A note by Simon Sutcliffe, a Blick Rothenberg Partner, on the impending trade war with some potential solutions:
With the EU imposing retaliatory tariffs on US made goods many firms must now consider whether they quicken or begin implementation of any production and manufacturing diversification plans. The tit for tat actions of the major trading blocs such as the US, China and the EU will only worsen in the coming weeks as the US threatens tariffs on Chinese goods beginning in early July.
Our clients who regularly import and export between these blocs should look closely at their pricing structures, shipping terms (INCOTERMS), business contracts and manufacturing locations to begin to decide whether short term or long term shifts in their manufacturing bases and contract negotiation is a consideration or a feasibility. Although, trade negotiations will no doubt follow as positions soften or deals are brokered by the various parties and WTO; it is unclear whether firms, especially with the uncertainty over the UK’s EU exit, should add this latest round of changes to their trading contingency plans.
UK/EU Firms importing from the US should consider rationalising their imports so as to only import to free circulation the stock they can be sure has a confirmed onward sale. Importing goods to hold as stock in the EU upon which import duty and Import VAT has to be paid at entry will only increase costs unnecessarily. Additionally, utilising a Customs Warehouse regime to import goods duty suspended may again manage cost effectiveness and realistic stock control in the short to medium term. Goods imported to this regime only attract duty and import VAT once they cross the threshold of the warehouse in which they are stored. Hence, stock can be imported and held in suspension until a definitive quantity for sale is known and then released .
Lastly, firms may want to examine closely their business contracts, distributor agreements and INCOTERMS to see if import costs could be equally borne by both the importer and exporter. Such INCOTERMS as DDP (Delivered Duty Paid) from the US means that the exporter bears the import taxes in the destination country.
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