In an era marked by global unrest, regulatory complexities, and a shifting market landscape, companies must remain diligent in their trade compliance procedures and stay apprised of changes in the law.
TC Trade Alerts will serve as a central resource for identifying the policy changes, executive orders, and necessary information and context regarding government actions affecting international trade.
See below for more information on the last TC Trade Alerts. If you have any questions about how this affects your business, please don't hesitate to contact one of our attorneys.
Additional Resources
Trade Compliance Handbook | Checklists of Foreign Countries Subject to Sanctions | Our International Trade Practice
| THOMPSON COBURN TRADE ALERT – IMPORTS | |
|---|---|
| HEADLINE | Reciprocal Trade and Tariff Memorandum |
| DATE OF ACTION | 13 February 2025 |
| AGENCY | Trump Administration; The Secretaries of the Treasury, Commerce, and Homeland Security; The Director of the Office of Management and Budget; The United States Trade Representative ("USTR"); The Assistant to the President for Economic Policy; The Senior Counsel to the President for Trade and Manufacturing. |
| EFFECTIVE DATE | Implementation undetermined. Unlikely to be before 1 April 2025. |
| BACKGROUND | The Presidential Memorandum of January 20, 2025 (America First Trade Policy Memorandum) outlined the Administration's opposition to "unfair practices and limited access to foreign markets." The Reciprocal Trade and Tariff Memorandum (hereafter, the "Memorandum") seeks to address the "lack of reciprocity" in tariff rates that the Administration says contributes to these issues and the annual trade deficit. |
| DETAILS | The Memorandum does
not implement reciprocal tariffs; rather, it is a policy statement
and instruction for various agencies to investigate and report on
"non-reciprocal" trade measures other countries employ
towards the United States. These reports, which do
not have a specific due date (other than a fiscal impact assessment
from the Office of Management and Budget, which is due Tuesday,
August 12), are not expected for months and will assumably propose
remedies for tariff implementation.
The Memorandum introduces the "Fair and Reciprocal Plan" to counter non-reciprocal trading arrangements by "determining the equivalent of a reciprocal tariff with respect to each foreign trading partner." To this end, the Secretary of Commerce and USTR are instructed to investigate "non-reciprocal trade arrangements" after agency reports are due (1 April 2025) and submit a report detailing proposed remedies. The Memorandum includes within the scope of non-reciprocal trading arrangements "unfair, discriminatory, or extraterritorial tases, . . . include value-added tax." The Memorandum leaves considerable questions unanswered, including the full scope of the measures and their basis in statutory authority; the timing of the investigations, reports, and tariff actions; and the practical manner in which the implementation will occur. Delayed timing leaves opportunities for nations to negotiate, but companies should take steps now to analyze potential exposure and mitigate risk of sudden price increases. |
| BASIS | None provided |
| HTS/ PRODUCTS |
To be determined |
| COUNTRY | To be determined |
| CITE | Reciprocal Trade and Tariffs – The White
House Fact Sheet: President Donald J. Trump Announces "Fair and Reciprocal Plan" on Trade – The White House |
Summary
President Trump issued three executive orders that "impose, consistent with law, ad valorem tariffs on articles that are products of" 25% on products of Mexico, 25% on products Canada (except energy products, which are at a lower 10% rate), and an additional 10% on products of China as set forth in each order, under IEEPA and other authorities. These duties are effective Tuesday, February 4, 2025. There is no drawback or duty-free de minimis relief available for these duties, and they will apply on top of other applicable programs.
Products Affected
The executive orders cover "all articles" that are the product of Mexico, Canada, and China, "as defined by the Federal Register notice." The Secretary of Homeland Security is tasked with determining and publishing "the modifications necessary to the Harmonized Tariff Schedule of the United States (HTSUS) in order to effectuate this order consistent with law." This notice has not been published yet. While it is anticipated that these E.O.s will cover all products from each nation, with the exception of Canadian energy products, there are significant questions to be resolved. For example, if a Chinese item was excluded from the Section 301 tariffs, will it be subject to the tariffs under the February 1 E.O.? Similarly, does the E.O. apply equally to goods that originate in Canada or Mexico under the United States-Mexico-Canada Agreement (USMCA) as it does to goods that are substantially transformed in Canada or Mexico, but do not qualify as originating under USMCA?
Canadian "energy or energy resources," which are subject to a 10% tariff instead of the 25% tariff applicable to other Canadian products, are defined by reference to section 8 of the president's order on January 20, 2025, Declaring a National Energy Emergency to include "crude oil, natural gas, lease condensates, natural gas liquids, refined petroleum products, uranium, coal, biofuels, geothermal heat, the kinetic movement of flowing water, and critical minerals, as defined by 30 U.S.C. 1606 (a)(3)."
Application in Relation to Other Duties
The rates of duty established in each order are defined to be in addition to any other duties, fees, exactions, or charges applicable to such imported articles.
No drawback program relief (19 CFR parts 190, 191) is available with respect to the duties imposed pursuant to these orders.
Duty-free de minimis treatment under 19 U.S.C. 1321 is not available for the articles affected by the tariff action.
For foreign trade zone products subject to each order, articles that are products of Canada, other than "domestic status" eligible products defined in 19 CFR 146.43, entered after the effective date must be admitted as "privileged foreign status" as defined in 19 CFR 146.41, and upon entry for consumption will be subject to the increased duties in effect at the time of admittance into the foreign trade zone.
There is no indication as to whether goods that are entered pursuant to one of the provisions of Chapter 98 of the HTSUS would be exempt from these duties.
Retaliation Clause
Each order contains a retaliation clause reserving the right to "increase or expand in scope" the tariffs imposed by each E.O., should the country retaliate by imposing additional tariffs on U.S. goods. Canada and Mexico have already announced tariff retaliations are planned, with Canada specifying 25% additional duties would be imposed on C$30 billion of U.S goods as of February 4, and an additional C$125 billion in goods in three weeks, according to Prime Minister Justin Trudeau's announcement February 1. He stated the list of products would include "American beer, wine and bourbon, fruits and fruit juices, including orange juice, along with vegetables, perfume, clothing and shoes ... major consumer products like household appliances, furniture and sports equipment, and materials like lumber and plastics, along with much, much more" as well as some "non-tariff measures" related to critical minerals, energy procurement, and other unspecified partnerships. See Transcript of Trudeau's response to U.S. tariffs on Canada, Global News, Posted February 1, 2025, 10:21 pm, available at https://globalnews.ca/news/10993376/trudeau-trump-tariffs-us-canaaada/.
Products Excluded and/or Exclusion Process
No product exclusions or exclusion process were announced.
Removal of Duties
The Secretary of Homeland Security is charged with consulting with several other cabinet secretaries and the attorney general regarding the emergency situation and is required to "inform the President of any circumstances that, in the opinion of the Secretary of Homeland Security," indicate the government of the tariffed country has taken "adequate steps" to alleviate the emergency that gave rise to the order. If the president determines sufficient action to stem the crisis has occurred, the tariffs will be removed. What constitutes "adequate steps" to justify removal is not defined.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
