Tariffs force proactive risk approach

Date: Friday, July 20, 2018
Source: American Shipper

Tariffs have become a favorite trade policy tool of President Donald Trump’s administration during his second year in office.

Since the spring, the administration has ushered in tariffs that will have significant effects for a range of industries, including global tariffs on steel and aluminum and tariffs targeting a variety of Chinese products. The administration has also begun a process that could lead to tariffs on automotive imports, and it has threatened to impose additional new tariffs on even more imports from China.

These new tariffs carry significant implications for companies throughout the supply chain of affected products. In light of recently implemented tariffs — and those still to come — trade compliance professionals should pay close attention to key risk areas, including product classification, country-of-origin labeling and valuation. In examining each of these issues, risk management personnel should also work to leverage opportunities with products that fall outside the scope of the tariffs.

Sparks Fly. The Trump administration’s flurry of tariff activity began in earnest in April 2017, when the U.S. Department of Commerce announced it was initiating an investigation into the implications of global steel and aluminum imports for U.S. national security. Commerce’s investigation, conducted pursuant to Section 232 of the Trade Expansion Act of 1962, resulted in January 2018 findings that both steel and aluminum threatened to impair the national security of the United States, paving the way for Trump’s March announcement of additional tariffs of 25 percent and 10 percent, respectively, on imports of steel and aluminum to the United States.   

In the months that followed, the U.S. government negotiated with several trade partners that sought deals to avoid the imposition of tariffs on their exports. Ultimately, the Trump administration reached agreements to extend exemptions to steel products from Argentina, Australia, Brazil and South Korea and aluminum products from Argentina. Several key trade partners remain absent from the list of exemptions, including Canada, Mexico and the European Union, all of which have imposed retaliatory tariffs on U.S. imports in response.   

The United States’ first round of China tariffs followed on July 6, with the U.S. Trade Representative implementing a 25 percent tariff on a wide range of Chinese products. Unlike the Section 232 metals tariffs, the China tariffs were imposed pursuant to Section 301 of the Trade Act of 1974, which authorizes USTR to investigate whether foreign trade practices are unfair. 

USTR initiated an unfair trade practices investigation into Chinese trade practices in August 2017 and released its findings in March of this year, citing the Chinese government’s practices pressuring U.S. companies to license technology to Chinese businesses. In response, President Trump directed USTR to propose a list of Chinese products that would be subject to new tariffs on March 22. While the Trump administration initially delayed the new tariffs as it negotiated with Beijing over U.S. intellectual property security concerns, it announced on June 15 that it would impose a first round of tariffs on approximately $34 billion in Chinese goods starting on July 6. USTR’s June announcement also included a proposal for a second round of tariffs on approximately $16 billion in further Chinese imports, subject to public commentary and a hearing scheduled to take place on July 24.   

Immediately after the first round of tariffs went into effect on July 6, the Chinese government imposed retaliatory duties on an equivalent value in U.S. imports, prompting the Trump administration to announce that it would explore an additional 10 percent tariff on approximately $200 billion more in Chinese products. USTR on July 10 formally announced plans for the additional tariffs and a Section 301 Committee public hearing to be held Aug. 20-23.

In May, Commerce announced it would launch another Section 232 investigation, this time into the national security implications of U.S. automobile and automotive part imports. Having solicited public commentary on the issue in June, Commerce will hold a hearing on the investigation Thursday and Friday. Section 232 allows Commerce until February to complete its investigation, but Secretary of Commerce Wilbur Ross said the review will likely conclude in July or August. President Trump, meanwhile, tweeted in June that the U.S. government would impose a 20 percent tariff on all cars assembled in the European Union unless the EU lifts its tariffs on imports of vehicles produced in the United States.

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