Trade compliance officers are scrambling — they knew change was afoot but no one expected the speed and wide scope of upheaval in the trade arena. One day presents potential changes with serious ramifications.
In this turbulent era, legal and compliance have to maintain calm, avoid over-reaction and remain close to their corporate values and principles. Legal and compliance have to present a steady confidence. Senior leadership has been sounding some alarms as to the impact of this changing environment; legal and compliance have to contrast this by careful risk analyses.
This set of challenges requires legal and compliance officers to understand the law and regulations surrounding trade policies and the ability of the Trump Administration to use these tools to accomplish stated goals. This new perspective sets up is own set of fresh risks and need for controls.
The Trump Administration’s focus is clear — trade imbalances, unfair trade practices and currency manipulation. It is this broad framework that is now the set of talismanic issues for every part of the federal government. Tariffs is one tool for addressing these concerns but the federal government has many other at its disposal to counteract some of these issues.
The Customs and Border Protection agency is a major player in this area. However, the Trump Administration may be examining ways to supplement this tariff enforcement function to enhance its ability to collect external trade revenues. The Trump Administration has been examining the use of third-country assembly operations of Chinese products, which are eventually used in U.S. manufacturing processes, as a significant loophole employed to avoid U.S. tariffs imposed on Chinese manufacturers. As focus on this issue grows, foreign companies that employ such mechanisms may face increased taxes or charges beyond tariffs.
The Trump Administration is in the process of launching a broad examination of exchange rate policies aimed at identifying currency manipulators that operate to frustrate balance of payment adjustments or give trading partners unfair advantages. Those countries, like China, that have large trade deficits with the United States will face a U.S. response. As a result, the Trump Administration may be on the verge of returning to policies designed to lower the value of the U.S. dollar overseas as a way to curb such activities by foreign trading partners.
In other trade areas, the Trump Administration will be weighing the benefits and costs associated with existing free trade agreements. This could lead to revision of all of the U.S.’s free trade agreements — a significant change in U.S. policy.
With respect to dumping and countervailing duty laws, the Trump Administration may change existing subsidy programs, cost adjustments and heighten enforcement actions against trading partners. Again, this adjustment could mean real changes in the handling of lengthy, trade litigation programs. Annual adjustments and other programs could result in increases in duties and fees paid foreign trading partners to benefit U.S. companies.
Another targeted area for reform is the current “de minimis” exception to tariff and import regulations that have been abused in the import of counterfeit products and contraband drugs. Fentanyl and its precursors, and counterfeit goods that pass through the Mexican border have been increasing through use of this exemption.
A further area for focus is the Trump Administration’s examination of foreign countries that impose U.S. citizens and corporations to discriminatory or extraterritorial taxes. This broad examination is unprecedented and creates a real threat to foreign trading partners that maintain severe tax programs that impact U.S. citizens and businesses.
In the government contracting area, companies that are required to comply with Buy American and Hire American programs may receive some further benefits and support. The Trump Administration may key these areas for a fresh set of requirements that could enhance U.S. benefits and increased business opportunities.
