Will China-Specific Tariffs Impact Irish/NI Exports to US?

My last post discussed the potential (but likely very small) impact of the relatively new U.S. steel and aluminum tariffs on Irish and Northern Irish exports to the U.S. In this post, I turn to the related question of whether proposed U.S. tariffs against China could impact Irish and Northern Irish exports to the U.S. The answer is ‘maybe.’ In fact, U.S. tariffs on Chinese products could have a larger impact on U.S. imports from Ireland and Northern Ireland than the steel/aluminum tariffs.

U.S. tariffs are applied on certain imports that meet the (i) relevant country of origin test; and (ii) the relevant HTSUS code test. In other words, the tariffs hit certain products (each item imported into the U.S. is given a multi-digit Harmonized Tariff Schedule number) from certain jurisdictions–in this case, China. In general, the jurisdiction of product’s ‘last substantial transformation’ will be the product’s country of origin for U.S. customs purposes. And that could be an issue for some Irish/NI companies that source their product from China.

Let’s assume for a minute that an Irish company sources a widget (I remember my college economics) from China, imports it into Ireland for labeling and packaging, and then exports the packaged widget to the U.S. Let’s assume further that the U.S. has just placed a 50% tariff on all Chinese origin widgets. Are the Irish company’s subject to the tariff? In this scenario, yes. If the product is sourced from China and not substantially transformed elsewhere (and packaging/labeling almost always will not be a substantial transformation for U.S. customs purposes), then the product is determined to be–again, for U.S. customs purposes–of Chinese origin. It doesn’t matter that the exporter/seller is an Irish company–the relevant questions focus on the product(s) at issue.

Of course, the precise scope, and timing, of U.S. tariffs on Chinese products remains a bit foggy. But we have some indications as to scope from U.S. government pronouncements.

Irish and Northern Irish exporters should, sooner rather than later: (i) determine if their products are included within the HTSUS code of products subject to tariffs; and (ii) check their supply chain to determine if their products would be considered to be of Chinese origin under relevant U.S. customs rules. If their products are subject to tariffs, affected companies have few options; (i) continue to sell to the U.S. market at a higher cost; (ii) alter their supply chains to source from a place other than China and/or have the last substantial transformation of the product happen outside of China; or (iii) seek a tariff exemption from the U.S. government. None of these options is particularly attractive, easy or inexpensive.

US Aluminum/Steel Tariffs and Irish/NI Companies

Several Irish and NI companies have asked me whether the recently-imposed US tariffs on aluminum and steel would impact their products–products that use/incorporate aluminum and steel. Much of the confusion stems from how the tariffs were developed and publicized. The bottom line is that US steel/aluminum tariffs should not impact most Irish or Northern Irish companies.

As for the tariffs, for goods entered, or withdrawn from a warehouse for consumption, on or after March 23, 2018, there will be a (i) 10% ad valorem tariff on defined “aluminum articles” imported from all countries except Canada and Mexico; and (ii) a 25% ad valorem tariff on defined “steel articles” imported from all countries except Canada and Mexico.

Under the tariff proclamation, “aluminum articles” are defined in the Harmonized Tariff Schedule (HTS) as: (i) unwrought aluminum (HTS 7601); (ii) aluminum bars, rods, and profiles (HTS 7604); (iii) aluminum wire (HTS 7605); (iv) aluminum plate, sheet, strip, and foil (flat rolled products) (HTS 7606 and 7607); (v) aluminum tubes and pipes and tube and pipe fitting (HTS 7608 and 7609); and (vi) aluminum castings and forgings (HTS 7616.99.51.60 and 7616.99.51.70). “Steel articles” are defined at the HTS 6 digit level as: 7206.10 through 7216.50 including ingots, bars, rods and angles), 7216.99 through 7301.10 (including bars, rods, wire, ingots, and sheet piling), 7302.10 (rails), 7302.40 through 7302.90 (including plates and sleepers), and 7304.10 through 7306.90 (including tubes, pipes and hollow profiles).

The tariffs cover unfinished products that would be used an inputs for finished products, and not for products that incorporate or use aluminum or steel. There is a very low volume of imports from Ireland ant the UK under the covered tariff headings. As stated above, the bottom line is that US steel/aluminum tariffs should not impact most Irish or Northern Irish companies.

