On 23 June 2020, the United States Trade Representative (USTR) announced a revised list of European Union products that will be subject to punitive tariffs in the United States. The revision will introduce a carousel mechanism so that different products will always be subject to duties. The USTR is considering tariffs of up to 100% on 395 new products, as well as possible increases in current tariffs.
The US and EU have an ongoing dispute over subsidies granted by the EU and Germany, France, Spain and the United Kingdom (UK) for the manufacture of aircrafts. The US filed a complaint in 2004, which found the subsidies to be illegal and was upheld. As a result, the US imposed an additional 10% duty on aircraft imports from France, Germany, Spain and the UK.
The US also imposed a 25% penalty duty on more than 150 different products from certain EU countries. The measures were divided into 16 parts, with each section containing a list of products originating in certain UK and/or EU Member States.
In February 2020, the USTR announced proposed changes to the list of products subject to punitive tariffs. While the initially proposed list was very extensive and covered products such as sparkling wine, luxury handbags, olive oil, helicopters and motorbikes, the USTR made only minor changes to the products subject to punitive duties.
Penalty duties imposed by the USA on new German products
On 23 June 2020, the USTR announced plans to further amend the list of EU products subject to punitive tariffs. This periodic revision of the product list is known as the “carousel mechanism” and puts pressure on trading partners by continuously disrupting various industries. Accordingly, there are now three annexes, which outline the duties to be paid:
- Annex I: Products currently subject to US punitive tariffs of 15% or 25%
- Annex II: Products for which duties were previously proposed, but are not currently subject to punitive duties
- Annex III: New products for which the US is considering applying tariffs of up to 100% (applies only to products of French, German, Spanish or British origin)
The main products listed in Annex III include:
- decaffeinated coffee, tariff number 0901 12 00
- Bread, pastry, cakes, biscuits and similar bakery products and custard, with or without chocolate, fruit, nuts or confectionery, imported under tariff heading 1905 90 10
- Olive products, tariff number 2005 7002, 2005 70 04, 2005 70 50, 2005 70 60, 2005 70 70, 2005 70 75, 2005 70 97 imported products
- beer made from malt imported under tariff number 2203 00 00
- Vodka imported under tariff number 2208 60 10, 2208 60 20, 2208 60 50
- Gin imported under customs tariff number 2208 50 00
- Self-propelled industrial trucks powered by an electric motor with lifting and handling devices, imported under tariff number 8427 10 80
- Trucks equipped with lifting and handling devices, imported under customs tariff number 8427 90 00
The FRN set a deadline of 26 July 2020 for submission of comments, with specific aspects for each annex open for comment. The information requested by the USTR regarding each annex is as follows:
Exporters to the US should take action
To date, the US has imposed tariffs on only about half of the WTO-approved value, so amendments to the current product list could be significant.
Emergency measures that companies should consider are:
- Clarifying the scope of products affected by the US penalty tariff list
- Submit comments in response to the announcements by 26 July 2020
- Examine options to mitigate the impact of possible obligations, such as
- the use of free trade zones or customs warehouses to defer customs duties and avoid customs duties re-exports
- adjustments to reduce the customs value of US exports, e.g. adjustments to transfer prices
- Review of whether existing customs guarantees are sufficient