Writing this before the 2022 midterm elections presents even more of a “crystal ball” challenge than a post-election perspective might offer. However, there are at least three areas, among many, that shippers to the United States and their transport providers should pay particular attention to so that consignees and importers can receive their merchandise timely and without “surprise” additional costs in the form of duties, penalties, detentions, and seizures.
First, although the inflationary effects of additional tariffs are well recognized, so far, the Biden administration has been reluctant to eliminate the 25 percent (7.5 percent on some products, such as apparel) additional “Section 301” tariffs on Chinese imports imposed by former President Trump in his “trade war” against China’s intellectual property theft, forced joint ventures with Chinese “partners,” and illegal subsidization of its export industries. Various bills introduced in both the House and Senate to reinstate the “exclusion” process that allowed certain products to escape these tariffs have not made it into legislation that could pass both houses in the closely divided Congress. While the Office of the United States Trade Representative (USTR) is now collecting comments on the effects of these tariffs in connection the statutorily required four-year review of them, it is likely the only means of forcing USTR to renew an exclusion application process will be if required to do so by new legislation, possibly considered in the “lame duck” session or the next session, obviously depending on the outcome of the election. Shippers should keep abreast of developments on this issue, if any, in the next two months.
More ominously for shippers and their US customers is the recent proliferation of unexpected antidumping (AD) and countervailing duties (CVD) assessed on products made in third countries not subject to those orders. This most commonly applies in cases of alleged “circumvention” of AD/CVD orders on Chinese products through production in third countries brought before the US Department of Commerce (DOC) , or allegations of “evasion” of such orders brought by domestic manufacturers against specific importers of products manufactured in third countries brought before US Customs and Border Protection (CBP) under the “Enforce and Protect Act” of 2015 (EAPA).
While both types of actions have the same result — i.e., imposition of the usually draconian “country-wide” AD/CVD rate to imports that most importers had no idea they could face — a “circumvention” case before DOC applies to anyone importing that product into the US from the third country under investigation, while EAPA allegations are directed at specific named importers of products from the third country allegedly transshipping the Chinese products, even though such products could be manufactured in that country with no Chinese content. This makes it ever more critical for importers and their foreign shippers to coordinate efforts to ensure that any product they ship to the US that is subject to an AD/CVD order from China is not being “transshipped” through a third country or even subject to “minor processing” there.
A third issue that shippers and their transport providers need to pay attention to is the full-on border enforcement by CBP of the regulatory requirements of “Partner Government Agencies,” such as the Food and Drug Administration (FDA), Consumer Product Safety Commission (CPSC), Department of Agriculture’s Animal Plant Health Inspection Service (APHIS), Environmental Protection Agency (EPA), Department of Transportation (DOT), Department of Energy (DOE), Federal Trade Commission (FTC), etc. Each one of these agencies regulate products imported and/or sold in the US with requirements that often impact their admissibility and administered by CBP through detention and seizure notices.
One “stealth” regulation applies to almost all commercial cargo shipped to the United States that shippers frequently ignore: the wood packing materials (WPM) regulations, which require items such as wood pallets and crates used to ship the actual merchandise being sold to be both treated against pest infiltration and bear a specific logo issued by the agricultural authority in the export country clearly visible in multiple places on the WPM. Violations of these regulations, which can be applied differently depending on the subjective observations of government inspectors at different ports of entry, can result in penalties in the value of the entire shipment, as well as requiring re-exportation of either the entire shipment (if pests are found) or the mismarked WPM in the case of marking violations.
Compliance with these regulations, therefore, becomes the responsibility to inspect the cargo by all parties in the supply chain: the shipper, freight forwarder and carrier before loading the cargo onto an exporting vessel, because it is the importer who bears the burden of the WPM penalties if their supply chain partners neglect this task.