Recent Trade & Tariff Perspectives

November 3, 2021 | Ivana Gavroski Manager, U.S. Customs Compliance

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The Current State of Customs and Trade

After a relatively quiet few months, new developments are rapidly beginning in customs and trade.

From the upcoming changes to the 2022 Harmonized Schedule to the recent agreement reached on steel and aluminum tariffs—we will discuss what these developments mean for your supply chain, how they could potentially cut into your bottom line, and what steps need to be taken to maximize potential cost-savings opportunities.

Agreement reached on steel and aluminum tariffs

On October 30, 2021, U.S. officials said the United States and the EU reached an agreement pertaining to the Section 232 steel and aluminum tariffs and the retaliatory tariffs imposed by the EU.

The agreement, to negotiate a carbon-based arrangement on steel and aluminum trade, addresses both Chinese overproduction and carbon intensity in the steel and aluminum sector. It represents a renewed partnership on both economic and environmental matters.

The Section 232 tariffs currently in effect at 25% on steel and 10% on aluminum will remain in place. However, the deal will allow “limited volumes” of EU-produced metals into the United States duty free. The volume of duty-free steel to be allowed into the United States under a tariff-rate quota system has yet to be determined.

Commerce Secretary Gina Raimondo said the deal will achieve the following:

  1. Protect American steel and aluminum industries and workers from excess capacity driven by China dumping steel into our markets
  2. Reduce costs for American manufacturers and consumers while providing relief in the supply chain, drive down cost increases as the tariffs are lifted, and increase volume
  3. Drop Europe’s retaliatory tariffs against the United States that were set to increase to 50% on December 1, 2021
  4. Create a framework through which the United States and EU agree to take carbon intensity into account in future negotiations

C.H. Robinson continues to monitor the U.S.-EU agreement on steel and aluminum tariffs and will provide updates as developments emerge. Sign up for our Client Advisories to be notified.

Changes to the Harmonized System

On January 1, 2022, amendments to the Harmonized Tariff Schedule of the United States (HTSUS) will go into effect and impact more than 350 products. The amendments are the result of numerous reviews to ensure the HTSUS is kept current on product advances in technology, product stream development, environmental concerns, and changes in global trade.

The basis of the HTSUS is the Harmonized System (HS), the product nomenclature used by more than 200 countries across the globe to classify internally traded goods. Signatories to the Harmonized System Convention, including the United States, agree to use the same six-digit product classification codes to facilitate trade between countries and ensure harmonization.

Every five years, the World Customs Organization (WCO), an intergovernmental organization comprised of 183 customs administrations worldwide, conducts a widespread review of the HS and approves the amendments.

Products most affected by the 2022 HS amendments include:

  • Industrial equipment, such as partial and fully electric heavy-duty vehicles
  • Unmanned aerial vehicles (UAVs), such as drones
  • Health and safety equipment, such as diagnostic kits
  • Tobacco and nicotine-based products, such as vapes
  • Electronic waste
  • Smartphone devices
  • 3D printers

Waiting until these changes go into effect on January 1 could result in costly shipment delays. Be sure to consider the following implications HTSUS codes can have on your business:

  • Punitive tariffs, such as the China, steel, and aluminum tariffs, may be added or removed for certain products, increasing your duty spend, or decreasing it, respectively
  • Free Trade Agreement and trade preference program eligibility
  • Partner Government Agency requirements
  • Antidumping and countervailing duty cases could flag for products that previously did not flag
  • Where duty rates have changed, consider front-loading or delaying imports of certain products as a cost-savings measure
  • If you believe your products have not been properly identified in the HS, consider proposing a change—while the HS Committee meets every six months to review proposed changes, preparation to request changes should begin now

Need help classifying your products? Our dedicated classification team can help you navigate through the upcoming tariff changes and assist with the classification of your products. Connect with one of our trade policy experts.

Comment period open for China tariff exclusions

Effective October 12 through December 1, 2021, the United States Trade Representative (USTR) is allowing the public to comment on whether to reinstate certain Section 301 China tariff product exclusions. If reinstated, the exclusions would be retroactive for eligible entries on or after October 12, 2021.

For those parties interested in commenting, the USTR will review each of the 549 product exclusions on a case-by-case basis. It is imperative that the exclusion descriptions are thoroughly reviewed as they are product specific. Whether a product meets the description of the exclusion will determine eligibility.

The primary factors the USTR will focus on in their consideration of whether to reinstate the exclusions are similar to those of the previous Administration, such as:

  • Whether the product and/or a comparable product is available from sources in the United States and/or in third countries
  • Any changes in the global supply chain since September 2018 with respect to the product or any other relevant industry developments
  • The efforts, if any, the importers or U.S. purchasers have undertaken since September 2018 to source the product from the United States or third countries
  • Domestic capacity for producing the product in the United States

The instructions to submit comments and additional factors that will be taken into consideration by the USTR have been detailed in the October 8, 2021 Federal Register notice. More details on the comment period and the impact this could have on the trade community can be found in a previous Trade & Tariff Perspective.

Renewal status for GSP and MTB remains unclear

Renewal of the Generalized System of Preferences (GSP) and Miscellaneous Tariff Bill (MTB) program continues to remain at a standstill since legislation was last introduced on June 17, 2021.

Both the U.S. House and Senate introduced bills to reform and renew GSP and MTB, but significant differences between the bills have prevented lawmakers from reaching an agreement. The House argued that the Senate’s legislation fails to fix the GSP eligibility criteria and transparency provisions, and address loopholes in the MTB process with China.

On Sept. 21, 308 companies and trade associations signed a letter to the Senate Committee on Finance and House Ways and Means Committee to renew and improve the GSP program. The companies argued that Americans have paid about $750 million in extra taxes while going through the challenges resulting from the pandemic and on-going increase in freight costs both domestically and in beneficiary countries.

Explore a more in-depth look into the current legislation on GSP and MTB.

United States terminates tariffs on Europe

On October 21, the United States entered into an agreement to terminate the currently-suspended 25% tariffs related to the Section 301 Digital Services Taxes (DSTs) investigation for goods from Austria, France, Italy, Spain, and the UK.

The termination is the result of a compromise amongst the countries to take a transitional approach in taxing multinational corporations. Under the agreement, DSTs that U.S. companies accrue during the interim period will be creditable against future income taxes accrued under Pillar 1, under the Organization for Economic Co-operation and Development (OECD) agreement.

Turkey and India, the other two countries covered by the Section 301 DST investigations, have not joined in the agreement. As a result, the 25% tariffs for both countries will remain suspended until November 29, 2021, and the USTR will continue to oppose the DSTs until an agreement is reached.

Products subject to the DST tariffs for India include seafood, basmati rice, bamboo products, jewelry, and furniture. A complete list of products can be found under Annex B of the Federal Register notice for India.

For Turkey, the products subject to the tariffs include carpets, building materials, and jewelry. See the complete list of products for Turkey under Annex B in the Federal Register notice.

Next steps

Remaining proactive in a rapidly changing customs and trade environment can be overwhelming. Fortunately, your supply chain does not need to navigate these changes alone. Connect with one of our trade policy experts to learn more.

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