US importers face regulatory unknown amid Trump’s tariff threat on Mexico

02 Apr 2020 12:41 pm by Kat Lucero

US importers are still in the dark over how to comply with President Donald Trump’s abrupt plan to levy escalating tariffs next week on Mexico under a four-decade-old emergency authority that has never been used to impose duties.

Since Trump announced the plan last week, Customs and Border Protection has not yet received critical instructions on how the agency would administer and collect the new duties on a vast amount of goods that have long been duty-free under the current North American Free Trade Agreement, trade experts told MLex.

Yet the president is still set to impose the tariffs on June 10, starting at 5 percent, unless the US and Mexico can strike a deal over how to stem the flow of migrants from Central America, entering Mexico and into the US, which the White House describes is an “illegal migration crisis.”

Amy Magnus, president of the National Customs Brokers and Forwarders Association of America, said the only guidance available is the White House May 31 statement, which also said the tariff rate would rise 5 percentage points each month until it reaches a permanent 25 percent in October.

Since the specifics are unknown, Magnus said companies won’t know whether the tariff will only hit products with Mexico as a country of origin or all goods coming from Mexico – whether they originated elsewhere such as Brazil, Argentina or El Salvador. Companies also won’t know whether American goods returned to Mexico for processing or assembly will face duties, she said.

“There are no real specifics on what the rules are going to be,” said Magnus, whose trade association members help importers navigate the entry filing process, prepare documentation to clear customs and meet the CBP and other government agencies’ requirements.

Trump made an unprecedented move last week in invoking the International Emergency Economic Powers Act of 1977, or IEEPA, to authorize the new tariff on Mexico. The IEEPA gives the president broad powers to control economic sanctions against foreign people and organizations that have engaged in corruption, arms trafficking and nuclear proliferation – but never has the authority been used to levy a tariff on a specific country.

The proposed tariff order would likely be subject to the National Emergencies Act of 1976. So, before the duty takes effect to respond to an emergency, the White House must issue a specific declaration citing the power under IEEPA, since the president’s February emergency declaration at the southern border didn’t address the authority, according to a Congressional Research Service report.

It’s also uncertain whether instructions to CBP — traditionally published in the Federal Register — will come straight from the White House, either as an executive order or a proclamation, or be delegated by trade authorities, such as the Commerce Department.

"Customs is between a rock and hard place because they're being asked to jump hoops and hurdles to try to get a notice out," said Lars-Erik A. Hjelm, a partner at Akin Gump Strauss Hauer & Feld, who manages the firm's customs practice.

​"I've been at this for 30 years and I've never seen anything like this — particularly under a free trade agreement," said Hjelm, who previously worked at the CBP.

— Delay, end or short-lived tariffs? —

Meanwhile, Mexican officials this week have been meeting with the Trump administration in Washington to avert the looming duties. Both sides say they’re making progress in the negotiations but the administration has yet to signal whether Mexico’s responses are satisfactory enough to delay or end the tariff order or if the tariff rate itself would be short-lived while the two sides continue negotiations.

On Twitter today, the president predicted the two sides will strike a deal, which would involve Mexico buying more American agricultural goods in "very high levels, starting immediately."

Mexico Foreign Affairs Secretary Marcelo Ebrard expressed optimism this week that his government can avoid the tariff. Speaking to reporters Wednesday after the first round of official talks, Ebrard said his meeting with Vice President Mike Pence, Secretary of State Mike Pompeo and other administration officials went well and discussions will continue.

Congress is also mulling ways to delay or block the tariff action. Most notable is the stiff opposition from several Senate Republicans, who are mulling ways to stop or delay the order. House Ways and Means Committee Chairman Richard Neal also vowed to unveil a resolution to stop the national emergency order.

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