US Companies React to Temporary Tariff Relief

The U.S. government’s temporary relief on import tariffs for goods covered under the U.S.-Mexico-Canada Agreement (USMCA) has led to a surge in exemption requests from American companies, industry experts report.

On March 5, the White House imposed new 25% tariffs on goods from Canada and Mexico but later announced a delay in levies for items covered under the USMCA until April 2.

The USMCA grants preferential treatment to goods that are either sourced from or have a minimum percentage of value added within the three member countries—the United States, Mexico, and Canada.

“We’re seeing importers rush to become USMCA certified… the risk is just too high not to,” said Brian Riley, senior vice president of customs house brokerage at logistics firm GEODIS.

Some of the companies, mostly small businesses reliant on cross-border trade, are scrambling to verify if their products already qualify for exemptions.

At present, only 37.8% of imports from Canada and 48.9% from Mexico are eligible for duty-free status under the USMCA, an S&P Global Market Intelligence report showed.

To qualify, an importer must analyse the bill of materials—a list of all parts and materials used in a product—to determine if their goods meet requirements.

Mike Short, president of Global Forwarding at freight forwarder C.H. Robinson, said there was an increase in USMCA qualification and tariff classification requests even before the official announcement.

“Now that the official amendments are published, these requests have only increased, and we expect this trend to continue.”

Businesses earlier refrained from getting the certification due to its complexity and costs of meeting requirements, especially since their goods were already entering the U.S. duty-free.

Even after certification, a company has to maintain detailed records for up to five years after import and ensure continued compliance.

“Companies are hedging their bets by becoming USMCA certified because what’s to say, the exemption may not continue after April 2? Or, if the exemption expires then, what if it returns in the near future?”  GEODIS’ Riley said.

The uncertainty has prompted companies to overlook immediate cost savings.

“If you are slapping 25-50% tariffs on everything, companies that never previously needed to are now forced to evaluate if this (USMCA certification) is an option,” said Sung Choi, vice president of product management at supply chain solutions provider e2open.

REUTERS