UK exporters caught between a rock and a hard place by 10% US tariffs
UK exporters are stuck between losing US customers by passing tariff costs on, or shouldering the financial burden themselves, say leading audit, tax and business advisory firm, Blick Rothenberg.
Robert Salter, a director at the firm, said: “In February of this year the Supreme Court declared tariffs on imported goods imposed by president Trump under the auspices of presidential powers derived from the International Emergency Economic Powers Act (IEEPA) as illegal. US president Trump’s reaction to the Supreme Court’s decision was to introduce new 10% tariffs pursuant to presidential powers authorised by Section 122 of the Trade Act of 1974.”
He added: “These new 10% tariffs imposed by Donald Trump, have British export firms stuck between a rock and a hard place – they must either pass tariff costs onto their US customers and risk losing their business, or try to shoulder the financial burden themselves.”
He added: “UK firms which export to the US market on a ‘Delivered at Place’ (DAP) basis, will have to pass the responsibility for paying US customs tariffs onto their American client. In DAP arrangements, although the seller bears all costs and risks to transport the goods, buyers are responsible for paying tariffs. UK firms exporting via DAP will likely lose American business, as US-based clients have the option of purchasing similar products from US-based suppliers.”
Robert said: “If UK exporters try and defend their US market share by initially taking responsibility for bearing the US tariff charges which arise – an option which is not financially possible for many exporters – they will significantly reduce their profit margins in the short-term.”
He added: “There is currently a new round of litigation concerning the legality of these Section 122 tariffs. By a majority decision, a lower court has already found them to be illegal, but the government has appealed that decision. Presently, there is no indication when that appeal will be heard. However, as an interim measure, The United States Court of Appeals for the Federal Circuit has ruled that the government can continue to collect the 10% Section 122 tariffs until the Court has heard the government’s appeal and come to a decision.”
Robert said: “While UK exporters can hope that the US appeals court will eventually confirm that these new tariffs are illegal, that is unlikely to provide an immediate basis for reclaiming these customs duty monies. Whatever the outcome of the appeal, the losing party will inevitably want to appeal to the US Supreme Court. It is likely to be many months before anyone might be in a position to reclaim a refund of Section 122 tariffs.”
He added: “On a happier note, the Consolidated Administration and Processing of Entries (CAPE) system set up by the US Customs and Border Protection (CBP) to repay the illegal tariffs collected under the auspices of the International Emergency Economic Powers Act (IEEPA) has been processing refund claims since April 20. If a UK exporter reimbursed its US customer for IEEPA tariffs suffered by the customer, that UK exporter is not eligible to submit a refund application. It is the US customer who must apply for a refund. The extent to which any refund received by the US customer is shared with the UK exporter is a private matter between those two parties.”