If you’re an importer that just spent the last 18 months fighting the chaos that are the IEEPA tariffs as well as the Section 122 global surcharges as well as the newly introduced forced labor tariffs, you may be thinking it couldn’t get worse, and that you can finally breathe a sigh of relief. This, however, is a dangerous fantasy as the government and the various agencies that oversee trading and importation of goods will at any given time find ways to make your life difficult, thereby eating into your margins. There is a little-known tariff wave that is set to be launched and isn’t related to any country’s trade practices or human rights record, but to an economic issue that affects multiple industries across different economies. This wave could very well take down your supply chain in a way you never even considered, and while the investigation into this phenomenon is ongoing, the USTR and other relevant agencies are getting ready to stack rates and tariffs, creating a combined duty conundrum one that could be the straw that broke the camel’s back. In this post, we’ll delve into the overcapacity investigation and demonstrate why it matters for your supply chain, as well as what you need to do in order to prepare for yet another round of exhausting tariffs that are coming sooner or later.
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A Deep Dive into the Overcapacity Phenomenon
The overcapacity investigation is one that was triggered by Section 301 actions which focuses on countries that allegedly produce more goods than the global demand needs, which in turn creates a glut that leads to a decrease in prices, which in turn, makes it difficult to near impossible for American manufacturers to compete.
Here’s what you need to definitively know about the overcapacity investigation:
- The investigation focuses on 16 economies, in particular the European Union, South Korea, Japan, Mexico, India and Vietnam. Therefore, do not be of the mistaken belief that this is a China-only issue; your supply chains in Europe are also at risk
- The investigation zeroes in on 10 key sectors that have been deemed “plagues by excess capacity” and this include automobiles, electronics, aluminum, robotics, semiconductors, steel, solar modules, ships, machinery and batteries.
- Should the investigation find that the suspicions of overcapacity are material, then more tariffs will be stacked on the already existing ones, which includes the 301 and forced labor tariffs.
How to Prepare for the Overcapacity Tariffs
If you import goods in any of the categories and economies above, it would be prudent of you to prepare for the additional tariffs, and here’s how to do it:
- Map your supply chain according to category and not just by country of origin. Since the overcapacity tariffs and sector-specific, it is important to have a correct understanding of which products fall into the affected categories.
- Ensure to audit your duty exposure in order to know exactly where overcapacity tariffs would stack on top of the duties you are currently already subjected to.
- Consider diversifying your supply chain which will effectively lower your sourcing price, and choose countries that aren’t currently subject to the investigation
- It is vital that you work with a competent law firm to prepare USTR submissions regarding product-specific exemptions in the event that your imports only have one sourcing region and are essential such as medical supplies or security-related products.
Best IEEPA and Section 301 Tariffs Refund Attorneys – Call Us Today!
At McCready Law and Frost Law Arizona, we appreciate that you may have a difficult time making sense of all these new tariffs in relation to the risk they pose to your corporation as an importer of note. We therefore would like to lend an expert hand when it comes to mapping your supply chain, auditing your duty exposure and even prepare submissions to the USTR in order to protect your interests as well as your bottom line. Need to learn more? Please give us a call NOW at (314) 481-63338 to speak with one of our experienced trade tariffs attorneys. The call is 100% FREE, and there is no legal obligation. Thanks for choosing us, and we look forward to helping you.