With all the discussion about tariffs these days it is necessary to pay closer attention to what it all means. Let’s begin with the basics. A tariff is essentially a fee collected on a particular good imported into a country or economic zone, such as the European Union. The tariffs we want to take a closer look at today though, are the Chinese Tariffs and those duties falling under 301 and 232.
Tariffs are usually imposed to protect domestic producers. The Trump Administration has been adamant from its inception about preserving US manufacturers by limiting certain imports into the United States. According to President Trump, faulty trade deals have caused the loss of America's manufacturing prowess, which is rapidly becoming a nostalgic recollection and also diminishing America's power to protect our National Security when needs come into play.
President Trump has had the Office of the United States Trade Representative dust off a couple of old laws which have not been applied practically for a few decades. Namely, the Trade Expansion Act of 1962, and the Trade Act of 1974. The reason for the inactivity of these laws has been the expansion of global free trade, and the subsequent abolition of tariffs.
As a pillar of his “Make America Great Again” campaign, President Trump has evoked his right, as president, to use both the Trade Expansion Act of 1962 and the Trade Act of 1974 to advance his America first agenda. Notably, he has deployed Section 301 of the 1974 law, and Section 232 of the 1962 act. Thus, we have our section 301 tariffs and our section 232 tariffs.
The Section 301 tariffs: These give the U.S. President the ability to implement initiatives to counteract burdensome or unreasonable actions of another country which may negatively impact American industry, commerce or trade. Furthermore, the section 301 tariffs allow for appropriate retaliation to encourage the offending foreign government to desist from its harmful trade policies against the United States.
Here is a breakdown of what the tariff changes are going to look like for your business. In Section 301, this has been broken down into four parts. These are as follows:
Parts 1& 2: This was the first $50 Billion in duties on products that fell under its tariff that were originally added up to 25%.
Part 3: This was the next announced round of duties that will add an additional original 10% but will add up to the 25% as of January of 2019 for all products that fell under its tariff. This was the next $250 Billion in goods.
Part 4: this is yet to be announced but it will include the last at least $250 Billion in tariffed goods.
If you want to learn all about these new tariffs being imposed, you can listen to our one hour webinar explaining the details of 232 and 301 here.
Section 232 tariffs: on the other hand, are intended to limit the importation of any product which could result in a national security risk for the US. That is to say, these tariffs are designed to maintain the fitness of domestic producers who could be put out of business by foreign competition. President Trump is using this law to protect America’s steel and aluminum producers by imposing 25% and 10% section 232 tariffs on each of these industries respectively.
The effect of all new 232 or 301 tariffs will absolutely impede on many businesses by increasing their duties anywhere from an added 10% all the up to an 25% in duties being paid. This is an astronomical number for some businesses which is why completing a drawback program will be absolutely essential for many to complete.
If you have questions as to how to complete a drawback program around the new 301 issues, feel free to visit us here and send us a request to talk in greater detail.