ireland export

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

Mike Burke Economics, Smart Exporting, Terms of Trade , , , , , , , , , ,

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.

The Second Thing You Should Do…

Mike Burke Formation Issues, Intellectual Property , , , , , , , , , ,

After taking the survey at http://agglaw.polldaddy.com/s/irelandnisurvey and subscribing to this blog (see left column)…

Register the IP you’ll use in the US, most likely your trademarks. Many Irish and Northern Irish companies mistakenly believe that their home jurisdiction trademark registrations will be effective in the US. Nope. Also, some will think that the Madrid Protocol causes their home jurisdiction approvals to be effective in the US.  Nope. The Madrid Protocol is useful in determining applicant priority, but doesn’t operate to extend a home jurisdiction registration.

I always encourage Irish and Northern Irish companies to inventory their IP that they intend to use in the US before they expand to the US. Part of that effort is to ensure that we’ve properly protected what needs to be protected, and part of it is to ensure that, to the extent needed, any intercompany agreements have the proper scope.

Logos, trade names, product names, etc., can be trademarked here. The US is not a first-to-file trademark registration jurisdiction (where the first to file may prevail even if they are not the first to use–China is, for example, a first-to-file jurisdiction). And, yes, the US does allow for common law trademarks that arise from usage. But the most effective way to protect the value of those marks–the value built in Ireland and Northern Ireland and leveraged in the US–is to register. A basic trademark registration can cost less than $2,500 (with no opposition or other weird developments), and that’s a small price to pay.

The reason I suggest that this is the second thing to do is timing–the USPTO takes a little while to review applications, and may have questions. This isn’t to suggest that you wait on US expansion until after you obtain appropriate registration–you shouldn’t–but you should have your registrations in motion (submitted) when you hit the US market.

The First Thing You Should Do…

Mike Burke Distribution Agreements, Economics, Life Sciences, Smart Exporting , , , , , , , , ,

Well, after taking the survey at http://agglaw.polldaddy.com/s/irelandnisurvey that is…

The first thing you should do when considering whether to export your product to the United States is determine whether the product can be marketed or sold in the United States, or if there are license or registration requirements in connection with marketing or selling your product here.  From time to time, I have seen companies go through the time and expense of setting up operations here or take other significant steps, only to discover that their product either needs prior approval/registration to be marketed or sold in the US or can’t be imported here at all.

There is an obvious reason to think of this issue first–you don’t want to waste time, effort or money if they US market is closed to your product, or if your product needs a license/registration to be sold here.  You should take into account the time and cost of a license/registration process when building and analyzing the economic/business case for expansion to the US market. Another, perhaps less obvious, reason is timing–you want to build enough lead time for your product launch in the US to account for any licensing/registration issues. You don’t want to leap into the US market without having a properly registered/licensed product.

Many products don’t need a license or registration to be marketed and sold here. But several products do, including products in areas where Irish and Northern Irish companies do well:

  • Pharmaceuticals and medical devices require authorization from the FDA to be imported, marketed, and sold here.
  • Certain ingredients in cosmetics are not allowed in the US (some ingredients may be banned on a state-by-state basis).
  • Food and drink imports may need prior approval from the US Department of Agriculture.
  • Medicinal foods require prior approval from the FDA.
  • Certain consumer products–especially those that are used by children–may need to be reviewed by the US Consumer Products Safety Commission.

There are other products that require license/registration to be marketed and sold here.

The primary observation of this post is that you should be sure whether, and on what terms, your product may be imported, marketed, and sold in the US before you set up a affiliate, create a distribution network or take any other substantive step to expand here. It’s a small up-front expense compared to the expense of finding out later and having to correct a mistake.