CARGO ALERT: Ping Pong Trade
The White House has announced that the administration will impose tariffs on aluminum and steel imports from Mexico, Canada and countries in the European Union. The increased tariffs went into effect today Friday, June 1st, when the previously designated exemption expired.
BACKGROUND ON STEEL AND ALUMINUM TARIFF
On March 8, 2018, President Trump authorized increased tariffs on steel and aluminum imports under Section 232 of the Trade Expansion Act of 1962, but granted relief to Mexico, Canada and countries in the European Union. Investigations led by the Commerce Department concluded that steel and aluminum, “are being imported into the United States in such quantities and under such circumstances as to threaten to impair the national security of the United States.” The Secretary of Commerce also found that, “the present quantities of steel [and aluminum] articles imports and the circumstances of global excess capacity for producing steel [and aluminum] are ‘weakening our internal economy.’”
TARIFFS ON STEEL & ALUMINUM FROM CANADA & MEXICO
Secretary Ross had a call with reporters on Thursday morning and he explained that Canada and Mexico’s initially proposed tariffs were deferred pending the outcome of the NAFTA talks. Currently, there is no precise date when the NAFTA renegotiations will be concluded and therefore Canada and Mexico were added back to the list of countries that will have additional tariffs.
RESPONSES FROM CANADA & THE EU ON STEEL & ALIMINUM TARIFFS
Canada and the EU have announced plans to levy tariffs on American made products into their countries. Canadian Foreign Minister, Chrystia Freeland, announced $12.8 billion in retaliatory tariffs against the U.S. The EU stated that it will respond with increased tariffs on $3.3 billion of American imports as early as June 20, 2018. The European Commission has also announced plans to file a dispute with the World Trade Organization on June 1st.
NEGOTIATIONS WITH CHINA
China and the U.S. have planned weekend meetings this Saturday with Commerce Secretary Wilbur Ross. Ross will be in Beijing to discuss the frustrations with China’s $375 billion bilateral trade surplus with the United States. On Thursday evening, China announced a tariff reduction for July 1s on an array of imported goods. The categories of selected goods for tariff cuts cover few American goods and appear to be on goods that include low-value manufacturing. This is in line with China’s goal of developing more sophisticated industries rather than low-value manufacturing. Some of the goods on China’s list include areas of manufacturing that have been shifting outside of China to lower-wage competitors.
MAY 29TH ANNOUNCEMENT OF TARIFFS & RESTRICTIONS ON CHINA TRADE
Meanwhile, on Tuesday, May 29th, the administration announced that they will release a final list of $50 billion in imports from China that would be subject to tariffs of 25% and they would place additional limits on Chinese investments in U.S. high-tech industries. The Trump administration announced that they will release the final list of covered imports subject to additional tariffs by June 15th. The administration also announced that by June 30th they would announce the additional investment restrictions on U.S. technology industries.
U.S. COMPANIES MUST REMAIN ALERT
As potential trade actions are announced or carried out importers in the U. S. must remain alert as to the potential impact of such actions on their business. For example importers should determine, after announcements, whether their products are on the list of goods subject to increased duties or restrictions.
We’re happy to review classifications and confirm tariff numbers. If products are on the list, consider a few options: goods can be put into a bonded warehouse and/or a Foreign Trade Zone, to defer duties until the goods enter the commerce of the U.S. or are exported. Some goods can be shipped to Canada and stored in Canada, to avoid U.S. duties and/or defer them. Note, if you choose to import goods at the higher duty rates, it is unlikely that you will get the higher duties back, even if the trade issues are ultimately resolved. If you pay these duties your customs bond may be insufficient and require an increase in coverage.
Exporters need to consider many options available. For example, if goods are destined to China, consider sending them to Hong Kong (which doesn’t have duties on most products).
Please contact Ernie Stein, Gary Stratton, Maria Abrego, Elizabeth Magistro or Robert Krieger for further information.