Next Steps on China Tariffs

Transcription

1 Next Steps on China Tariffs

2 Current State of Play 2

3 US Section 301 tariff measures on Chinese products List 1 Affected products Effective date Tariff rate Exclusion process Products that generally fall into the technology sector and cut across the aerospace, information and communications technology, robotics, industrial machinery, and automotive industries (818 Tariff Lines) July 6, % on $34 billion annual trade value Exclusion instructions published July 11, Deadline for submission October 9, 2018 List 2 Products principally identified under China s Made in China 2025 industrial policy (284 Tariff lines) TBD 25% on $16 billion annual trade value Currently in comment period. Public hearing July 25. Comments due by July 31. Exclusion process TBD. List 3 Much broader range of products including seafood, minerals, chemicals, consumer items (shampoo, soap, handbags, luggage, gloves)and paper, furniture, auto and bicycle parts (6031 Tariff lines) TBD 10% on $200 billion annual trade value Currently in comment period. Public hearing August 20. Exclusion process TBD. 3

4 What Can Traders Do? 4

5 What s the next step? Tariff impact modeling The growing US list of impacted products and the quick-changing patchwork of retaliatory measures by multiple jurisdictions make it imperative for companies to assess the potential impact of the current tariffs on their supply chains For the US and many jurisdictions implementing retaliatory measures, we can apply data analytic models to real-time import data in order to drive enhanced supply chain visibility and assess likely tariff impact across multiple jurisdictions Effective Impact modeling informs the process of considering the viability of the other alternatives that may be leveraged to mitigate tariff impact 5

6 Mitigation planning Tariff classification assessment and planning All current and proposed tariff measures are driven off tariff classifications Many importers rely on third party service providers to determine their tariff classifications and have not routinely reviewed their correctness Many basket provisions covering products not otherwise specifically provided for, which are often used indiscriminately, are covered by the Section 301 list Tariff engineering, the process by which the correct tariff classification attendant to given products can be altered by effecting changes in the character of the product. 6

7 Mitigation planning Valuation planning All current and proposed tariffs are assessed on the basis of declared customs value, so a reduction in customs value will result in lower tariff exposure Transfer Pricing analysis can help support restructuring of intercompany prices which may afford a reductions to customs value while complying with OECD guidelines Royalties and other intercompany agreements can sometimes be structured to avoid unintentional capture of payments streams in customs value First sale for export valuation can be an important tool to leverage where imports are the result of a multi-tiered chain of sales prior to import in the US. This valuation methodology can enable the sue of a sale price in an earlier sale transaction as the basis of customs value for imported products 7

8 Mitigation planning Origin planning Section 301 tariffs specifically target Chinese-origin goods; identical products from other countries will not attract the tariffs More robust manufacturing operations can often be adjusted to produce complete knockdown (CKDs) assemblies which can be further manufactured in operations conducted in second jurisdictions outside China Where subsequent production operations are conducted in a second jurisdiction before importing into the US, the second country of production may confer origin provided the products undergo a substantial transformation in the second (non- China) Where the products ultimately imported to US are not of China origin, that tariffs are not applicable Ready and compelling support for the alternate origin must be developed to ensure the viability of this solution 8

9 Mitigation planning Alternative sourcing Some products may easily lend themselves to dual or alternative sourcing, whereby manufacturing of products intended for US distribution can be directed to non-china productions locations Where products shipped to US are not of China origin, they will avoid Section 301 tariffs regardless of whether the supplier entity is a Chinese entity Such alternative sourcing undertakings should take into account freight and logistics costs. 9

10 How to be prepared? Actionable items How should the trade community react? - Increase visibility on trade lanes - Determine applicability - Seek specific exclusions / exemptions, if available - Contemplate alternative sourcing / supply strategy - Seek other duty saving opportunities How can s Customs and International Trade support? - Help obtain company s import/export data and utilize data analytics tools to gain detailed insights - Review import products, assess applicability and implications based on new tariff measures - Conduct alternative supply analysis from a customs and duty perspective - Perform feasibility study and support in implementation of US duty planning strategies 10

11 Thank you! Christine Berghofer (646) Tom Kukanza (513) s Customs and International Trade Practice All rights reserved. refers to the U.S. member firm, and may sometimes refer to the network. Each member firm is a separate legal entity. Please see for further details.