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Trump’s 45% Tariff on Chinese Imports and How to Avoid It?

On February 10, 2017 we post we posted Border Tariff or Border Adjustment Tax or US VAT?  where we discussed that there's a lot of talk these days about borders and taxes in Washington. U.S. President Donald Trump wants to hit firms that outsource with a simple tariff on imports, but republicans in Congress have pitched a more complex idea, a border adjustment, built into a corporate-tax overhaul.

The idea is that U.S. companies that import goods in VAT countries (i.e., almost every other country in the world) are being charged with import VAT. This import VAT is creditable/recoverable for domestic importers, but not for U.S. importers. Therefore, U.S. companies that import goods elsewhere are significantly worse off than domestic traders. This is protectionism and must be retaliated against.

Now according to TradeReady  in addition to a potential border adjustment tax (BAT), President Trump has also threatened to impose a 45% tariff on imports from China. Imported goods that would be affected by this tariff include clothes and electronics. According to the Tariff Act of 1930, President Trump could impose “tariffs of up to 50% and then, if escalation was required, block imports completely.”

Those Affected Companies May Avoid The 45% Tariff On Imports By Using A Bonded Warehouse or A Foreign Trade Zone.
For example, importers bring merchandise into the U.S. that is not intended for U.S. consumption, but rather for exportation and consumption overseas; can take advantage of either a Bonded Warehouse or FTZ to bypass the 45% duties.

What is a Bonded Warehouse?

A Bonded Warehouse “is a customs regulated warehouse which must comply with strict Custom and Border Protection requirements.” According to the CPB, any merchandise that is stored in the Bonded Warehouse “is under the joint custody and joint supervision of both CBP and the Bonded Warehouse proprietor.”

What is a Foreign Trade Zone?

A Foreign Trade Zone (FTZ) is a secure area that is under CBP supervision, but is not considered within customs territory. The CPB explains that FTZs are “located in or near CBP ports of entry,” and are the American version of what are known in the rest of the world as free trade zones. Both domestic and foreign goods may be placed in an FTZ.
With an ability to curtail the possible 45% import tax by opting for either a Bonded Warehouse or an FTZ, the time to apply is now.
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Read more at: Tax Times blog

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