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The MAPP office has received several questions from members across the US regarding the Trump Administrations recent changes in tariffs. Since MAPP is not officially chartered or staffed to handle lobbying or public policy issues, the organization requested assistance from Alan Rothenbuecher, partner of law firm Benesch, Friedlander, Coplan & Aronoff LLP and MAPP’s corporate attorney to provide an overview and some guidance as to recent changes.
Below is a brief outline to help MAPP members better understand how these changes may impact business along with contract language that may be helpful.
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List of Classifications Announced – Tariff Effective July 6th
On June 15th USTR published the first list of classification subheadings for China origin commodities that will be subject to a 25% tariff. The additional tariff for these 818 classifications will go into effect on July 6th. The commodity list can be found at this link:
In addition, a second list of 284 subheadings was published that has not previously been proposed. Information on the review & comment process or timelines for the possible implementation of a tariff on these commodities has not been provided. This list can be found here: https://ustr.gov/sites/default/files/enforcement/301Investigations/List%202.pdf
Some more information per Alan Rothenbuecher:
- 25% tariff applies to molds from China. Taiwan does not appear to be exempted from tariff (seeking further confirmation from the government).
- 25% tariff takes effect July 6.
- Tariff is imposed when mold hits the border. Order and ship date are irrelevant; the tariff is imposed when the product hits US border.
- Tariff is imposed on the transaction price (or price paid for the mold)
- Company can apply for exclusion from the tariff. No deadline for applying, but must show
(i) US products are not produced in sufficient quantity, are not reasonably available or not of satisfactory quality in the US, or
(ii) need foreign product based on national security considerations. Please note that applying for exclusion, if granted, applies exclusion retroactively to date of request of exclusion. It is also a public process allowing the public to comment on the requested exclusion.
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For all your current quotations, add the following language:
This quotation is subject to [insert name]’s right to pass through via a surcharge its cost for any new duties, tariffs, or taxes it is required to pay because of any change in U.S. law on tariffs impacting imported molds.
Whether you can pass on the surcharge to your customers will often be driven by the language (terms and conditions) of your contract. Claims of force majeure and the exercise of force majeure provisions in contracts (particularly if the force majeure clause contains broad catchall language such as “or any other events or circumstances that may affect the Company’s ability to deliver products”) will allow passing along a surcharge, as will price adjustment clauses linked to increases in cost of raw materials.
Regardless, for those quotations that already have been accepted and upon which you are performing, here is an example of a notice you can send to the customer:
The Trump administration announced June 15 a list of 818 products from China that will be subject to an additional 25 percent duty as of July 6. These tariffs are being imposed after a Section 301 investigation determined that China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation are unreasonable and discriminatory. In light of this unforeseen contingency, [insert name of molder] must pass through via a surcharge the additional cost imposed upon it by its mold supplier because of this substantial and unanticipated expenditure caused by the new executive action. The amount of the surcharge will be sent to you via separate email along with documentation substantiating the cost.
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Disclaimer: No representations or warranties with respect to the accuracy of the information contained in this email correspondence. MAPP shall not be liable to any client, manufacturing or business company executive or any other person or entity for inaccuracy or inauthenticity of the information contained in this email or for any errors or omissions in its content, regardless of the cause of such inaccuracy, inauthenticity, error or omission. Furthermore, in no event shall MAPP, Inc. be liable for consequential, incidental, or punitive damages to any person or entity in any manner relating to this email correspondence.
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