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US Tariffs: Refunds, Section 301 duties and Importer advice · The Loadstar

• 0:00
  Speaker A: Hello, and welcome to the Lodestar podcast. I'm your host, Charlotte Goldstone. And in this episode, we are going to be diving into one of the biggest stories currently shaping global trade. That is U.S. tariffs. And just when many U.S. importers thought they were turning a bit of a corner after the US Supreme Court struck down Trump's AIPA tariff regime and the refund process began, the landscape has now shifted once again and we are seeing the emergence of lots more tariffs. So to help me make sense of what all of this means, I'm going to be joined by CEO of Trade Force Multiple Supplier, Cindy Allen. We are going to be discussing how the current tariff refund process is progressing. We're also going to be looking at why the US Administration has been allowed to introduce more tariffs after the IP tariffs were ruled unlawful. We are going to be looking at what importers need to do to stay compliant and how freight forwarders, customs brokers and shippers can prepare for what looks set to be a very volatile trade environment going forward. Let's get straight into the episode foreign. Hello, and welcome to the Lodestar podcast. Thank you so much for joining me. It's great to have you here.
• 1:10
  Speaker B: Thank you for having me. I appreciate it.
• 1:12
  Speaker A: Firstly, before we get into all the nitty gritty, I'm going to give you a nice, easy question. Can you please introduce yourself and what you do at Tradeforce Multiplier?
• 1:20
  Speaker B: Yeah, so I'm Cindy Allen. I'm CEO of Tradeforce Multiplier, which is a global trade consultancy service. I've been in the international trade arena for 40 years now. I've worked both in the private sector and in the public sector at CBP for large companies, for small companies. And I help importers really understand what's going on today, which I hope I can do on this podcast.
• 1:42
  Speaker A: Thank you so much. Yeah, I'm looking forward to it. I think for someone like me, I mean, I've been covering tariffs for quite a while now, since they first kind of popped up over a year ago. It seems like there are so many that are overlapping on top of each other. We've had them implemented and then taken down, and then we've had new ones. So are you able to please just kind of give us a rough overview of where we stand, which tariffs are currently in place?
• 2:03
  Speaker B: Yeah, you're in good company. This is complicated stuff. There are four specific sections in the law that Congress has given the President authority to assess tariffs for different reasons. The first is section 122 and section 122 has a time limit on it. So it's about six months. The president can come in and he can determine that there's an emergency and he has to assess tariffs. So 122, you have 232, which really deals with critical. So you see specific 232 cases and duty assessments on specific industries or specific products. Then you have 301. 301 is really a national emergency issue or a national security concern. Those can be very broad or they can be very narrow. The most famous 301 is the section 301 on China that the Trump administration actually put in place in his first administration and has been in a effect since 2018. And then the last one is section 338. Section 338 is one that has not been used until very recently and does have a time limitation on it. So those are the specific authorities that Congress has given the President. Then we have iipa. IIPA which was the subject of a very long court battle which ended up in the Supreme Court. And the Supreme Court ruled these unlawful. And IIPA is the Economic Emergency Protection Act. So it really doesn't talk about specific tariff authority, which is what the Supreme Court found. So that was the first salvo in this administration. They came out, they assessed all these IEPA duties across the board, almost every country that was importing into the United States. So those are the largest tariffs, but also found unlawful because the President does have these other four authorities.
• 4:07
  Speaker A: Thank you so much. That was a really useful overview. I wanted to ask you about the IPA tariffs, actually, because I think everyone was quite happy when these were initially ruled unlawful and then people were starting to seek refunds. When it initially happened, I think quite a few people assumed that the refund thing was quite far down the road and people wouldn't actually be able to get what they were owed. How is the refund process going? Before we get into all these new tariffs, are you seeing people actually get their refunds?
• 4:32
  Speaker B: Yeah, I am. I think it's gone relatively smoothly for the amount of refunds that have been filed and also for the amount of duty that's come back. I think there was a court filing yesterday. The court has ordered the government, specifically cbp, Customs and Border Protection, to come in and update it on about a monthly basis now on how things are going. And they indicated There were over 122 million filings with $126 billion that are set to be refunded or have been refunded. So $126 billion. I'd say it's going well. There have been some hiccups. There's some limitations still for parties that have paid duty. And the entry has been finalized. We're still fighting that out in court. Still waiting for the Court of International Trade to give specific instructions on how to get that money back or if it's gone forever. So I think everyone is mostly pleased, but we're also still waiting for the entire amount to be collected or, I'm sorry, for the entire amount to be actually refunded to all of the importers.
• 5:43
  Speaker A: Right. So slight silver lining, but still a long way to go. Obviously, this refund process doesn't signal the end of this tariff saga. As you outlined at the beginning, we've got these new recently, these new looming Section 301 tariff rules that target imports from 60 economies. So what are the, what is the basis of this new kind of tariff regime? How is this allowed after the initial IPA tariffs were overruled?
