Will China-Specific Tariffs Impact Irish/NI Exports to US?

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My last post discussed the potential (but likely very small) impact of the relatively new U.S. steel and aluminum tariffs on Irish and Northern Irish exports to the U.S. In this post, I turn to the related question of whether proposed U.S. tariffs against China could impact Irish and Northern Irish exports to the U.S. The answer is ‘maybe.’ In fact, U.S. tariffs on Chinese products could have a larger impact on U.S. imports from Ireland and Northern Ireland than the steel/aluminum tariffs.

U.S. tariffs are applied on certain imports that meet the (i) relevant country of origin test; and (ii) the relevant HTSUS code test. In other words, the tariffs hit certain products (each item imported into the U.S. is given a multi-digit Harmonized Tariff Schedule number) from certain jurisdictions–in this case, China. In general, the jurisdiction of product’s ‘last substantial transformation’ will be the product’s country of origin for U.S. customs purposes. And that could be an issue for some Irish/NI companies that source their product from China.

Let’s assume for a minute that an Irish company sources a widget (I remember my college economics) from China, imports it into Ireland for labeling and packaging, and then exports the packaged widget to the U.S. Let’s assume further that the U.S. has just placed a 50% tariff on all Chinese origin widgets. Are the Irish company’s subject to the tariff? In this scenario, yes. If the product is sourced from China and not substantially transformed elsewhere (and packaging/labeling almost always will not be a substantial transformation for U.S. customs purposes), then the product is determined to be–again, for U.S. customs purposes–of Chinese origin. It doesn’t matter that the exporter/seller is an Irish company–the relevant questions focus on the product(s) at issue.

Of course, the precise scope, and timing, of U.S. tariffs on Chinese products remains a bit foggy. But we have some indications as to scope from U.S. government pronouncements.

Irish and Northern Irish exporters should, sooner rather than later: (i) determine if their products are included within the HTSUS code of products subject to tariffs; and (ii) check their supply chain to determine if their products would be considered to be of Chinese origin under relevant U.S. customs rules. If their products are subject to tariffs, affected companies have few options; (i) continue to sell to the U.S. market at a higher cost; (ii) alter their supply chains to source from a place other than China and/or have the last substantial transformation of the product happen outside of China; or (iii) seek a tariff exemption from the U.S. government. None of these options is particularly attractive, easy or inexpensive.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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