Certificates of Origin can minimize tariff impact amid brewing 'trade war'
Unfortunately, a trade war is brewing.
While something of a truce was recently called between the US and the EU, the fact remains that tariff hikes on US products by the EU and China (in response to increased US tariffs) still poses a major threat to global trade. In some circles, there is ongoing debate as to whether or not this a good thing in the long run; what’s not debatable is that many companies are being hurt right now. Companies in affected industries are left with reduced profits, or in several cases, significant losses since they must either absorb the tariff cost or increase prices to cover tariffs thus reducing market share – neither an attractive proposition.
As it turns out, Certificates of Origin can play a critical role for US & EU Exporters (and their Buyers) looking to minimize tariff impact.
Many companies in the US and EU export products bought from third countries (not as common for Chinese exporters, who tend to export Chinese goods exclusively). When a US or EU company is exporting goods that originate from another country, clarifying origin becomes critical. This is evident from the recent surge in inquiries to Chambers of Commerce by Exporters requesting Certificates of Origin from new markets.
Below are some scenarios where Exporters and their overseas Buyers have the possibility to significantly reduce the impact of recently-imposed tariffs.
US exports to the EU:
Many US companies export products that originate from Mexico, Canada, Japan, China or other non-US or EU locations. In the past, because of weak documentation, goods were cleared into the EU as American goods, even though they were made elsewhere. When tariffs were low or non-existent, this would only affect trade statistics but had little or no impact on costs. Today, it’s critical for a US company exporting foreign goods to clearly identify them as non-US goods, and in turn, benefit from reduced tariffs where applicable. This typically entails some additional paperwork under the International Chamber of Commerce (ICC) rules, and many US Chambers of Commerce are equipped to issue Certificates of Foreign Origin to facilitate this process for Exporters.
EU exports to the US:
For EU Exporters, it’s the opposite problem – it is mandatory for Exporters to ensure US Customs are made aware if goods being sold into the US from the EU are not actually produced in the EU. A Certificate of Origin is one way to help solve this problem. Because Chambers operate under ICC guidelines, there are procedures for establishing foreign origin of goods, and EU exporters should discuss these with their Chamber of Commerce.
US exports to China:
Again, not all exports from the US are made in the US. If a US company is exporting foreign-made goods to China, it is crucial that Chinese customs understand when goods coming from the US are not made in the US. Typically, there are some extra requirements to be met, but Chambers in the US that are familiar with ICC guidelines can help American Exporters clarify foreign origin of goods, which could also lead to significant reductions in tariffs depending on the origin.
If you’re an Exporter looking to minimize tariff impact, click here to register for essCert.