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Is Your Supply Chain Prepared for Potential U.S. Tariffs on EU Goods?

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Is Your Supply Chain Prepared for Potential U.S. Tariffs on EU Goods?

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.

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Ben Bidwell serves as the Director of U.S. Customs at  C.H. Robinson

2019 Tariff Changes: Expectations and Supply Chain Strategies

If you’re currently navigating the impact of tariff changes as well as the potentially additional billions of dollars’ worth of tariffs on Chinese goods, we have the information you need to understand what’s changing—and just as important—what you can do about it.

What is a tariff?

In the United States, a tariff is a tax on imported goods. Tariffs are a major source of revenue and can promote/encourage domestic products.

How do tariffs work for section 301?

Tariffs can make trade with another country more costly. There are several types of tariffs, each with their own rules, but section 301 tariffs are based on a percentage of the item’s value. This is called an ad valorem tariff.

For example, plastic eyeglass cases in List 3 fall under the Harmonized Tariff Number 4202.32 1000, with the general rate of duty: 12.1 cent per kilo and 4.6% based on value. Now, with the Section 301 duties added in, there’s an additional 25% charge on top of the others. This simple product, which sells for less than $10 USD could be charged 29.6% plus 12.1 cents per kilo in tariffs.

What tariffs are changing?

Since we’ve previously covered the tariff changes from 2018, I won’t go into detail about them here. Instead, let’s focus on the most recent Section 301 trade actions that have taken place. There have been three major announcements regarding tariffs with China:

Section 301 List 3 tariffs

On May 9, 2019, the United States Trade Representative (USTR) formally announced Section 301 List 3 tariffs would increase to 25% from 10%, effective Friday, May 10, 2019. However, unique to how the Section 301 tariffs were previously implemented, this increase added some specific date criteria. The 10% tariff would still apply to goods exported prior to May 10, 2019, and entered into the United States before June 15, 2019. This was originally noted by the USTR as June 1, 2019, but updated on May 31 to extend an additional 15 days.

Proposed List 4 tariffs

In another major announcement, on May 13, 2019, the USTR published a notice requesting comments on a proposed List 4. The proposed fourth list of tariffs would impact about $300 billion USD in Chinese origin goods at a 25% tariff rate. This could go into effect as soon as late July or August 2019. If List 4 does go into effect, the Section 301 tariffs would cover over 96% of all U.S. imports from China. Public comments regarding List 4 are due into the USTR by June 17, 2019, when a public hearing will commence.

China’s tariffs on U.S. goods

These changes and proposals have not gone unnoticed by China. On May 13, 2019, the Chinese Government announced they will raise tariffs on $60 billion worth of U.S. goods. These increases in tariffs affect the three retaliatory tariff lists put into place by China in 2018, and raise the initial tariffs rates, depending upon the harmonized tariff code 10%, 20%, or 25%.

What do tariff changes mean for your supply chain?

At C.H. Robinson, we strive to be your Trusted Advisor® experts by providing you with information on matters affecting your supply chain. By leveraging data from 18 million shipments a year, we are able to deliver an information advantage to the over 200,000 companies that conduct business on our global platform, creating better outcomes for our customers, carriers, and employees.

That’s why we’ve recorded our top transportation, customs, and trade policy experts explaining the ongoing tariff changes. The discussion will help you understand:

-The current state of tariffs

-The impact on global and domestic transportation strategies

-What you can do right now

Watch the discussion and consider how you will manage potential disruptions to your supply chain as tariff developments continue to unfold.

Next steps

Done watching the video? If you would like more information or have questions about the information covered in the recording, please connect with one of our trade experts.

This blog originally appeared on chrobinson.com. Republished with permission.

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Realign Your Trade Compliance Program with a Midyear Review

The complexities of importing and exporting goods in the United States means it’s easy to overlook process changes and forget to make updates in a timely manner. However, if not caught quickly, outdated information or imprecise processes can add unnecessary fees and penalties. If left to accrue over the course of a full year, these costs can be staggering.

That’s why I recommend a midyear customs review. If something is off base with your customs compliance program you can rapidly realign as needed. Use C.H. Robinson’s comprehensive checklist to guide your own midyear customs process review.

