Please Don't Shoot the MESSenger - Tariff Update

Before we address the current tariff MESS, we wanted to share a piece of our country's tariff history from Douglas A. Irwin's Clashing Over Commerce: A History of U.S. Trade Policy regarding the tariffs in 1865 the year JW Hampton was founded:

"The 1864 and 1865 legislation helped push the average tariff on dutiable imports up to 48 percent in 1865. These wartime tariff increases were enacted with little opposition. Although some Northern Democrats griped about the high level of taxation—the burden on consumers and merchants, and the "crude and defective" approach taken in the hastily drafted legislation— the necessity for additional revenue was so obvious, and the Republicans so dominated Congress, that opposition was pointless. In Taussig’s view (1931, 166), Congress had "neither the time nor disposition to inquire critically in the meaning and effect of any proposed scheme of rates. The easiest and quickest plan was to impose the duties which the domestic producers suggested as necessary for their protection. Not only during the war, but for several years after it, all feeling of opposition to high import duties almost entirely disappeared.""

Although the dust has not completely settled and might not for a long time for all we know, we did want to not rush this email out without doing our best to understand each of the scenarios. While there is no way for us to simplify an increasingly complicated situation when it comes to the tariffs, here is a basic starting point to make it a little easier to understand the background and where we are now. Keep in mind the below is in addition to whatever the regular duty rate for a particular product was before the tariff wars began.

·Under Section 301 (of the Trade Act of 1974) starting in July 2018 there was a 7.5%, 15% or 25% additional duty depending upon the product imposed on some products from China when the government determined that "China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation are unreasonable and discriminatory." - these are referred to as the Section 301 duties.

·Under Section 232 (of the Trade Expansion Act of 1962) starting in March 2018 there was a 25% additional duty imposed on articles of steel and 10% additional duty on articles of aluminum. There have been some alterations to this over the years including special trade agreements with certain countries. Currently, there is a 25% additional duty on both steel and aluminum products from all countries as well as 25% on most steel and aluminum components (derivatives) that are part of finished goods.

· Under the International Emergency Economic Powers Act (IEEPA) in March there was an additional 10% which was then doubled to 20% on all products from China and Hong Kong regardless of the HTS. The IEEPA was employed based upon "The extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl, constitutes a national emergency under the International Emergency Economic Powers Act".

· Shipments that arrive 4/5/25 and later - an additional 10% Universal Import Tariff will be imposed on all products from all countries with the exception of USMCA qualifying products (see below).

· Shipments that arrive 4/9/25 and later - a country-specific Reciprocal Tariff will go into effect per Annex I. It is a flat duty % per country for all products manufactured in that country. Each country on the list has their own Reciprocal Tariff rate.  Many but not all countries are on Annex I. The Reciprocal Tariff is instead of the Universal Import Tariff. If the country is not listed on Annex I then the 10% UIT will apply. So every country, with the exception of Mexico and Canada (for USMCA qualifying products), will have either their own specific higher Reciprocal Tariff from Annex I or the lower 10% Universal Import Tariff but not both.

· Shipments that depart the foreign port directly to the US before April 5th the Universal Import Tariff or Reciprocal Tariff will not apply.

· There is a small window for shipments that depart on or after 4/5/25 and arrive no later than 4/8/25 (so air shipments or a really, really fast ship) where the 10% UIT would apply for all countries since the Reciprocal Tariff would not be in effect yet.

· Annex II defines exceptions to the Universal Import Tariff and the Reciprocal Tariff. Those exceptions include steel and aluminum products that already have the 25% Section 232 duties. HTS numbers that fall under the 25% Section 232 tariffs will not have any additional Universal Import Tariff or Reciprocal Tariff.

· Here is the White House Announcement on Reciprocal Tariff of 4/2/25 which is attempting to "rectify trade practices that contribute to large and persistent annual United States goods trade deficits". Worth taking a peek at.

· Starting 5/2/25 shipments from China and Hong Kong will no longer have duty-free treatment under the de minimis exemption which applied to business to consumer shipments under $800.

· The agreement between the United States, Mexico and Canada (USMCA formerly NAFTA) is in effect and thus duty-free treatment is allowed for products that qualify as originating under USMCA. If they do not qualify then an additional 25% duty applies.

 Here are a few examples:

· A shirt from Vietnam which normally has a 32% duty will have an additional 10% Universal Import Tariff as of 4/5 which gets replaced by a 46% Reciprocal Tariff (based upon Annex I) on 4/9

· A wood door from Indonesia which normally has 4.8% duty will have an additional 10% Universal Import Tariff as of 4/5 which gets replaced by a 32% Reciprocal Tariff (based upon Annex I) on 4/9

· A steel product from China which normally has 3.5% duty could also have 25% Section 301 duty and does have 25% Section 232 duty + 20% IEEPA duty + 10% Universal Import Tariff as of 4/5 which gets replaced by a 34% (based upon Annex I) Reciprocal Tariff on 4/9

The National Customs Brokers & Forwarders Association of America, Inc. provided this clarification:

Products subject to future Section 232 actions will be exempted**

1. **While the introductory sentence of Section 3(b) of the Executive Order is awkwardly worded, we believe the correct interpretation or intent is that it is either Section 232 (steel/aluminum auto/auto part) or if no 232, then the IEEPA Reciprocal rates apply. However, our opinion could change based on forthcoming notices or clarification as noted below.

2. Note: Section 232 rates will apply to the imported article and in some instances may be lower than the IEEPA reciprocal tariffs.)