, while others call for stepped-up security measures such as inspecting 100 percent of cargo.

     "A massive invalidation of existing terminal leases and a fire sale of terminal operating contracts have real potential for confusion at the top levels of terminal management," the Port Tracker report said. "It is possible that such confusion could trickle down to affect operations on the docks, especially if inexperienced port managers or federal government employees are brought in to make decisions. The magnitude of the impacts and the risk or this occurring are unknown because disruption of this order is unprecedented anywhere."

     In a $6.8 billion transaction, Dubai Ports World is slated to take over some terminal operations at the ports of New York/New Jersey, Miami, Houston, New Orleans, Philadelphia and Baltimore. Critics claim the deal is a security risk because the company is owned by the government of Dubai, part of the United Arab Emirates. The UAE at one time recognized the Taliban government in Afghanistan and has allegedly allowed terrorist organizations to operate.

     Of the ports involved, only New York/New Jersey is a major retail container port, and Dubai Ports World would take control of only the Port Newark Container Terminal, the smallest of the three terminals in New Jersey.

     Despite the news media and political attention focused on the Dubai issue, the March Port Tracker report found that the nation's major retail container ports are in good condition, operating without congestion as the slow season for retail cargo comes to an end and volume begins to increase. Looking ahead toward the peak of the 2006 season this fall, the report sees challenges from increased growth in trade, but expects any congestion to be kept to a minimum through continued refinements to operations.

     All ports covered by the report -- Los Angeles/Long Beach, Oakland, Tacoma and Seattle on the West Coast, and New York/New Jersey, Hampton Roads, Charleston and Savannah on the East Coast -- are currently rated "low" for congestion, the same as in the February Port Tracker report. A low rating means "business as usual" with no serious congestion, delays or diversion of cargo anticipated.

     Nationwide, ports surveyed handled 1.23 million Twenty-foot Equivalent Units (TEUs) of container traffic during January, the most recent month for which numbers are available. The figure is up 2.1 percent from December and 8 percent from January 2005. Over the report's six-month forecast period, February's 1.1 million TEU, up 1.4 percent from a year ago, was expected to be the lowest volume of the slow post-holiday winter season. Volume is beginning to climb again and should hit 1.4 million TEU in July, up 10.2 percent from July 2005. One TEU is a 20-foot cargo container or its equivalent.

     Port Tracker is produced each month for NRF by the economic research, forecasting and analysis firm Global Insight. Subscription information is available at www.nrf.com/porttracker.

     For more information, contact NRF Vice President and International Trade Counsel Erik Autor at (202) 626-8104.

FTC Says Gift Card Fees, Expiration Dates Must be Disclosed

     The Federal Trade Commission has warned that failure to disclose dormancy fees, expiration dates and other restrictions on gift cards could be considered an unfair or deceptive trade practice.

     The FTC's opinion came in a February 14 letter to House Energy and Commerce Committee Chairman Joe Barton, R-Texas, written after Barton asked the commission to examine gift card practices. 

     "I share your concern that companies fully and clearly disclose all material terms and conditions of their gift cards," FTC Chairwoman Deborah Platt Majoras said. "Consumers are entitled to know all material terms relating to these cards."

     The existence of an expiration date or fee on a gift card is a "material" fact that would influence a consumer's decision whether to buy a card, and therefore is subject to Federal Trade Commission Act prohibitions on omitting such information or being misleading, Majoras said. Failure to "clearly and conspicuously" disclose such information therefore "may constitute a deceptive act or practice" under the law, she said.

     Majoras' letter didn't criticize the use of fees or expiration dates, only the non-disclosure of the terms.

     The FTC also issued an alert urging consumers to ask about terms and conditions when purchasing gift cards and explaining how to file a complaint with the FTC or their state Attorney General if disputes cannot be resolved with the store or financial institution that issued the card.

     Barton asked the FTC to examine gift cards in December, alleging that "consumers are not being given all the appropriate information about their use."

     Barton's demand for an investigation drew no distinction between gift cards issued by retailers and those issued by banks and shopping centers. The bank/shopping center cards are often confused with traditional retail gift cards by consumers, but are far more likely to carry the high fees and quick expiration dates that have drawn criticism.

     A number of states ban or restrict expiration dates and dormancy fees, and federal legislation requiring the FTC to issue regulations declaring expiration dates and dormancy fees "unfair" or "deceptive" was introduced more than a year ago by Representative Rodney Frelinghuysen, R-N.J. The bill was assigned to Barton's committee but has seen no action.

     Many retailers have moved away from dormancy fees and expiration dates, but NRF has argued against restrictions, saying decisions on fees and expiration dates should be left to the retailers who issue the cards.

     NRF has long urged consumers to shop carefully when buying gift cards and to ask about terms and conditions. NRF also urges consumers to purchase cards only from reputable retailers and not from online auction sites where cards are more likely to be counterfeit or obtained through fraudulent means.

     For more information, contact NRF Vice President and Government and Industry Relations Counsel Maureen Riehl or Senior Director and Government Relations Counsel Elizabeth Treanor Oesterle at (202) 783-7971.

NRF Urges Support for Vietnam WTO Membership

     NRF is leading importers in urging the Bush Administration to support Vietnam's efforts to join the World Trade Organization.

     NRF spearheaded a February 22 letter to U.S. Trade Representative Rob Portman voicing support for Vietnam joining the WTO on "commercially meaningful" terms. The letter, signed by 19 trade associations, said the United States should not seek a textile and apparel "safeguards" mechanism for Vietnam similar to the safeguards requirement imposed as a condition for China joining the WTO.

     "Vietnam's entry into the WTO on commercially meaningful terms will have important benefits ... across the major sectors of the U.S. economy," the letter said. "We urge that the Administration continue to pursue the conclusion of a commercially meaningful accession package with Vietnam as soon as possible, and not propose unnecessary and detrimental safeguard provisions that would only hinder these negotiations and Vietnam's own ability to make important domestic economic reforms."

     Safeguards are temporary limits on imports from a WTO member nation that can be sought by domestic manufacturers threatened by low-cost imports. Retailers' ability to source goods from China was thrown into turmoil last year when the Bush Administration approved two dozen safeguards quotas limiting textile and apparel imports from China even though there was little evidence of harm to U.S. manufacturers.

     With most of the world's suppliers now quota-free and China's safeguards scheduled to expire at the end of 2008, NRF sees no economic or political reason to impose safeguards on Vietnam.

     Joining the WTO would make Vietnam eligible for Permanent Normal Trade Relations status with the United States, helping it expand its role as an important supplier of apparel and other consumer products. Vietnam's current Normal Trade Relations status is subject to annual renewal.

     For more information, contact NRF Vice President and International Trade Counsel Erik Autor at (202) 626-8104.

Congressional Outlook:

House: Returns 12 noon, Monday, March 6.

Senate: Returns 1 p.m., Monday, March 6.

NRF Events:

• March 29-30, Taxation Committee, Washington, D.C.
• April 26-28, Committee on Employment Law, Longboat Key, Fla.

     For information on NRF events, contact Eileen Pryor at (202) 626-8114 or pryore@nrf.com.

     Washington Retail Insight is published each week that Congress is in session by the National Retail Federation, 325 7th St. NW, Washington, D.C. 20004. To unsubscribe, send a blank e-mail to:
leave-nrfgovtrelations-169150C@lists.easent.net

Copyright 2006 National Retail Federation