International trade continues to change significantly leaving many companies wondering what to anticipate for shipping in years to come

 

International trade has received an unprecedented level of attention over the past year with change and uncertainty keeping it at center stage. Normally a quiet, behind the scenes aspect of the American experience, trade policy has regularly grabbed headlines in newspapers, cable news and the talk show circuit.  Those of us who work in this arena on a daily basis know the importance of international trade, but rarely is the general public is so in tune with our industry. Who would have thought that trade policy would ever be linked to immigration policy? That we would be having many discussions with our closest allies and adversaries alike regarding fairness and reciprocation?

Early last year, Section 232 tariffs were assessed against steel and aluminum products from nearly all countries, exemptions for the EU, NAFTA countries, and other allies were discussed and eventually rejected. Some countries struck back with retaliatory tariffs on U.S. exports, many of which impacted agricultural products.  Now, Canada and Mexico have received their exemptions as we toil through with a new trade agreement: USMCA as a replacement for NAFTA.

Garnering the most attention are the additional Section 301 tariffs levied on imports from China. These additional tariffs were implemented over the course of nine months in three rounds. Currently, the 25 percent additional tariffs cover roughly half of all goods imported from China. Tariffs covering the other half were on track for a late July implementation, until it was recently announced the implementation had been deferred. President Trump and President Xi at the G-20 Conference agreed to restart trade negotiations; China compromising to resume purchases of more U.S. agriculture goods with the U.S. lifting a ban on sales to Chinese tech giant, Huawei. Five lists of exclusions to these tariffs have been released and there will be more to follow. These exclusions for the most part are limited to very specific products which makes it difficult to identify goods which are eligible.

Both Turkey and India lost their long held preferential tariff treatment afforded by the GSP program. Turkey’s removal from the program was chalked up to their expanding economy which precluded their continued eligibility. India, on the other hand, lost eligibility due to a perceived pattern of unfair trade practices against U.S. companies. Countries losing GSP eligibility is to be expected due to the nature and stated aim of the program, but these moves added to the uncertainty importers are already facing.

Trade and immigration policies intersected when the U.S. announced that sliding tariffs, starting at 5 percent continuing to a ceiling of 25 percent, would be assessed on Mexican products – unless we could come to an agreement reducing the flow of migrants heading to our southern border. Thankfully, an agreement was reached just days before the scheduled implementation. Mexico followed this by being the first country to ratify the USMCA agreement.

The past year has also seen a mix of new trade initiatives. A new free trade agreement was proposed for the U.S. and the E.U., meanwhile both sides have threatened new tariffs to retaliate for government subsidies in the aircraft industry. In November, the President will receive a much anticipated report on proposed Sec 232 tariffs for automotive products. There has been speculation of a possible new trade agreement with England once Brexit has occurred. The generally popular NAFTA agreement remains in force as USMCA awaits ratification by the US and Canada. Though adoption of USMCA is not a certainty there is probably enough political traction to get this agreement approved.

We have discussed a possible new trade agreement with England once Brexit has occurred. The generally popular NAFTA agreement remains in force as USMCA awaits ratification by the US and Canada. Though adoption of USMCA is not a certainty there is probably enough political traction to get this agreement approved.

The item most concerning to U.S. importers may be the unprecedented number of applications for relief under ADD/CVD cases. Some cases are nearing implementation and the pipeline is cluttered with new cases at various stages of the approval process. The duty rates proposed for these cases can be disquieting as with the case on mattresses where the added duties are expected to run as high as 1,731%. In addition to mattresses, active investigations cover commodities such as file cabinets, stainless steel kegs, nails and agricultural products among others.

Tariff changes have been announced and then implemented or rescinded at an accelerated pace. Updates and changes can occur at the last minute leaving Customs, importers and vendors scrambling to adjust. Subsequently importers and their customers have found themselves in uncertain times when it comes to pricing and planning. Ocean carriers are considering changes to their sailing lanes as buyers move away from China in favor of countries not effected by the Section 301 tariffs. Even after the tariff situation dissipates, there will be permanent changes in supply chains as new suppliers and countries are brought into the mix.

One thing that seems certain is that the trade landscape will continue to see major and rapid changes.  Now more than ever, importers need to stay current on trade issues that affect their businesses.  At CVI, we work hard to keep our clients informed and forewarned on major trade issues. We encourage all our customers to watch for our alerts and contact us when they have questions. These are not the times to go at it alone.

For more information, please email Sam McClure, smcclure@cvinternational.com.

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