Uncertainty on Mexico Tariffs as June 10 Deadline Approaches

Monday, June 10, 2019

Sandler, Travis & Rosenberg Trade Report

The White House is proceeding toward the imposition of new tariffs on all goods imported from Mexico as of June 10 but at the end of the business day June 7 there was substantial uncertainty as to whether and how that will happen.

President Trump has said that to push Mexico to address immigration issues he plans to levy a tariff of five percent on all goods imported from Mexico beginning June 10. That tariff rate will increase to 10 percent on July 1 and by five percentage points on the first of each month thereafter, topping out at 25 percent on Oct. 1, if Mexico’s response is not deemed sufficient.

However, as the weekend began it appeared that both the trade community and U.S. Customs and Border Protection were unprepared for the new tariffs to take effect June 10. Nicole Bivens Collinson, president of international trade and government relations for trade and customs law firm Sandler, Travis & Rosenberg, was quoted in a Yahoo Finance article as stating that CBP “has no instructions from the White House” on how to reprogram its computers and make the other changes necessary to start collecting tariffs on goods that have been duty-free for decades under NAFTA.

Lenny Feldman, a customs attorney with ST&R who serves on CBP’s commercial operations advisory committee, added in a CNN article that there are also questions about how exactly the tariffs will be applied; e.g., whether the value of U.S. components in goods manufactured in Mexico will be subject to or excluded from the tariffs.

Customs brokers said in a June 5 letter that “it will be impossible to comply” with the new tariffs “as the mechanisms of compliance are not available between now and June 10, or even before the increase planned for July 1.” For example, the CNN article noted, “many importers don’t have accounts to pay tariffs” and CBP has “warned of growing backlogs of up to three weeks for new applicants.” As a result, the brokers requested that the tariffs be postponed “until CBP can develop the procedures by which importers and brokers can reasonably pay them.”

At press time, however, there had been limited response from the administration. CBP said it was “working through details, including the technical aspects,” the CNN article said, and White House Press Secretary Sarah Sanders said only that “tariffs are going to take effect on Monday.”

In the meantime, there is growing congressional opposition to the Mexico tariffs and lawmakers are considering measures to stop them. Senate Finance Committee Chairman Chuck Grassley, R-Iowa, said the tariffs are “a misuse of presidential tariff authority and counter to congressional intent.” Senate Finance Ranking Member Ron Wyden, D-Ore., added that the tariffs will be “paid by American consumers” and that “the retaliation we should expect from Mexico will harm American workers.” House Ways and Means Committee Chairman Richard Neal, D-Mass., said he would introduce a resolution of disapproval if Trump declares a national emergency to justify the tariffs, and press sources indicate that there appears to be growing support behind such an effort.

© 2019, Sandler, Travis & Rosenberg, P.A. Originally published in the 06/10/19 issue of the Sandler, Travis & Rosenberg Trade Report. Reprinted by permission.

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