March 20 (Reuters) - Washington's temporary relief for
import tariffs on goods covered under the U.S.-Mexico-Canada
Agreement (USMCA) has triggered a spike in US companies seeking
exemption under the trade deal, industry experts said.
The White House slapped fresh 25% tariffs on goods from
Canada and Mexico on March 5, but later announced that levies on
goods covered under the USMCA would be delayed until April 2.
The USMCA grants preferential treatment to goods either
sourced from or having a minimum percentage of value added in
any of the three countries.
"We're seeing importers rush to become USMCA certified ...
the risk is just too high not to," said Brian Riley, senior vice
president of customs house brokerage at logistics firm GEODIS.
Some of the companies, mostly small businesses reliant on
cross-border trade, are scrambling to verify if their products
already qualify for exemptions.
At present, only 37.8% of imports from Canada and 48.9% from
Mexico are eligible for duty-free status under the USMCA, an S&P
Global Market Intelligence report showed.
To qualify, an importer must analyze the bill of materials -
a list of all parts and materials used in a product - to
determine if their goods meet requirements.
Mike Short, president of Global Forwarding at freight
forwarder C.H. Robinson ( CHRW ), said there was an increase of USMCA
qualification and tariff classification requests even before the
official announcement.
"Now that the official amendments are published, these
requests have only increased, and we expect this trend to
continue."
Businesses earlier refrained from getting the certification
due to its complexity and costs of meeting requirements,
especially since their goods were already entering the U.S. duty
free.
Even after certification, a company has to maintain detailed
records for up to five years after import and ensure continued
compliance.
"Companies are hedging their bets by becoming USMCA
certified because what's to say the exemption may not continue
after April 2? Or, if the exemption expires then, what if it
returns in the near future?" GEODIS' Riley said.
The uncertainty has prompted companies to overlook immediate
cost-savings.
"If you are slapping 25-50% tariffs on everything, companies
that never previously needed to are now forced to evaluate if
this (USMCA certification) is an option," said Sung Choi,
vice-president of product management at supply chain solutions
provider e2open.