International Trade Updates and Reminders for January 2020
Section 301 Tariffs
Section 301 Tariff: List 4A & 4B
Goods on List 4A were subject to a 15% additional tariff effective September 1, 2019. Goods on List 4B were scheduled to be subject to a 15% additional tariff effective December 15, 2019. The List 4B tariff was suspended until further notice and did not go into effect on December 15, 2019. The suspension of additional tariffs on List 4B was part of a Phase 1 deal with China that will likely be signed around January 15, 2020.
The USTR will release a notice regarding the reducing of additional tariffs on List 4A “in the near future.” The notice has not been officially issued and tariffs will not be reduced without this Federal Register notice.
The exclusion process for goods on List 4A began on October 31, 2019, and will close on January 31, 2020. Exclusion requests must be submitted through an online portal and require company and product information.
Section 301 Tariff: List 3
List 3 goods, with an import value of $200 billion, are subject to 25% additional tariff as of May 10, 2019. List 3 goods were initially subject to 10% tariff which was increased to 25%.
The USTR granted 311 HTS exclusions from August 2019- January 2020. All exclusions granted are retroactive to September 24, 2018, and will expire August 7, 2020.
Section 301 Tariff: List 2
List 2 goods, with an import value of $16 billion, are subject to 25% additional tariff as of August 23, 2018. The USTR granted 269 HTS exclusions. All exclusions granted are retroactive to August 23, 2018.
Section 301 Tariff: List 1
List 1 goods, with an import value of $34 billion, are subject to 25% additional tariff as of July 19, 2018. The USTR granted 726 HTS exclusions and all exclusions granted are retroactive to July 6, 2018.
Changes to AGOA and other Trade Agreements
President Trump issued a proclamation modifying the African Growth and Opportunity Act. The proclamation made the following changes effective January 1, 2020:
Terminates Cameroon’s designation as a beneficiary sub-Saharan African country.
Terminates Niger’s, Central African Republic’s, and the Gambia’s textile and apparel benefits under AGOA.
Designates Guinea-Bissau and Niger as less developed beneficiary sub-Saharan African countries.
Extends duty-free access to eligible agricultural products of Israel to December 31, 2020.
Modifies existing duties to certain goods between the U.S. and Japan.
Modifies the tariff-quota allocation to beef under the Uruguay Round Agreements Act.
Incoterms 2020 Changes
What are Incoterms?
“Incoterms” is an acronym standing for international commercial terms. Incoterms are a collection of internationally recognized essential terms of trade published by the International Chamber of Commerce. Incoterms provide specific guidance to individuals participating in global trade on a daily basis.
What are Incoterms used for?
Incoterms are used to cover various elements of a sale contract such as the primary obligations of the seller and the buyer; the time and delivery; and the transfer of risk. They also specify export and import clearance, insurance, and the division of costs pertaining to the delivery of the goods.
What Incoterms are not used for?
Incoterms are not used to transfer title to the goods; pricing of the goods; detailed payment obligations and terms; vessel requirements; force majeure; terminations; insolvency; compliance and trade restrictions; and applicable law and jurisdiction. These important issues should be explained in the sale contract.
When are Incoterms changing?
The ICC released the new rules in September 2019, with the Incoterms 2020 going into effect on January 1, 2020.
What about contracts already entered into?
For existing contracts, Incoterms 2010 will continue to apply even if performance of the contract will take place in 2020.
After January 1, 2020, courts and arbitrators can be expected to assume that any reference to Incoterms in new contracts is intended to reference Incoterms 2020.
What are the main changes to Incoterms 2020?
Bills of lading with an on-board notation in FCA deliveries—Incoterms 2020 FCA has changed to allow parties to agree for the buyer to direct the carrier to issue the onboard bill of lading to the seller. Sellers want to secure payment with a letter of credit. However, letters of credit often require the presentation of an onboard bill of lading. Previously, sellers using FCA had little prospect of obtaining the onboard bill of lading.
Different levels of insurance cover between Cost Insurance and Freight (CIF) and Carriage and Insurance Paid To (CIP)—The Incoterm CIP means that the seller delivers to the carrier, but pays for the carriage and insurance to the named destination. CIF is the same, but can only be used for maritime transport. With Incoterms 2010 the seller is obliged to provide insurance for the buyer that is equivalent to Clause C (basic level of insurance typically suitable for bulk commodity cargoes). Incoterms 2020 keeps the same insurance requirements for CIF, but has increased the required insurance to Clause A for CIP. This is because CIF is more often used with bulk commodity and CIP is more often used for manufactured goods.
Acknowledging the use by parties of their own transportation in FCA, Delivered At Place
(DAP), DPU, and Delivery Duty Paid (DDP) deliveries—Incoterms 2010 assumed that the transportation of goods between seller and buyer would be by a third-party carrier. Incoterms 2020 clarifies if the seller or buyer will provide the transport (i.e. the seller’s own truck).
The inclusion of security-related requirements within carriage obligations and costs—Incoterms 2010 did not cover the responsibility for security requirements and their costs. Incoterms 2020 makes security obligations more prominent.
Detailed Explanatory Notes for Users—the explanatory note for each Incoterm has been made more detailed and the pictures have been made more useful.
The arrangement of provisions relating to costs—The detail of the precise allocation of costs between seller and buyer has been improved. The principle is that the seller is responsible for costs incurred up to the point of delivery, and the buyer is responsible for costs beyond that.
Change of ‘DAT’ to ‘DPU’—For Incoterms 2010 DAT (Delivered at Terminal) means the goods are delivered once unloaded at the named terminal. The change to DPU (Delivered at Place Unloaded) allows for delivery not just at a terminal, but other locations that may be agreed to (for example the site of a factory). Otherwise, there is no other change in substance to the Incoterm.
Incoterms facilitate trillions of dollars in global trade every year. Importers and Exporters around the world use the Incoterms rules to form the language of international sales transactions and understand their responsibilities, while avoiding costly misunderstandings. It is important for companies to ensure they know the new Incoterms rules and incorporate them in their contracts and terms as necessary.