Trump on Trade/NAFTA’s Future – Part II

Dear Friends,

It is being widely reported this afternoon that President Trump is considering imposing a 20% tax on imports from Mexico in order to pay for the border wall (which would mean that U.S. companies/consumers will be paying for the wall, not Mexico. . . ). 

While nothing is imminent, this is a further example of how the rhetoric on renegotiating/withdrawing from NAFTA is being ratcheted-up.  Any company with meaningful investments in Mexico, or that otherwise imports meaningful volumes from Mexico, should be modeling different scenarios and developing contingency plans.  We are assisting numerous clients with this and would be happy to discuss the issues with you further.  If you would like to do so, please let me know.

Best regards,
Ted

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Trump on Trade/NAFTA’s Future

Dear Friends,

Earlier today, I had the privilege of speaking at a seminar hosted by my colleagues in Toronto entitled “Trade and Business Strategies for a Post-Globalization World – CETA, Brexit, NAFTA and Preserving Cross Border Data Flows.”  I spoke on a panel entitled “NAFTA’s Prospects and Preserving its Benefits” with colleagues from the US, Canada and Mexico.  I thought that you might find the slides from this panel to be of interest.

If you have any questions about the future of NAFTA, or trade in general, in these interesting times, please let me know.  Also, please check out our “Trump on Trade” webpage for further updates.

Best regards,
Ted

 

Miscellaneous Tariff Bills — Hope Becoming Reality

Dear Friends,

As you may have heard, the long awaited renewal of the Miscellaneous Tariff Bill (MTB) process is one step away from becoming reality.  The House passed the American Manufacturing Competitiveness Act by a vote of 415-2, and the Senate unanimously passed the same legislation on May 10th.  The President is expected to sign the bill shortly.

This legislation is uncommonly popular, and uncommonly bipartisan—and with good reason. The benefit here is a potential boon to downstream U.S. manufacturers, with as much as $500,000 in annual duty savings for each covered product.  Because benefits are limited to products with no or limited domestic production, there is little political downside to granting such relief.

What you need to know.

In the short term, there will be just one opportunity to obtain temporary duty suspension via the MTB process—a 60-day window this Fall during which a petition can be filed with the USITC.  (The next opportunity to take advantage of the MTB process won’t be until 2019.)  As a result, the time to begin preparing is now.

The main objective at this point should be to identify the products you import and pay duties on which either (1) are not manufactured in the United States or (2) are not manufactured in sufficient quantities to fulfill your sourcing requirements.  The $500,000 limitation on duty savings is calculated on a per article basis.  Consequently, to maximize duty benefits, the goal is to identify potentially eligible articles by as narrow a description as possible.

If you are interested in submitting a petition, please let us know.  We have extensive experience with the MTB process, and would be glad to help.

Best regards,

Ted

Dear Friends,

Further to the below, we are writing to make sure you are aware of an additional duty-savings opportunity that has been made available under the recently-renewed Generalized System of Preferences (“GSP”) program.

As you know, GSP is a U.S. trade preference program that affords certain articles produced in specified developing countries preferential tariff treatment upon importation into the United States.  As part of its annual product review for 2015, the United States Trade Representative (“USTR”) announced that it will accept petitions seeking to add articles to the GSP program (see the attached Federal Register notice). This is a significant opportunity because the exclusion on certain articles from the GSP program was recently lifted by statute.  Thus, this is the first time that certain articles are eligible under the program.

More specifically, importers of various travel goods classified under heading 4202, HTS (e.g., handbags, briefcases, backpacks, suitcases, sports bags, camera cases, etc.) now have the opportunity to petition the USTR to have such goods designated as eligible for GSP program benefits (i.e., duty-free treatment for such goods imported into the United States that are produced in specified developing countries).  Because these travel goods often carry high duty rates (up to 20% ad valorem), the potential savings opportunities at issue here are significant.  Any company importing articles classified in heading 4202 from a GSP-eligible country should country should consider submitting a petition.

Petitions for inclusion of the abovementioned products in the GSP program must be submitted by October 16, 2015.

If you have any questions about this opportunity, or would like any assistance identifying products that may be eligible, please let us know.

Best regards,

Ted

CBP Offers Classification and Value Assistance to Exporters

Dear Friends, 

U.S. Customs and Border Protection (“CBP”) has a notice in today’s Federal Register that we thought you might to be of interest.  The notice, which is entitled, “Notice of Opportunity and Procedures to Request Assistance on Tariff Classification and Customs Valuation Treatment by Other Customs Administrations Affecting United States Exports” (copy available here), is aimed at companies that run into tariff classification and/or customs valuation disputes with foreign customs administrations.  

