U.S. Trade Policy Webinar. August 9, PDF Free Download

U.S. Trade Policy Webinar August 9, 2018

Webinar Agenda Welcome / Introduction Kurt Bauer, President & CEO Wisconsin Manufacturers & Commerce Congressional Briefing U.S. Sen. Ron Johnson (R-Wisconsin) Economic Impact of Tariffs John Murphy, Senior Vice President for International Policy U.S. Chamber of Commerce What are Businesses Doing to Stay Competitive? Jeff Jorge, Principal / Firm Leader International Services Baker Tilly

U.S. Sen. Ron Johnson (R-Wisconsin)

John Murphy Senior Vice President for International Policy U.S. Chamber of Commerce

Update on Trade and Tariffs John Murphy Senior Vice President for International Policy U.S. Chamber of Commerce

Trump Administration on Trade 1) Sec. 232 tariffs on steel and aluminum 2) Sec. 232 tariffs on autos, auto parts 3) Sec. 301 tariffs on Chinese imports 4) NAFTA modernization

1) Sec. 232 Tariffs on Steel, Aluminum 25% on steel, 10% on aluminum Steel prices up ~50% since 1/1/18; now 50% higher than in Europe Aluminum prices up 10% - 130% since 1/1/18 Foreign retaliation on $40 billion of U.S. exports Product exclusion process is a mess

2) Sec. 232 Tariffs on Autos, Auto Parts Launching investigation, 20%-25% tariff threatened for August or September (?) $350 billion in trade Every state an auto state >600,000 U.S. jobs at risk

3) Sec. 301 Tariffs on Chinese Imports Broad agreement on China challenge Broad opposition to tariffs as response 25% tariff on $34 billion of imports on 7/6 Another $16 billion soon; $200 billion more in Sept.? A better way? International coalition, WTO actions, new trade pacts (like TPP) in Asia

4) NAFTA Modernization: The Stakes JOBS: 14 million American jobs MANUFACTURING: More U.S.-made manufactured goods than next 10 largest markets combined AGRICULTURE: A bonanza for American farmers and ranchers, with exports quadrupling

4) NAFTA Modernization Areas ripe for modernization Digital Commerce Intellectual Property Dairy access

4) NAFTA Modernization: Poison Pills Enforcement Sunset Clause Auto Rules of Origin Uncertainty, higher costs, forcing jobs and production offshore

Chamber Actions Highlight the harm of tariffs in media, federation www.thewrongapproach.com Rally Governors, Congress to press White House Legislative options Tariffs are taxes: They hurt families, farmers, workers

Jeff Jorge Principal / Firm Leader International Services Baker Tilly

Surviving a trade war 3.5 proven approaches to address tariff impacts

How many years can the effects of a trade war linger? > 60 years and counting

How many years can the effects of a trade war linger? > 60 years and counting > Proof: Germany and France vs. United States Germany and France: tariffs against U.S. poultry exports U.S. response: tariffs against starch, brandy and light trucks (25 percent)

How you will benefit from today s session > At least one of the items we share should apply and be implemented to resolve your import tariff concerns > Consider strategic options to conducting global trade in a changing socio-political landscape > Learn 3.5 approaches to overcome tariffs and other limitations in conducting cross-border business > Position your company to better address future trade policy shifts

Select alternatives vs. time horizon

Select alternatives vs. time horizon 0.5) Exemption

Select alternatives vs. time horizon 0.5) Exemption 1) Import mosaic

Select alternatives vs. time horizon 0.5) Exemption 1) Import mosaic 2) HTS classification

Select alternatives vs. time horizon 0.5) Exemption 1) Import mosaic 2) HTS classification 3) FTZ

0.5) Seek an exemption Since April 2018:

0.5) Seek an exemption Since April 2018: 25,000 exemptions filed

0.5) Seek an exemption Since April 2018: 25,000 exemptions filed 500 reviewed

0.5) Seek an exemption Since April 2018: 25,000 exemptions filed 500 reviewed 250 accepted

1) Import Mosaic: Strategic view of imported supply chain & outbound exports A. View trade markets as a mosaic; interconnected (U.S.-Mexico, U.S.-Canada, U.S.-Chile, U.S.-Peru )