 

How to Open a U.S. Bank Account

Just back from a two-week swing through Belfast, Antrim (at a wonderful InvestNI program) Londonderry/Derry, Galway, and Dublin, meeting with companies looking to export to the U.S. One question that came up time and again: how can an Irish or NI company open a U.S. bank account?

Opening U.S. bank accounts has become harder because of the ‘know-your-customer’ requirements on U.S. banks by virtue of U.S. anti-money laundering regulations. In general (and keep in mind that some banks may have other specific requirements), in order to open a U.S. bank account, a bank will want to see (i) a certified copy of your U.S. affiliate’s certificate of incorporation/formation; (ii) your entity’s taxpayer ID number from the IRS; and (iii) a signed copy of your U.S. affiliate’s initial consent in lieu of a board meeting, which consent should include banking authorization language (see the sample consent here). The pain-in-the-neck part is this: you’ll need someone to actually go to the U.S. bank (with his/her passport and another form of ID) to open the account. The banks want to be sure that the account holders are who they say they are. Often, Irish/NI parent companies will open the account when one of their executives travels to the U.S. on other business.

Derry/Londonderry Doing Business in the U.S. Event–September 7

Related to yesterday’s post, I’m also thrilled to be speaking at a Doing Business in the U.S. program in Derry/Londonderry on the morning (8:30) of  September 7, at Invest Northern Ireland’s office there. I’ll also be using the Invest NI office for the balance of the 7th as my ‘office’ in case people need to speak about U.S. expansion. Looking forward to it, and thanks to the great help from @investNI, @investNI_USA, @derry_chamber, and @investdcsdc. Contact Invest NI’s Derry/Londonderry office for more information.

Galway Chamber Event: Doing Business in the U.S.

I’m thrilled to announce that I’ll be giving a talk, at the Galway Chamber of Commerce, on September 12 on doing business in the US. I’ll be presenting with Mary Rogers, Innovation Community Manager, PorterShed (@portershed) & Founder & CEO, Stateside Solutions (@StatesidePortal). The program will discuss the following topics: (i) Starting at the start: why expand to the U.S?; (ii) Can your product be sold in the US and/or are there any pre-sale registration or approval requirements?; (iii) Do you need a U.S. affiliate entity? Considerations on form, jurisdiction and tax impact of U.S. affiliate entity; (iv) IP protections; (v) Controlling the contract(s); (vi) Product liability concerns; (vii) Insulating the Irish parent; (viii) Labour/employment/immigration; and (ix) Conclusion: Moving forward. This event will include time for Q&A.

 

Location: Galway Chamber, Commerce House, Merchant’s Road, Galway Date: Tuesday, 12th September Start Time: 8am Duration: 1 hr 30minutes Price: Free to attend Register here

 

US Workforce Compliance for Irish/NI Companies

My partner Montserrat Miller is an expert on workforce compliance issues, including compliance with employment eligibility verification requirements (the I-9 form). She also has her own blog at http://www.workforcecomplianceinsights.com/. Compliance with US employment eligibility verification requirements sometimes slips through the cracks for Irish and NI companies with US employees. It shouldn’t, since the penalties for non-compliance are high. Montserrat can help Irish and NI companies navigate these compliance issues, and she’s compiled a list of resources at http://www.workforcecomplianceinsights.com/2017/07/11/how-compliant-is-your-company-with-the-form-i-9-requirements/. Check out the link, and contact Montserrat (or me) with any questions.

How to Obtain Evidence in the U.S. for International Dispute Resolution

Let’s say you have a lawsuit or an arbitration in Ireland or Northern Ireland and need to obtain evidence in the U.S. How do you do it?

My partner Gene Burd has written an article, recently published on the Young Arbitration Review, on the use of ‘1782’ actions in connection with international arbitrations. 1782 refers to the section of the United States Code that provides a process to obtain evidence in the U.S. for litigation/arbitration outside the U.S. Although Gene’s article focuses on 1782 actions in the arbitration context, the article provides valid insights for litigation.  The article can be found here. Feel free to contact Gene (or me) if you have any questions.