• 6:08
  Speaker B: So the IPA tariffs, as I said, don't have the authority within the government to actually, or constitution or law to actually collect it. So that's why we saw this mass refund. And it's kind of been like a daisy chain. It's just been a daisy chain of, okay, now we tried this. That didn't work. We're going to try this. That didn't work. So you saw the iepa, the IEPA duties being assessed, and then immediately when those were struck down and they could no longer collect it, you had the Section 122 tariffs, which, as I said, has a time limitation. So that was almost every country, with some exceptions, those 122 tariffs actually expired. And immediately upon their expiration, we saw the section 301 for forced labor. What the government has said is that for these 60 economies, they have not sufficiently enforced forced labor laws within their own countries. And that has had an impact on the US and how the. The enforcement of forced labor is actually in force here in the United States. So it has damaged the economies, it has damaged our ability to produce goods at a reasonable price because we're competing with countries that produce goods with forced labor. So that's the basis. What we do know is from the timing, these were designed to actually supplement the U.S. treasury and collect the duty rates that have been pretty much consistent through IEPA, Section 122 and now Section 301 for forced labor. We have seen already court challenges to the section 301 for forced labor. How can every economy, all 60 economies, which are assessed at a 10 or 12.5% rate. How can they all be the same? If there was a fulsome investigation, which Section 301 requires the government to do and have findings, how can they be exactly the same? So we expect this court challenge to go through. We did see court challenges on Section 1 even though it was only in effect for a period of months. There are some importers who have filed a court case, so that could eventually be refunded back to the importers. But legal minds are a little less hopeful for any of the section duties that have been assessed that they're going to be found unlawful.
• 8:34
  Speaker A: Right. Well, I mean with all the layering of these different tariffs, obviously we're also, you mentioned we're seeing the refund process for the IEA tariffs. How do they work in conjunction with each other? Is it that you have to seek your refunds and then separately pay other tariffs or do the two cancel each other out?
• 8:50
  Speaker B: Yeah, so they're layered. Some of these duty rates are layered. So we have. If you're importing something from China, it could be subject to several different duties. So you have the original section 301 China duties which are still in place. Then you could have an actual section 232 that has been assessed for a specific product. Let's say pharmaceuticals recently came into view. The most articles that have been in the news are the steel, aluminum and copper that have been in place for quite some time. You could pay duty on those and then you could also have a separate 122 duty. Or you could have a separate 301 duty for a different reason. So most of the duties absent section 301 for China, most of the duties are singular in that you'll have 301. But you either have section 232 or you have the 301 you also could have in I EAPA. What happened is when they first came out, they said, okay, if you're paying a section 232, we are not going to assess the section IIPA duties. So it's one or the other. And what we're seeing is in section 338 that that is not. It's layering on top so you can have additional duties. But the section 301 for the forced labor you have carve out. So if you're already paying a different kind of duty, you do know that you aren't going to pay that 301. On top of that, there's also some carve outs for the section 301 forced labor. For things like free trade agreements. If goods qualify in some instances for free trade agreements, those are carved out.
• 10:37
  Speaker A: Sounds like a lot of paperwork to me. With these new 301 tariffs. You mentioned that there's quite a few reasons that the President could enact them, and this is quite a big umbrella. So is there one specific thing that importers need to be aware of, where you see the biggest compliance mistakes, or is it just kind of as broad as the umbrella of 301 itself? Like, is it classification or country of origin or valuation, or are they looking for something else?
• 11:02
  Speaker B: We're seeing customs actually have a huge enforcement on both value and country of origin. We're seeing a record number of requests by CBP for importers to verify their country of origin status, and they're asking questions going all the way back to the origin of the raw materials that were used to produce this good. That's common for inquiries from CBP that are looking at forced labor, but what it's not common for is for valuation or country of origin. So when they're asking importers to actually go through and tell them all of the products that make up their one imported good, they're looking at both the country of origin where all of those processes were taken, and also the valuation that was added at each step along the way. So when those goods come in, you have to justify the value, the total value, and it's taken in all of the costs that are reasonable in that supply chain and also make a reasonable assumption about the country of origin. So enforcement is a huge, huge focus for all of those things because the government wants to ensure they're getting the right amount of duty.
• 12:16
  Speaker A: Does the CBP have the capabilities for this? I mean, you mentioned there was a record number. Obviously, we saw at the beginning, quite a while ago, when the de minimis thing came in, we saw that CBP didn't actually have the capacity to deal with that. So kind of where are we at now? Are they using digital tools or is it sheer manpower? And do they have the capabilities?