1) Import Mosaic: Strategic view of imported supply chain & outbound exports A. View trade markets as a mosaic; interconnected (U.S.-Mexico, U.S.-Canada, U.S.-Chile, U.S.-Peru ) B. (New) implications of country of origin C. Strategic and tactical considerations i. Intermediary stops ii. Transformation pre-u.s. arrival iii. Value-added collaborations pre-import

2) HTS Codes Past decisions vs. Future outcomes > Sound familiar? You use the HTS code your company has always used You arbitrarily select your HTS classification Your customs broker assigns the HTS codes to your imports You select the HTS code / classification based on the lowest duty rate You lack a complete list of your imported items, the appropriate code and classification for each > If so, major risk: GRI (General Rules of Interpretation) U.S. International Trade Commission It is the manufacturer s responsibility to accurately classify its own products.

2) HTS Codes Analytics + Experience + Discernment Part analytics, part process and 100 percent experience and discernment.

2) HTS Codes Analytics + Experience + Discernment Example

2) HTS Codes Analytics + Experience + Discernment Example > Chapter 4016.99.1500 Caps, lids, seals, stoppers and other closures Prior to May 22, 2018: 2.7 percent General duty rate applied on imports

2) HTS Codes Analytics + Experience + Discernment Example > Chapter 4016.99.1500 Caps, lids, seals, stoppers and other closures Prior to May 2018: 2.7 percent General duty rate applied on imports

2) HTS Codes Analytics + Experience + Discernment Example > Chapter 4016.99.1500 Caps, lids, seals, stoppers and other closures Prior to May 2018: 2.7 percent General duty rate applied on imports After May 2018: 25 percent Duty rate applied on imports from China

2) HTS Codes Analytics + Experience + Discernment Example

2) HTS Codes Analytics + Experience + Discernment Example > Chapter 3923.50.0000 Stoppers, lids, caps and other closures Prior to May 2018: 5.3 percent General duty rate applied on imports

2) HTS Codes Analytics + Experience + Discernment Example > Chapter 3923.50.0000 Stoppers, lids, caps and other closures Prior to May 2018: 5.3 percent General duty rate applied on imports After May 2018: 5.3 percent Duty rate applied on imports from China

Clarity begets confidence. Directional steps for appropriate analysis and possible reclassification: > Foundation upon the know-how of your product > the flow of goods > the data > Product know-how: break down to the BOM and its 3 C s*: Components, Content and Construction > Analyze parity against known and possible HTS codes > Contrast against GRI enforcements / history, brokerand customs-related data * 3 C s (Components, Content and Construction), in the context of import/export and foreign trade, is a Baker Tilly moniker. All rights reserved.

Data as the gateway to understanding and control > Contrast against GRI enforcements / history, broker- and customsrelated data

Data as the gateway to understanding and control > Contrast against GRI enforcements / history, broker- and customsrelated data Classification fluctuation by declaration number

Data as the gateway to understanding and control > Contrast against GRI enforcements / history, broker- and customs-related data Broker history and scorecard

Combine with process, experience and discernment Achieve winning outcome under your control > Compile assessment, analysis and data findings

Combine with process, experience and discernment Outcomes under your control > Compile assessment, analysis and data findings > Couple to experienced know-how in classifications, GRI enforcements and global trade management best practices History, precedence and rulings Ensure ongoing compliance Applicability Protect (Binding Ruling attainment) Specificity of language (contents, notes, even punctuation ( ; vs,)) Test

3) Foreign Trade Zone (FTZ) Image source: St. Louis Economic Development Partnership

3) Foreign Trade Zone (FTZ) Inbound component @ 25% 2% Finished product @ 2%

Road Ahead > High-stakes macro-level actions Aimed at mutual economic destabilization Potential disruption to capital markets Strategic focus for U.S.: Impact area(s) where China s technology ambitions pose the most threat Strategic focus for China: Target production sectors in U.S. economy with political leverage > No quick end in sight (e.g. $12B relief to US agricultural sector)

Road Ahead Preparation is important Second only to action.

Baker Tilly Center for the Return of Manufacturing Jeff Jorge Principal, Firm Leader - International Services, Center for Return of Manufacturing Leader 248 368 8798 jeff.jorge@bakertilly.com Connect with us: returnofmanufacturing.com returnofmfg@bakertilly.com @returnofmfg 215 972 CFRM (2376) 54

Thank You! If you have additional questions, please contact WMC at 608.258.3400.

U.S. Trade Policy Webinar. August 9, 2018