Midyear customs clearance checklist

1. Review customs broker powers of attorney

Revisit powers of attorney (POAs) and revoke any from U.S. customs brokers with whom you no longer wish to work. Remember, any POA you extend should have an expiration period, providing a natural time to review. If you aren’t sure of existing POAs, you can see all U.S. customs brokers transacting business on your behalf by requesting your Importer Trade Activity (ITRAC) data (see #11)

2. Update names and addresses on file with U.S. Customs

U.S. Customs and Border Protection (CBP) uses contact information from CBP Form 5106 to communicate with Importers of Record. If you have recently moved, or have not reviewed the information listed on CBP Form 5106 in a while, re-validate the information you have on file so you will receive all pertinent and time-sensitive correspondences the CBP sends.

3. Ensure bond amount is sufficient

If your import activity has changed, or you anticipate a large increase in activity during the remaining half of the year, your bond may need updating. CBP can determine your bond is insufficient and may require you to increase your bond amount. A midyear review and update is a proactive move.

4. Consider changing listing multiple principals on the same bond

Having multiple entities on one bond can bring cost savings. But be sure to decide if the risks are worth the reward. When sharing a bond, each entity shares liability if CBP issues a demand against the bond. In addition, if any entities terminate the bond, this can disrupt the other entities within the bond.

5. Check customs broker instructions

Review and document any customs broker instructions you send to U.S. customs brokers regularly—from Harmonized Tariff Schedule (HTS) classification rules and related party verification instructions to anti-dumping/countervailing duty instructions—to ensure your customs broker declares entities to the CBP according to your wishes.

6. Request updated certificates of origin

Be proactive with foreign suppliers and obtain updated annual blanket certificates of origin (COO) for any program in which you’d like to claim preference. And provide any updated COOs to your U.S. customs broker. Not obtaining COOs in a timely fashion may lead to unnecessary annual duty costs.

7. Update free trade agreement instructions

Revise any instructions pertaining to free trade agreements (FTAs) so your U.S. customs broker has proper direction about how you would like to file entries that may be eligible for FTAs.

8. Obtain your manufacturer’s affidavits

If you utilize a U.S. goods return program, found under Heading 9801, be sure you have obtained your manufacturer’s affidavits for the rest of the year. Share these affidavits with your U.S. customs broker and record them within any customs broker instructions.

9. Review anti-dumping/countervailing duties products

The CBP can investigate any potential anti-dumping/countervailing duties (AD/CVD) evasion allegations. Accurate case numbers, rates, etc. are critical for reporting upon entry. Even if you are disclaiming AD/CVD, document your product details internally, explaining why your product does not fall within the scope of the order.

10. Provide reconciliation flagging instructions to U.S. customs broker

If you are a reconciliation participant, approved by CBP, flagging of entries is the responsibility of the importer. Now is the time to send your U.S. customs broker written direction with any flagging instructions you would like established or changed.

11. Request import activity records from CBP

ITRAC provides a wealth of information you can use to create or improve your import compliance program. Likely, you’ll need tools, like C.H. Robinson’s Global Trade Reports®, to transform the raw ITRAC data into user-friendly dashboards and reports.

12. Sign up for the ACE Portal

The ACE Secure Data Portal is a powerful way to manage trade compliance programs. This powerful tool enables you to receive paperless notifications from CBP, monitor your brokers, audit entries in real time, and much more.

13. Request export activity data

Similar to ITRAC data for import activity, request your Electronic Export Information (EEI) from the Census Bureau, Foreign Trade Division. If you are the filer in the Automated Export System (AES) using the ACE Export Portal, you can review your EEI on a regular basis.

14. Check U.S. Import HTS Classification and Export Classification

Review and communicate any updates to your HTS Classification Database and your Export Schedule B Number to proper stakeholders—both internally and externally.

15. Reduce liability with marine cargo insurance

Steamship lines and air cargo providers have limited legal and financial responsibility for international cargo. Marine cargo insurance plans can reduce your company’s financial exposure and bring new efficiencies.

16. Protect trademark and trade names

Make sure the CBP has any and all of your trademarks and trade names protected and recorded. This allows CBP to help you combat potential counterfeit products or infringement.

17. Request manifest confidential treatment

You can request confidential treatment of inward and outward manifest information. However, note that there are mandatory biannual renewal requirements. In addition, account for all possible variations of names within your request.

18. Review your denied party screening program

Look at which parties you are screening, and how often. This can ensure your program is appropriate for your current business model and bring potential risks to your attention.

19. Perform internal and external training

Regularly schedule time to ensure adequate training is happening with appropriate stakeholders. This keeps all parties, especially new employees, up to date with changes.

