EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.
New legislation
Trump’s tariff playbook: how tariffs against top trading partners could backfire
The US implemented its first so-called "Trump Tariffs" on Tuesday, 4 February: an additional punitive tariff of 10% on imported products from China. Initially, extra tariffs were also imposed on products from Canada and Mexico. However, these measures have been postponed with 30 days and are expected to take effect on 1 March 2025. Canada, Mexico, and China have swiftly responded with retaliatory measures. Canada has already announced countermeasures, but their implementation has been postponed. China has announced that it will impose additional tariffs on a range of products originating from the US, including 15% on coal and liquefied natural gas, and 10% on crude oil and agricultural machinery.
The announced measures, as well as other expected measures for example related to goods originating from the EU, are expected to have a significant impact on trade globally.
In this email, we briefly outlined the potential impact of these trade policy measures and how we can further assist in proactively responding to the dynamic changes.
What does this mean for businesses?
- In 2025, all products imported into the US may be subject to a tariff of up to 60%, with retaliation measures expected from all countries targeted by the US. Concrete tariffs of 25% on most goods from Mexico and Canada and an additional 10% on goods from China are proposed/effective, with potentially other countries to follow.
- This has prompted these countries to announce retaliatory tariffs/actions, attracting additional pressure on businesses. Trump's tariffs would reorder trade flows, raise costs, and draw retaliation. This means that companies need to consider the entire supply chain from both an import and export perspective.
- A holistic view on global trade, direct tax, transfer pricing and the supply chain should be taken to assess/model potential impacts on US imports and exports, and to align on mitigation strategies and opportunities for your business.
Please appreciate that this topic is subject to change and additional news may be published after this newsletter has “gone to press”
EY also recently hosted a Webcast on this topic which can still be watched: Tariffs are here: what companies need to do now | EY - US.
EY will host another Webcast on 27 February 2025. You can register for the Webcast here.
Union Customs Code Reform (New UCC)
Since the introduction of the Union Customs Code (UCC) in 2013, various amendments and adjustments have been made to improve the legislation and adapt it to new developments, such as digitalization and changes in global trade. This ongoing process of taking action to improve and modernize the EU customs legislation resulted in the proposal by the European Commission on 17 May 2023, for what it says is the most ambitious and comprehensive reform of the European Union Customs Union since its establishment in 1968.
The Dutch customs authorities have communicated that it is expected that in 2025, a decision will follow about the new UCC.
As a reminder, this article highlights the most important proposed changes and their expected impact.
- New EU Customs Data Hub
The way of submitting and storing customs data and the interaction between customs authorities and businesses is going to change fundamentally. All pertinent information on imported products and supply chains will have to be logged into a single online environment, the so-called "new EU Customs Data Hub." Businesses will only have to submit data once for multiple consignments, aiming to reduce the administrative burden for both businesses. This automated system is also designed to provide the customs authorities with the needed level of overview and risk-analysis of supply chains and the movement of goods.
Furthermore, the current Authorised Economic Operators (AEO) program will be extended by adding a "Trust & Check" category for the most trusted traders operating in the EU market. Trust & Check traders will benefit from further reductions in the physical and document-based controls. Goods imported by Trust & Check traders may be cleared at the customs authorities in the trader's Member State, rather than at the customs authorities of the importer's Member State. Thus, these traders will have all their EU customs dealings with one customs authority. They will also be allowed to self-assess their customs duties payable and be able to receive goods without interference of the customs authorities.
The European Commission intends to open the EU-Customs Data Hub for e-commerce consignments in 2028 and for all other importers on a voluntary basis in 2032. The centralized clearance for imports of Trust & Check traders will also be implemented as of 2028. A review in 2035 will assess whether this can be extended to all traders when the EU Customs Data Hub becomes mandatory beginning in 2038.
- Establishment of a new EU customs authority
The new customs authority will take over certain specific tasks, which are momentarily assigned to the European Commission. The tasks of the new authority will mainly be focused on managing risk on a European level, and providing recommendations to member-states on how to best exercise control. Furthermore, the new EU Data Hub will be managed by the new customs authority. The European Commission stated the key function of this authority will be "to pool expertise and competence that are currently scattered across the EU to steer, coordinate and support national customs authorities in the EU." This will enable strengthened supply chain supervision with customs authorities at the EU and national level. The provisions regarding the new EU customs authority will come into effect on January 1, 2028
- Approach to e-commerce
The Commission has recognized that an increasing number of customs provisions are no longer fit for purpose due to a significant increase in trade volumes, especially in e-commerce.
Therefore, the Commission's reform also intends to remove the exemption of customs duties for goods valued at less than €150. Furthermore, online platforms will be deemed to be the importer of record to ensure that customs duties and VAT are paid at the time the customer makes a purchase on the platform. Finally, the way customs duties are calculated will be simplified for most common low-value goods. These goods will be classified in four categories, as opposed to thousands of possible customs duties categories. The new approach to e-commerce and deemed importer will come into effect on March 1, 2028.
In light of these changes, businesses will want to consider assessing their record keeping systems, evaluating if their importations are affected, or determining whether the Trust & Check category could benefit their business.