New Changes in US Trade Relationships

The existing NAFTA agreement is scheduled to remain in place until it is replaced by the new USMCA.  So, most US importers (and exporters) should expect to see very few if any significant differences in the short term.  No change-over date has yet been announced, but some time in mid-2019 seems likely.

The most noticeable changes are expected to be in the automobile industry, where the “rules of origin” for vehicles qualifying for duty-free treatment as a product of any of the three USMCA nations will now require at least 75% of vehicle component parts and other content to be produced in North America.  Also, market restrictions on exports of various agricultural products are scheduled to be reduced.

After meeting with the Chinese government leadership a few days ago, the President announced a plan to postpone the scheduled January 1 increase in “additional duty” on specified types of Chinese goods.  Instead of going from a 10% to a 25% rate (on top of any applicable general duty rate) on that date, the existing 10% “additional duty” rate is to continue for an unspecified period.  (Somewhere around 90 days has been a popular number in unofficial “guesstimates”, and seems like a reasonable initial expectation.)

Subject to the outcome of further US – China negotiations, the “additional duty” rates on this group of Chinese products could then:

  • be increased to the originally scheduled 25%, a few months later than originally planned, if the negotiations are not successful (from the US viewpoint);

  • remain at the current 10%, while further negotiations continue; or

  • be reduced or eliminated, if China makes what the US considers to be sufficient concessions.

So, for at least a little while, the US importers of goods subject to this group of “additional duty” tariff rates have at least a partial reprieve.  Even if the rates remain at 10% while future negotiations drag on, many importers will at least be able to avoid – for the moment, anyway – that additional 15% “hit” to their bottom line.  They also should not have to “scramble” quite as frantically, to get their shipments of these goods into the US, and fully Customs cleared, by December 31.

At this point, however, there have not yet been any suggestions from the Administration of any planned reduction in the “additional duty” rates of 25% on specified iron and steel products, and 10% on specified aluminum products, which currently apply both to China and to almost all other countries.

Recommendation: Watch this space.  One way or another, we can expect further “interesting” trade and customs developments, as one year ends and a new one begins.  Along the way, Transmark Customs Brokers will continue to help our valued clients remain up-to-date, so they can continue to make informed business decisions.