Earlier this week, President Donald Trump remarked that he is "thinking in terms of 25%" tariffs on goods imported from Mexico and Canada". A tariff is a tax levied upon imported goods. When goods enter the United States, they are classified and tariffs are assessed using the Harmonized Tariff Schedule of the United States (HTSUS), a compendium of tariff rates based on a globally standardized nomenclature.
Importantly, the tariffs are paid to the U.S. Customs and Border Protection department. This fact may have important implications under California's anti price gouging statute, Penal Code Section 396. As discussed in prior posts this week, this statute prohibits, among other things, sales or offers to sell any consumer food items or goods (as defined), goods or services used in emergency cleanup, emergency supplies (as defined), medical supplies (as defined), home heating oil, building materials (as defined), housing (as defined), transportation, freight, and storage services (as defined), or gasoline (as defined) or other motor fuels for a price of more than 10% greater than the price charged by that person for those goods or services immediately before the proclamation or declaration of emergency. However, a greater price increase is not unlawful under the statute if the seller can prove that "the increase in price was directly attributable to additional costs imposed on it by the supplier of the goods, or directly attributable to additional costs for labor or materials used to provide the services, during the state of emergency or local emergency, and the price is no more than 10 percent greater than the total of the cost to the seller plus the markup customarily applied by that seller for that good or service in the usual course of business immediately prior to the onset of the state of emergency or local emergency".
As noted above, tariffs are not imposed by the sellers of goods. Tariffs are imposed by the U.S. government. The statutory exception refers only to additional costs "imposed by the supplier of the goods" (emphasis added). Therefore, it is questionable whether the a seller may impose a greater than 10% price increase based upon an increase in tariffs imposed by the federal government. However, not allowing sellers to justify price increases based on increases in tariffs would likely have the unintended consequence of reducing supplies of much needed goods during emergency.
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