NAFTZ Chair Says EO Language on FTZs Undercuts Trump's Goals
National Association of Foreign-Trade Zones Chair Shannon Fura, a founder of Chicago law firm Page Fura, said the language in President Donald Trump's recent executive orders creating new tariffs, which say that goods must pay tariffs before entering FTZs, "are handcuffing some of the benefits" that FTZs are designed to provide.
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Fura was a panelist on a Washington International Trade Association webinar this week aiming to provide a snapshot of how the recent tariffs on Canadian and Mexican goods are affecting traders and businesses.
She said that the founding of FTZs in the 1930s was spurred by the higher tariffs imposed in the Smoot-Hawley bill. They are designed to allow the import of goods tariff-free either for reexport or to allow the foreign content to benefit from a lower tariff rate after the input is manufactured inside the zone.
"You have merchandise that’s going into a foreign-trade zone that’s being treated as if it’s being imported directly into the U.S.," she said. "That will disincentivize the use of the program." She said the FTZ program makes exporting manufactured goods more competitive, so ending that benefit is counter to Trump's desire to expand domestic manufacturing.
She said NAFTZ is "trying to educate Congress on its own program," in the hope of getting these rules reversed.
Fura, who is also a licensed customs broker, also talked about how the fast pace of changes to tariffs is making it hard for CBP and customs brokers to adjust -- and, in the case of the USMCA carve-out to the 25% tariffs, is making businesses change their compliance decisions on a dime.
"There’s no doubt companies have weighed the cost of compliance with the rules" in the FTA, and when the alternative was a low-most favored nation tariff, or even no tariff, they chose not to collect the information to see if their imports from Mexico or Canada met the product's rule of origin.
With the tariffs under the International Emergency Economic Powers Act, they are reevaluating past decisions on USMCA qualification, she said. "We would expect the use of the program to increase," she said.
However, the rush to certify could have short-lived benefits. "It remains to be seen if qualifying for USMCA will still result in any benefit once April 2 arrives," she said.
Fura mentioned the new Section 232 tariffs on the aluminum or steel content of products that are considered derivatives but that are outside the traditional steel or aluminum chapters in the Harmonized Tariff Schedule.
"The rapid and frenetic pace and inconsistency of the tariff deployment has really led to a lot of confusion. CBP is drinking from a fire hose," she said. She noted that the derivatives announcement came three hours before midnight, when the tariffs were to be collected at 12:01 a.m. the next day. "That can’t happen," she said.
She said companies are still digesting that shift, but when they don't have instructions on how to calculate the value of the content, it's difficult to know if you are compliant with your calculations.
"The brokerage community is affected as well," she said. "Will there be a period where they can go back and make corrections?"