Is Your Supply Chain Prepared for Potential U.S. Tariffs on EU Goods?
By Ben Bidwell Sep 26 2019 / Global Trade Daily
Transatlantic tariffs came closer to reality in recent months after the United States Trade Representative (USTR) proposed tariffs on a list of products from the European Union (EU).
Unfortunately, even if you’ve already gone through something similar with goods imported from China, the same strategy may not be effective for the tariffs on EU goods. This is due in large part to the types of proposed commodities from the EU.
The good news is there are things you can do today to adjust your import strategy to maintain compliance while insulating your company from the proposed tariffs.
Up to $25 billion worth of EU goods at stake
The USTR announcements in April and July proposed tariffs targeting up to $25 billion worth of goods. This includes items such as new aircraft and aircraft parts, foods ranging from seafood and meat to cheese and pasta, wine and whiskey, and even ceramics and cleaning chemicals.
To date, the USTR has only provided a preliminary commodity list for the proposed U.S. tariffs on EU goods. No percentages have been announced, leaving many to wonder if the tariffs will be manageable—in the 5-10% range—or more substantial, like the 25% tariffs applied to China imports.
On top of the tariffs, when the French Senate announced a 3% tax on revenue from digital services earned in France, President Trump threatened a counter-tax on French wine. But it’s unclear if this tax will come to fruition or fizzle out—especially since the USTR’s tariff list already includes many types of wine.
5 key questions to insulate your supply chain
Looking for the best way to prepare your business from the potential tariff increases? Answering these key questions may help you adapt and insulate your company.
-Do you have a plan to cover the costs?
You may not be able to avoid paying the tariffs, but there are various strategies you may consider to help cover their costs.
While not ideal, you could increase prices to end consumers. It may not be feasible to recover the entire cost of an added tariff, but you can at least offset a small portion of the tariff this way.
You can also adjust the cost of the goods with suppliers and manufacturers to cover a portion of the tariff. Just remember: pricing changes still need to meet the valuation regulations with U.S. Customs and Border Protection (CBP).
-Will you need to increase your customs bond?
The smallest customs bond an importer can hold is $50,000. That used to be enough for many importers to cover generally 10% of the duties and taxes you expect to pay CBP.
Unfortunately, as many importers from China are learning, a 25% tariff on products can quickly exceed your bond amount. And bond insufficiency can shut down all your imports while resulting in delays and added expenses.
To help avoid bond insufficiency, consider any increased duty amounts in advance of your next bond renewal period. And don’t wait to do this until the last minute, because raising your customs bond with your surety company can take up to four weeks.
-Do you re-export goods brought into the U.S.?
Duty drawback programs can’t be used by every importer. But if you can take advantage of them, they can result in big savings for your company.
In fact, you can get back 99% of certain import duties, taxes, and fees on imported goods that you re-export out of the U.S. Just be aware that you still need to pay the duties up front. And you might need to wait up to two years to get your refund.
-Are your product classifications current and accurate?
With potential tariffs looming, consider reviewing your product classifications and make sure they’re accurate. If you find an issue, discuss it with your broker or customs counsel to discuss how you can properly rectify the issue, and avoid penalties from doing it incorrectly.
And while we’re on the topic of product classifications, never change them to evade tariffs. CBP will be on the lookout for this kind of activity, and the penalties for noncompliance can be steep.
-Do you have the support you need?
Changing your customs brokers may not sound appealing, but ensuring they provide all the services you need to stay compliant should be your top priority when working with them.
Your provider should help make sure you pay the appropriate duty rates for your products. And they should have people and services available globally to support your freight wherever it is located throughout the world.
Also, consider simplifying your support by working with one provider that offers not only customs brokerage and trade compliance services but also global ocean and air freight logistics services.
If you only employ one strategy…
Discuss your import strategy with your customs attorney or customs compliance expert. Bringing in specialized expertise is the most effective way to analyze how these tariffs could affect your products, your supply chain, and your business.
If you don’t yet have a customs broker who can meet all your needs in today’s changing environment, consider C.H. Robinson’s customs compliance services. With over 100 licensed customs brokers in North America, and a Trusted Advisor® approach, our experts are ready to help.