20. Address priority trade issues

Be sure that your compliance program addresses each one of the CBP’s initiatives to mitigate the risks of priority trade issues.

Smooth customs clearance doesn’t just happen

Careful planning and regular reviews of your customs processes are critical components to a strong trade compliance program.

If a midyear review seems unfeasible or this list seems daunting to conduct all at once, consider bringing in an outside expert like C.H. Robinson to guide you through the process. The most important part is to ensure you review, update, and communicate any changes to these areas of your compliance program on a consistent basis.

In an Unclear International Trade Environment, Tariff Forecasting Provides Answers

If there’s one thing we can say with a fair amount of certainty amid the rapidly shifting priorities of the U.S. government’s current administration, it’s that tariffs appear to be their preferred international trade tactic. Though customs duties have always been a part of any worldwide shipping equation, their renewed prominence has the potential to create serious (and expensive) headaches for companies that are not proactively assessing their supply chains and goods classifications.

To combat this, cut through the confusion, and stay ahead of changing customs regulations, perceptive businesses are turning to a new data-driven analysis method offered by some logistics providers: tariff forecasting.

How tariff forecasting works

As the U.S. government announces lists of new tariffs or changes to existing tariffs, the delay between announcement and implementation offers a window of opportunity for immediate action. Beyond merely issuing client advisories detailing the impending impacts, savvy providers use historical shipment data to predict what their customers’ actual cost ramifications will be once the new or altered tariffs come into force.

Essentially, providers will analyze what shippers imported in the past six, twelve, or eighteen months to calculate what the total duty would have been on that historical cargo, had the approaching tariffs been in place during those times. Then, using information about upcoming shipments and business intelligence about a company’s importing patterns and cadences, providers can automatically project the additional costs that newly announced tariff changes will impose on importers.

Understanding future customs impacts today

When customs brokerage and trade compliance services originate from the same company that also offers global air and ocean freight logistics services—like with C.H. Robinson—customers benefit from their provider’s ability to synthesize that information and provide innovative insights.

As a result, importers gain true visibility to their incremental costs, eliminating the manual guesswork and uncertainty that changing tariffs can create. With concrete data on how changed tariffs would affect their bottom line, shippers are in a better position to reallocate resources or shift strategies before they experience impacts. Rather than merely react, businesses that use tariff forecasting open new possibilities and solutions for taking charge of the international trade situation, mitigating consequences, and preserving their margins.

But more than just easily highlighting anticipated duties on a shipper’s impending imports, forecasting offers new opportunities for businesses to rethink their broad importing strategy.

A chance to reconsider customs importing strategies

Because tariffs apply to particular countries, classes, and commodities, seeing duties’ specific impacts can spur new conversations about the best ways to declare imports. This often involves revisiting the basics of customs enforcement and asking holistic questions that may have previously slipped under the radar: Do our goods have the right tariff number/classification, or are they misclassified? Are our imports’ countries of origin correct? Are we properly declaring value?

With the rise in tariffs bringing renewed scrutiny to these compliance considerations, revisiting the customs process may suggest fresh ways for companies to keep their costs down. Here, providers’ modeling can also offer perspective on what would be the current or future impacts of changing strategies, helping importers project and evaluate the consequences of different courses of action to adapt to tariff volatility.

Additional opportunities around exclusions

Providers’ access to importers’ shipment information also allows them to provide valuable services surrounding tariff exclusions.

When the U.S. government announces that currently active tariffs will be reduced or suspended, providers can “invert” their tariff forecasting, using their customers’ historical information to quickly locate past shipments that were charged duties but—under upcoming cancellations—would not have been had they shipped later. With this data, providers’ local experts can approach U.S. Customs on their customers’ behalf to request refunds, saving importers time and money.

That means whether tariffs are coming or going, good logistics providers, like C.H. Robinson, proactively combine their experience and scale with the vast amounts of customs data they submit for their customers to create an information advantage that helps deliver better outcomes.

Staying prepared in a volatile trade environment

With all the politics and personality that surrounds U.S. tariffs and economic policy, seeing through the rhetoric and determining concrete impacts can be a real challenge. But doing so is essential for companies to remain in compliance and avoid unexpected, unpleasant increases in costs. Tariff forecasting is a proactive and automatic way some providers leverage their routine business with customers to provide additional insights and value-added services that keep companies ahead of changes, putting importers in better positions to make crucial decisions.

In an unclear global trade environment, it’s a powerful tool that can provide shippers some much-needed, tangible reliability.