In short, the notice reminds the public that the rules for tariff classification and customs valuation are based on international/harmonized standards, there are international forums where questions/disputes as to how these rules should be applied can be addressed (e.g., Harmonized System Committee and the Technical Committee on Customs Valuation), and the United States government actively participates in these forums.  Accordingly, CBP encourages U.S. exporters who run into tariff classification and/or customs valuation issues in foreign countries (e.g., a country classifying a product differently than the U.S. exporter believes to be correct; a country requiring an impermissibly high customs value, etc.) to raise these issues with CBP.   CBP will review the issue, and if it agrees with the U.S. exporter’s position, it will intercede with the foreign government on the company’s behalf. 

This is a well-intentioned gesture by CBP.  As any company which has experienced this sort of dispute knows, it could be quite helpful to have CBP on your side.  The same argument advanced to a foreign customs administration may carry more weight if it came from CBP, than if it came from the importer/exporter alone.  That said, it will be interesting to see if CBP will be able to respond to requests for assistance in a timely manner.  The notice states that CBP will “endeavor to provide an initial response” within 60 days.  Given the current backlog on requests for rulings on imports (CBP’s primary mission), that seems to be an ambitious target.  Nevertheless, any company that runs into a customs-related dispute with a foreign customs administration should keep this notice in mind as another potential avenue to resolve it. 

We hope this is helpful.  If you have any questions, please let us know. 

Best regards,
Ted

Miscellaneous Tariff Bills — A Glimmer of Hope?

Dear Friends:

We are writing to let you know that there is renewed hope that Congress will restart the tariff suspension bill process.  As many of you know well, the tariff suspension bill process, which used to be a mainstay, has languished for the past several years after being caught up in the debate over “earmarks”.

Bipartisan legislation was recently introduced to change the tariff suspension process.  The bill, introduced by Senators Rob Portman (R-Ohio) and Claire McCaskill (D- Mo.), would enable U.S. companies to directly petition the U.S. International Trade Commission (ITC) for duty suspension measures.  Upon approval by the ITC, the tariff suspension measure would then be sent to Congress for final approval.  Traditionally, companies have had to find a member of Congress to sponsor the proposed duty suspension measure as a stand-alone bill, in addition to it being vetted by the ITC.  The proposed legislation, if passed, would streamline the process for U.S. companies and potentially help to alleviate the concern surrounding the introduction of Congressional “earmarks”.

While this is a hopeful sign, similar bills were proposed in 2012 and 2013 and did not make it out of the Senate Finance Committee.  With the new Congress, hope springs eternal.

Tariff suspension bills can provide significant benefit to companies that import dutiable items that cannot be sourced here in the United States, and is something most companies should consider.  If you would like to discuss the possibility of seeking tariff suspension on a given article, or the process more generally, please let us know.

Best regards,

Ted

Potential Duty Savings Opportunity

Dear Friends:

I am writing to let you know about a favorable tariff classification ruling we recently obtained from U.S. Customs and Border Protection for one of our clients that may be of benefit to you.

U.S. Customs determined that certain surgical microscopes satisfy the legal requirements of a special classification provision set out in Chapter 98 of the HTS, and are thus eligible for duty-free treatment upon importation into the United States.  The provision at issue, subheading 9817.00.96, HTS, provides in relevant part for “articles specially designed or adapted for use or benefit of the blind or other physically or mentally handicapped persons.”

In short, we were successful in establishing that the microscopes, which are used to perform ear, nose & throat (ENT) and dental surgery, are specially-designed for the benefit of “physically handicapped persons,” a term defined in the tariff as “any person suffering from a permanent or chronic physical or mental impairment which substantially limits one or more major life activities . . . .”  U.S. Customs agreed that the microscopes are specially-designed and principally used for the benefit of the handicapped (specifically, persons suffering permanent/chronic physical conditions that require surgery), and that, if left untreated, those medical conditions substantially limit a person’s ability to hear, breathe, sleep and/or eat.

This special classification provision has been interpreted broadly by U.S. Customs over the years.   As a result, if you import dutiable healthcare products, it may be worthwhile considering whether any would potentially qualify for duty-free treatment under subheading 9817.00.96, HTS (i.e., whether they are specially-designed for the benefit of persons suffering from permanent/chronic and substantially life-limiting conditions).

We have a great deal of experience advising clients on tariff classification issues.  If you have any questions about the ruling discussed above, or if you would like to discuss whether any of your products can potentially qualify for duty-free treatment, please let us know.

Best regards,

Ted