While the tariffs against Canada and Mexico have been put on pause until March 1, 2025, the 10% tariff on all Chinese goods went into effect as planned. In response, the People’s Republic of China (PRC) announced a 10% tariff on U.S. coal and liquified natural gas, agricultural machinery, pick-up trucks and some large cars, and a 15% tariff on crude oil. Businesses that have Chinese products in their supply chain, absent new supplier resources, should not only review their contracts with suppliers but also begin negotiations while preparing for the long-term impact of these tariffs; these are in addition to Section 301 tariffs, and no exclusions apply.
The PRC additionally imposed export controls on 25 critical minerals that are components in electrical products and military equipment, including tungsten, tellurium, bismuth, molybdenum and indium. As a result, businesses that are expecting to receive shipments from the PRC will likely face delays due to application for export licenses and the amount of time it takes to receive a license approval.
Another critical aspect of the evolving trade landscape that businesses cannot afford to overlook is the anticipated surge in enforcement actions for violations of recently imposed tariffs. Traditionally, tariffs are enforced by U.S. Customs and Border Protection and pursued under the False Claims Act. However, it should come as no surprise if the Department of Justice (DOJ) undertakes enforcement actions of tariff evasion, possibly under International Emergency Economic Powers Act (IEEPA), the “general conspiracy statute,” 18 U.S.C. Section 371, statutes directed at wire fraud conspiracy such as 18 U.S.C. Sections 1343 and 1349, and the smuggling statute, 18 U.S.C. Section 545. These statutes impose severe penalties, including years and even decades of imprisonment. It is therefore more important than ever that businesses strengthen compliance. This is the time to review compliance procedures and ensure policies are in place to follow all legal requirements in line with the expected “reasonable care” standard: import entries, classification, country of origin and valuation are correct, and duties, taxes and fees are timely paid.
