On February 1, President Trump issued a White House Fact Sheet announcing the imposition of 25% tariffs on Canadian- and Mexican-origin goods, and 10% tariffs on Canadian-origin “energy and energy resources”[1] and Chinese-origin goods. On the same day, Trump issued an Executive Order imposing these announced duties on products of Canada. While the White House has not yet made them publicly available, we anticipate the forthcoming Orders addressing products of Mexico and China will mirror the Canadian Order. These new tariffs will be imposed in addition to tariffs (including Section 301 tariffs) which may currently be in place on these goods. Unlike many of the tariffs imposed in the first Trump administration, the Orders do not provide for any process to apply for exemptions or exclusions.
As further confirmed by U.S. Customs and Border and Protection (CBP)’s announcement issued on February, 2, 2024, these new tariffs will take effect on all goods entered into the U.S. for consumption or withdrawn from warehouse for consumption on or after 12:01 a.m. Eastern Standard Time on Tuesday February 4th. The Orders provide a grace period, however, for all goods that were loaded onto a vessel at the port of loading or in transit on the final mode of transport prior to 12:01 a.m. Eastern Standard Time on February 1, 2025, so long as the importer provides a specified certification to CBP at the time of entry.
The Executive Order on Canada limits the use of foreign trade zones (“FTZs”) to manage the new tariffs by directing that all covered goods admitted to a FTZ on or after 12:01 a.m. EST on February 4 must be admitted in privileged foreign status; this ensures that they will be subject to the new tariffs upon withdrawal from the FTZ for entry for consumption into the U.S., even if they have been manufactured into goods which would otherwise not be subject to the new tariffs while in the FTZ. Similarly, the Order provides that importers will not be able to recoup these new duties through duty drawback, nor will they be able to make duty-free entries of low value ($800 or less) goods under Section 321 de minimis procedures.[3] Again, we expect the Mexican and Chinese Orders to mirror these provisions.
As had been widely expected, the authority cited by President Trump for the new tariffs is the International Emergency Economic Powers Act (“IEEPA”), which allows the President to regulate imports if he first declares a national emergency arising from an “unusual and extraordinary threat” to the national security, foreign policy, or economy of the United States. President Trump previously declared a national emergency at the U.S. Southern Border related to the flow of illicit narcotics and unlawful migrants (including foreign criminal gangs and cartels).
The Canadian Order specifies that if Canada takes retaliatory measures (including imposing tariffs on U.S.-origin products), the new tariffs on Canada may be increased or expanded in scope (the Order does not provide specifics of such potential actions), and we expect the Mexican and Chinese Orders to mirror this provision. Canada nevertheless has threatened to impose retaliatory 25% tariffs effective Tuesday February 4 in response to the new U.S. tariffs.
We expect that legal challenges to the new U.S. tariffs will be filed shortly in U.S. courts. In addition, we believe that a joint resolution of disapproval will likely be introduced in Congress to terminate these national emergencies. While we cannot predict the outcome of any such challenges with certainty, we believe that any such challenges will likely not prevent the tariffs from going into effect, at least in the short term.
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This blog is a brief summary of a client-issued memorandum. We will continue to monitor this situation closely and will report all significant developments to you, including whether a last-minute deal is reached with some or all of the targeted countries in the short period before these tariffs are scheduled to go into effect. In the interim, please do not hesitate to reach out to us with questions or requests for additional information. If you have any questions, please do not hesitate to contact Jessica Rikin (jrifkin@ofwlaw.com) or Denise Calle (dcalle@ofwlaw.com).
[1] Crude oil, natural gas, lease condensates, natural gas liquids, refined petroleum products, uranium, coal, biofuels, geothermal heat, the kinetic movement of flowing water, and critical minerals,
[2] The instructions for certification will be published in the Federal Register. The upcoming Federal Register notice will also detail the manner in which the Canadian, Mexican, or Chinese origin of the goods covered by the new tariffs will be determined; CBP confirmed it will provide more specifics, including further details on relevant updates to the Harmonized Tariff Schedule of the United States (HTSUS).
[3] CBP will provide, via CSMS, additional technical updates regarding duty-free de minimis treatment following the publication of the Federal Register Notice.
