U.S. Trade and Tariffs

There has never been a time when it was so difficult to navigate through the international trade landscape. The Biden Administration’s focus is on equity, underserved communities, and climate change. The impact of these policies on business is secondary. With this in mind, the key areas that manufacturers and importers of agrochemicals need to effectively manage in the short term, include the following areas.

Ukraine/Russia

The war in the Ukraine is a tragedy on every level. It continues to present the world with a very difficult situation. The human cost is enormous. Financial pain is spreading all around the world. Cutbacks in natural gas deliveries to Europe may shutdown a large portion of the European Union (EU) chemical manufacturing base, and along with it, a huge percentage of the Western world’s capacity to produce agricultural chemicals. These issues present unprecedented challenges to our industry, worldwide.

Uyghur Legislation

As of June 21, 2022, under legislation signed earlier this year, the United States customs has been ordered to assume that any imports from the Uyghur region were produced by forced labor, and therefore are subject to exclusion, forfeiture, or seizure.

There is a specific list of entities to avoid. However, this list is not considered to be complete, and the burden of proof is on the importer.

This will be especially difficult to police since products produced in this region are likely to be extensively distributed in China as well as neighboring countries. Therefore, since this initiative also covers “components/intermediates/additives,” due care is required. There is no de minimis allowance in the rule.

If materials are blocked at the border, the importer has 30 days to make its case to customs. However, there is no time limit for customs to decide to allow or deny entry of the goods. During this time, goods will be impounded.

Importers of products from China need to have complete documentation on file so that they can respond rapidly to defend themselves against an allegation that forced labor played a role in their shipment.

MTB, GSP, & 301 Exceptions

These initiatives remain bundled into “the China Chips Acts.” Congress has now formed a conference committee that includes more than 100 members. While there is general agreement on language for the Miscellaneous Tariff Bill (MTB) as well as renewal of Generalized System of Preference (GSP), there is no agreement on pressing to re-open the China exclusions portal. The Administration has directly asked the Democrats in the Senate to drop any language forcing the re-opening of the China surtax exceptions procedures. The Senate Republicans continue to push hard for inclusion of this provision.

It is important to maintain detailed records since it is the clear intention that tariffs collected on GSP beneficiary products will be refunded back to the date that the program expired (31 December 2020). It is also likely that once the MTB is enacted, it will include 120 days of retroactivity.

If this process does not produce a result, the only remaining hope to enact GSP and MTB would be in the “lame duck” congressional session that is customarily held after the election in November.

U.S./China Trade Relationship (USTR)

The U.S./China phase one deal that was signed in January 2020 has now expired. Clearly, China did not meet, and in fact, was significantly below its purchase commitments under this deal. U.S. Ambassador Katherine Tai has publicly stated her dismay over the significant shortfalls and pledged to push China to keep its commitments. So far, no plan has been announced to try to make this happen. Technically, since this part of the agreement has expired, China no-longer has any remaining purchase commitments to the U.S.

As part of the phase one deal, and in anticipation that a phase two deal could be successfully negotiated, the U.S. held off on increasing the 301 tariffs against China as described below. Clearly USTR would have the authority to immediately increase all of the tariffs in these tranches if they believed that it would help encourage China to agree to U.S. requests.

Tranche 3: This rate was scheduled to be increased from 25% to 30% on 15 October 2019. That increase was put on hold pending the signing of the phase one deal. There are at least 100 agricultural chemical active ingredients, as well as all formulated agrochemicals included in this tranche.

Tranche 4a: On 1 September 2019, tariffs of 15% were imposed for products on this list. The 15% tariff in this tranche was cut to 7.5% on 14 February 2020, as part of the phase one deal. There are at least 18 active ingredients on this list, including some big volume products where China has a sizable presence, including but not limited to 2,4-D, atrazine, bromoxynil, dicamba, and metribuzin.

Tranche 4b: On December 15, 2019, tariffs of 15% were scheduled to kick-in. These tariffs were held in abeyance because of the agreement on a phase one deal. There are at least 11 active ingredients on this list, including some of the biggest herbicides imported from China, including chlorothalonil, glufosinate, glyphosate (acid and 62%), oxyfluorfen, and PMIDA.

If you are importing materials for inventory, unless they are due to be processed or sold onward shortly after they arrive, you should consider placing such imports surtax-able items into a bonded warehouse. Since former U.S. President Donald Trump imposed these levies by Executive Order, they can be reversed by another Executive Order on very short notice. If this were to occur, you could end out with a warehouse full of very expensive inventory, with no chance of receiving any refunds of surtaxes paid. This has happened in several instances where similar tariffs were removed against the European Union, including over the Boeing/Airbus dispute.