Customs and tariff issues for shipments of export cargo and import cargo in international trade.

China, Tariffs, and Trade Policy—What’s Going On?

If changes in trade policy have been giving you and your team whiplash lately, you’re not alone. A lot has happened recently on the global stage, and there is a lot to sift through. We compiled some of the top concerns we hear from customers. Read this summary, and consider how you will manage potential disruptions to your supply chain as developments continue to unfold.

What you can do now

Identify risks. US Customs and Border Protection (CBP) will be looking for misclassification and valuation issues, and you can expect increased oversight. Go to CBP’s website to read guidance on the Customs audit/survey, Centers of Excellence (CEE) for Base Metals, Customs valuation encyclopedia, tariff classification, Section 232 tariffs on aluminum and steel, and how to receive and respond to CBP forms 28 (request for information) and 29 (Notice of Action) in ACE.

Avoid potential delays in the import process. With the tariff changes, it may take more time for importers and customs brokers to process clearances. To avoid any unnecessary delays, US exporters should ensure the accurate Harmonized Tariff Classification (HTS) codes are communicated to importers in China before shipment departure.

In the actual process to get goods entered to customs, items involving 232 steel/aluminum should be considered a priority. To avoid delay, CBP has provided instructions in CSMS#18-000240 for entering goods into the US. In addition to this process, importers should review tariff classifications for parts that have steel and aluminum components to ensure accuracy.

Then, move on to reviewing classifications for Section 301 items. Tariff classification is the driver of all safeguard tariffs as well as partner government agency requirements. Ensuring that your products are classified properly according to the US Harmonized Tariff Schedule will be key to understanding your potential exposure and fielding any inquiries from CBP.

Additionally, be sure to review your customs bond with your broker. If these tariffs impact any of your product, CBP may require an increase in bond amount, and the surety may require collateral as part of that required increase.

Strengthen potential delays in the import process. Keep your personnel trained in changes to regulations. We provide full-day seminars to help you stay abreast of the latest information.

There is a lot of material here and much to digest.  The above material is very specific, and you should always discuss with your customs broker, legal counsel, and/or CBP.  This blog post is not meant to cover every aspect and provision of the above topics.

Ben Bidwell is director of global forwarding customs at CH Robinson. Readers are invited to find out more about the company’s trade policy group, to register for one of its customs seminars, and to sign up for Client Advisories.

Smoother customs entry for shipments of export cargo and import cargo in international trade.

Countdown to Black Friday: Two Tips to Help Ease the Customs Process

As consumers eagerly anticipate the Black Friday deals, shipments of the products they can’t wait to purchase are still making their way to store shelves. But before they get to retail locations, imported goods need to clear customs.

There is an increase in shipments by land, air, and sea leading up to the Black Friday shopping holiday. With that comes increased importance to make sure your customs broker is staffed accordingly and able to handle the surge in volume. What’s more, this is also the time of year that many folks begin taking longer stretches of time out of the office to spend time with friends and family, making it even more critical to stay on top of your supply chain plan.

Tip number one for importers: Talk to your customs broker sooner rather than later. Make sure your forecast for the weeks leading up to Black Friday is understood. In addition, ensure they have all of the information needed to make the entry as smooth as possible, especially if your commodity has new Participating Government Agency (PGA) requirements in the Automated Commercial Environment (ACE). This is particularly important if you are importing a new commodity.

Tip number two for importers: If you are importing new commodities, make certain you have an assigned tariff number and understand all requirements that go along with importing that commodity. For example, you don’t want to be the importer who decides to bring in CD/DVD players at the last minute and then wonder why your broker needs U.S. Food and Drug Administration (FDA) information and registration numbers. That little laser in the disc reader is all it takes for the FDA to govern that commodity.

Ben Bidwell is Director of U.S. Customs at C.H. Robinson. Ben joined C.H. Robinson in 2004 and became a Licensed Customs House Broker in 2007. Ben has consulted and resolved a wide range of Customs disputes for clients involving classification, country of origin, marking violations, seizures, and protests and for products ranging from hospitality goods, automobile tires, apparel and textiles, toys, and other consumer retail goods.

Editor’s note: As one of the United States’ biggest single shopping days of the year nears—and the unofficial start of the U.S. consumer holiday shopping season begins—we’ll be highlighting several areas of logistics that are integral in making Black Friday possible. The next in the series will appear on Sunday, November 20.