Descartes – June 10th, 2019 Trade Update
U.S. importers can breathe a sigh of relief that the Mexico tariffs did not get enforced and are ultimately behind us, for now. With most products imported from China subject to a 25% tariff, India and Turkey losing their GSP status, a potential threat of tariffs on imports from Australia and the EU, there is still significant volatility in trade today. A summary of recent events and recommendations to mitigate these tariffs is listed below.
Imports from China:
After the threat of tariffs against Mexico led to an agreement of stronger immigration enforcement by Mexican Authorities, the White House is now threatening to sanction almost all imports from China. On Monday, June 10, White House officials advised that additional tariffs will be enforced “immediately” on up to $300B more of Chinese goods if plans to meet at the G-20 summit to continue trade negotiations at the end of June falls through.
Imports from India:
The Generalized System of Preferences program (GSP) began in 1974 and allows certain designated developing countries tax exemption on goods imported into The United States. India was the single biggest beneficiary of this designation, exporting almost $6B in goods bound for The U.S. as duty-free in 2018. As of June 5, 2019, The U.S. has terminated India’s designation as a beneficiary designated country under GSP, citing that “India has not assured The U.S. that it will provide equitable and reasonable access to its markets”.
As a result, India has initiated retaliatory tariffs on 28 U.S. goods, with some tariffs as high as 70%, effective, Sunday, June 16th, 2019. Although the goods affected only amount to approximately $241M, the duties are strategically placed on U.S. exports of almonds, walnuts, apples, and other agriculture products. India is the largest buyer of U.S. almonds, purchasing more than half of those produced in The U.S. in 2018.
Imports from Turkey:
Turkey was also recognized as a beneficiary developing nation under GSP. Turkey exports nearly $1.7B to The U.S. every year. Turkey’s GSP has also been terminated effective May 17, 2019 based on its level of economic development.
Imports from Australia:
Earlier this month, White House officials considered tariffs on aluminum and steel originating from Australia due to a significant influx of Australian aluminum over the past year; however, at this time, it isn’t expected that the White House will enforce any tariff action on Australia.
Imports from the EU:
Last month, President Trump indicated that he may enforce tariffs on $11B - $21B worth of goods from the EU, citing that the EU subsidies provided to Airbus have adversely affected The United States. This decision still needs to be confirmed by a World Trade Organization (WTO) arbitrator and the decision is expected to be announced in July 2019. Depending on the outcome, duties on EU goods could hit as early as late July or early August 2019, however, negotiations to avoid tariffs are still a possibility.
Mitigating Tariffs:
Evaluate your classifications:
The first step to mitigating duty is to determine if you’ve classified your goods correctly. Importers should research recent CBP rulings, court cases, and Informed Compliance Publications to make sure you understand Customs logic and check for any new rulings that classify your items differently than what you are doing today. Next, read through and make sure you understand the General Rules of Interpretation, Section and Chapter Notes of the U.S. Harmonized Tariff Schedule. Often, when you have an item that is used for more than one specific function, (i.e. – a digital camera that takes still photos and videos or a speaker that also has a playback device, etc), there is some ambiguity as to how your item should be classified. Descartes CI Reference is an excellent place to start your research with more rulings than CROSS and access to all CBP references in a single, searchable location. When in doubt, seek a binding ruling request from CBP arguing your position.
Leverage Incoterms:
Incoterms are a set of rules that govern the responsibilities of seller’s and buyers for the delivery of goods under sales contracts. Delivered Duty Paid (DDP) can be used under any mode of transportation and requires the seller to arrange carriage and deliver the goods at the named place, cleared for import and all duties and taxes paid. Given the current trade climate, some suppliers are willing to go to extremes to keep your business.
Evaluate where you source your goods:
Most of the time, importers don’t have a ton of flexibility on where they source their goods from but in the event you do, it’s important to understand the total landed costs involved in sourcing your goods from a new country. For a duty comparison analysis, check out the GTIM module of CI Reference where you can do a duty comparison by country of origin and also review the top ten countries that your HS code is shipping from. You can also research trade routes and the political climate in Trade Tools and GistNet of CI Reference as well.
Leverage Trade Content and Global Trade Management Solutions:
Visibility and up to date information is key to a successful trade compliance program. Whether you are doing classification, duty management or sanctioned party screening, integrated systems and up to date content that supports global trade can open the window on trade activities, duty payments and other government agency regulations, helping trade compliance leaders understand and enhance their entire trade compliance program.
How Descartes Can Help
Descartes offers up to date trade content to fuel your Global Trade Management solution. Descartes’ global trade content solutions offer comprehensive access to market-leading data and tools to research, analyze and act on import/export movements, trade regulations and market trends; avoid the risk of transacting with denied or sanctioned parties; increase trade compliance rates; optimize sourcing, procurement, and business development strategies; and minimize duty spend.
Today’s trade climate is volatile, and things can change at a moment’s notice but there’s no reason to panic just yet. Companies need to take a strategic approach through trade tools, content, and automation that will result in reduced cost, risk, and complexity to their entire supply chain.
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