• 12:34
  Speaker B: So I think as far as implementing a duty rate, that has become pretty easy for cbp, I'm sad to say it's good for the trade, it's good for cbp, you know, my former colleagues, but it is. It's become routine for them. So they have a playbook and they know what they need to do. Most of these are assessed on tariff numbers, so it's pretty easy for them to go into the tariff record itself and update flags and update a tariff number. So that Part is easy. What I think the importing public needs to know, you know, shippers, importers into the United States, is that CBP has some very, very powerful AI analysis tools now. And when they're asking those questions about country of origin or valuation, it's likely they have information that has made them question your valuation or your country of origin. They have massive AI capabilities, they have massive mapping tools, they have massive analysis tools. What used to take take months for auditors or those investigating a company or a product to put all of the information together and do outreach and site visits, et cetera, they can do with an AI tool that looks at, you know, mapping global, global, you know, like global Google looking for facilities. And they put all of that information together. They then look at the mapping tool to say, oh, if you're a third stream, you know, if your upstream supplier, three tiers down, has an issue with one company, it's probably going to bleed over into all the other companies they're supplying to. So it is a. Almost scary, but very good because they are finding things. They recently announced they've collected over $1 billion in duty and penalties from companies that have not been honest in their dealings with the, with the US government. So it's working. And if you're compliant, you're okay. But you need to take the steps to make sure that all of your partners in that supply chain are compliant as well.
• 14:47
  Speaker A: It really is quite astonishing just how quickly the CBP managed to kind of adapt to that level of workload that they, that they had. I mean, I, as a journalist, I'm quite exhausted keeping up with all the new tariffs when they get put in and taken away. I'm sure you've kind of seen a lot of it over the last year and a half, but, but now that the CBP are kind of ready to deal with this and we've. Are we going to see a sort of baseline stability now, do you think? Maybe it'll take a few months, but do you think we're going to get to the point where we've got the tariffs that are set to be in place and they're going to stay in place and there's going to be no back and forth and there's going to be no new tariffs implemented, or do you think that importers should just kind of expect this baseline level of volatility to just continue forever?
• 15:31
  Speaker B: This is the baseline, this is the new normal. There are always going to be, I shouldn't say always. There is a pattern of assessing duties for things we never thought would happen. So not only do we have these baseline duties, you know, section 301 for China, we now have the section 301 for forced labor that are 60 different countries. We have the 338 for Canada. A lot of people have seen the section 338 duties for Canada because there was a longer implementation period as a negotiating tool to help the US Negotiate USMCA for favorable terms for them. You know, some people are betting that they aren't going to take effect. But I've been telling my clients, you know, our team has been saying, look, you have to prepare for it. Because we thought IIPA duties wouldn't happen. We didn't think 122 would be assessed. We didn't think some of these other tariffs would actually be maintained. And we've been surprised. So you have to plan for each of these types of duties. And just like the government has a playbook, importers should have a playbook. They should have a process that they go through. No matter what tariff comes out or what trade disruption comes out, they have a playbook and they know what they need to do internally, who they need to bring to the table, how they need to communicate, what actions they need to take, who needs to have input into their own policy and procedures, and how this is going to have an outcome. Especially if you're a publicly traded company here, you know, and you have to file with the sec, it's really important that you have everyone you needed at the table to talk about the impacts of these. But I don't think they're going away. I think we've seen there are around 15 Section 232 cases that have been communicated that still aren't out. They're in an investigation phase. So I think we're going to see additional 232 cases that continue to come out. I think that the government wants a baseline of tariffs that will continue. They'll find a way to do that and continue to reach in these section authorities in a way that we've never seen before.
• 17:44
  Speaker A: I'm sure that's the last thing that our listeners wanted to hear, but probably what they all expected. I think that has kind of been the baseline thing now since COVID is expect the unexpected and prepare for whatever you can't prepare for. And finally, Cindy, one piece of advice to our listeners, whether that's freight forwarders, shippers, US Importers. What is one thing that you would say they should be reviewing before their next shipment?
• 18:05
  Speaker B: They should be reviewing their supplier partners to make sure that they have the level of compliance that they need to ensure that these shippers and importers have compliant products when they come into the United States. What I'm seeing is there's very few actual companies imported in the United States who are perpetrating fraud. They're out there, of course they are. But most companies kind of get caught because they haven't done the due diligence that the government now requires all the way back to those origin of goods. So find a good AI tool. Do your due diligence. Don't rely on a shipper or a supplier saying, oh, yeah, we meet all the requirements. You have to do some due diligence now. And that's really what the government is looking at. So take some time, look at tools and make sure that you know who you're doing business with.
• 18:57
  Speaker A: Definitely. Great advice. Cindy, thank you so much for joining me. It's been wonderful to chat to you.
• 19:01
  Speaker B: Thank you.