US Customs Alerts on Glitch Affecting Tariff Exemption for Freight, Causing Supply Chain Uncertainty

On Friday, U.S. Customs and Border Protection issued a notification regarding a system glitch affecting the exemption of freight from tariffs, particularly impacting shipments from China that were already in transit during the recent shifts in tariffs policy. The alert also encompassed trade from nations currently under a 90-day pause imposed by the Trump administration.

Details of the Glitch

The alert detailed that the entry code utilized by U.S. shippers to obtain freight exemptions was non-functional, prompting Customs to conduct a review of the issue. In light of this, filers were advised to transmit cargo release forms separately and follow up with the summary filing once the problem was resolved. This deviation from the usual protocol was recommended to keep the cargo moving, allowing importers to file the cargo release form immediately and defer the financial form submission until the glitch was rectified.

Impact on Tariff Collection

As a consequence of the glitch, it was highlighted that the tariffs were not being collected by the U.S. government. The affected tariffs were based on the sailing date, specifically the date the freight departed the factory or warehouse. This "on the water" clause applied to all freight bound for the U.S. that had been in transit prior to the April 5, 9, and 10 tariff announcements, despite the increase in China tariff percentages to 145% and the imposition of a series of new tariffs.

Customs Update and Industry Concerns

U.S. Customs and Border Protection indicated that an update would be provided once the issue was resolved. This situation posed yet another challenge for U.S. shippers and the supply chain amidst ongoing uncertainty and apprehension surrounding tariffs policy. It raised pertinent questions regarding Customs' capability to manage the new policy and effectively collect the tariff revenue crucial to the economic objectives of the Trump administration.

Confusion and Challenges for U.S. Companies

Amidst the evolving landscape of tariffs, U.S. companies and industry groups were grappling with the interpretations of various executive orders, social media posts, and customs alerts. The ambiguity surrounding the commencement of the new tariffs, as articulated by President Trump, created confusion regarding their implementation. Jarred Varanelli, vice president of US sales at logistics firm Savino Del Bene, noted the challenges faced by customs brokers in navigating the constantly changing regulations.

Despite President Trump's assertions regarding the enforcement and collection of tariffs, U.S. shippers communicated to CNBC that they had not been charged higher tariff rates on their containers, including those that arrived recently. This inconsistency further compounded the uncertainty surrounding the tariff landscape.

Glitches and Their Implications

Dewardric McNeal, managing director and senior policy analyst at Longview Global, acknowledged the occurrence of glitches in such systems but emphasized the unfortunate timing of this particular issue. He expressed concerns about Customs' ability to keep pace with the rapid implementation of tariffs and questioned the adequacy of the current infrastructure to manage the evolving policy landscape.

Recommendations from Customs

To mitigate the impact on freight movement, Customs advised firms to pay the duties and tariffs within ten days of the cargo's release, anticipating that the glitch would be resolved by that time. While this recommendation was aimed at facilitating the flow of goods, it also introduced additional paperwork for U.S. companies already grappling with the complexities of the evolving tariff landscape.

Ongoing Negotiations and Business Anxiety

Simultaneously, the U.S. was engaged in negotiations with over 75 countries on tailored tariff deals, as outlined by President Trump. However, the uncertainty prevailing at Customs entry points was exacerbating the overall business anxiety, prompting companies to reassess their expansion plans and financial strategies. Rick Woldenberg, CEO of Learning Resources, expressed apprehension about the potential impact of the trade policy on small businesses, emphasizing the interconnectedness of various sectors and the potential for widespread disruption.

In light of the prevailing uncertainties, Woldenberg underscored the challenges faced by businesses in making informed decisions, lamenting the shift from growth-oriented planning to mere survival. He cautioned that the trade policy could have far-reaching consequences, not only for businesses but also for the banking and insurance industries serving both large and small enterprises.