Trump's Proposal for an "External Revenue Service" to Collect Tariffs
Trump’s proposal to create an "External Revenue Service" signals major shifts in tariff policies. How could this affect global trade?
What Questions I Will Answer in this Blog:
What is the "External Revenue Service" proposed by President-elect Trump?
How would this new agency affect the current customs and tariffs system?
What could this mean for U.S. importers, exporters, and global trade?
Introduction
In a bold statement this week, President-elect Donald Trump announced plans to create an "External Revenue Service" (ERS), an agency intended to collect tariffs, duties, and other revenue from foreign sources. If implemented, this significant policy change could reshape international trade, with potential impacts for customs professionals, importers, and exporters alike. This blog explores the implications of this proposal, offering an expert perspective on how it might affect global trade dynamics.
"The world of customs and trade is constantly evolving. We must stay informed and adaptable to respond to these changes with precision and professionalism." – Arne Mielken, Managing Director of Customs Manager Ltd.
Abbreviations I Use in This Blog
To facilitate understanding, I'll define the abbreviations used throughout this post:
CBP: U.S. Customs and Border Protection
DHS: Department of Homeland Security
ERS: External Revenue Service (proposed)
What Is the "External Revenue Service" (ERS)?
President-elect Trump’s proposal for the creation of the "External Revenue Service" has stirred conversations across the trade industry. According to his announcement, the ERS would be tasked with overseeing the collection of tariffs, duties, and any other revenue sourced from foreign entities. In essence, it would mirror the role of the Internal Revenue Service (IRS), but with a focus on tariffs rather than tax collection within the U.S.
Why is this important?
The ERS is intended to ensure that foreign trade partners, such as Canada, Mexico, and China, pay their "fair share" in tariffs. It represents a shift away from the current system, where U.S.-based importers of foreign goods are responsible for paying tariffs, directly to the U.S. government through Customs and Border Protection (CBP).
This move is part of a broader push to implement more stringent tariffs on goods coming into the U.S. from its major trading partners. Under the proposed system, the U.S. would increase tariffs, with the goal of addressing perceived trade imbalances. If enacted, these changes could have profound effects on customs practices and the global trade landscape.
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How Will This Affect U.S. Importers and Exporters?
The establishment of the ERS could lead to several changes that U.S. importers and exporters need to be aware of. Customs professionals, customs agents, and clearance specialists will likely be at the forefront of navigating these new tariffs and revenue collection methods.
1. Increased Tariff Rates
Trump has already indicated that, on his first day in office, he plans to enact tariffs of 25 percent on Canadian and Mexican goods, as well as an additional 10 percent tariff on all Chinese goods. While this directly impacts U.S. businesses importing from these countries, there are also broader implications for customs compliance.
What does this mean for customs agents? For customs agents and professionals, these increases in tariffs will necessitate thorough planning and a deeper understanding of new regulatory structures. Importers will need more detailed and frequent advice on how to comply with these changes and reduce the financial risks involved in non-compliance. It is also likely that we will see more audits and scrutiny of trade documentation to ensure tariffs are being correctly assessed and collected.
2. A New Layer of Complexity in Trade Compliance
As the ERS takes over tariff collection, customs professionals will need to navigate new structures for compliance. The ERS, unlike CBP, would likely be focused exclusively on external revenue, meaning U.S.-based customs officers may be tasked with ensuring that the correct amounts are being paid. This could mean increased administrative burdens for those in the trade and customs sector, as professionals must work closely with the ERS to ensure proper tariffs are calculated and collected.
3. Potential Disruptions in Trade Relations
There are potential risks for U.S. exporters as well, particularly those dealing with the countries targeted by these tariffs. As trade relations shift, there could be ripple effects that impact the stability of global supply chains. While some of these tariffs may be viewed as a way to bolster U.S. manufacturing, the retaliation from trading partners could complicate customs clearance procedures, leading to longer delays, increased costs, and more paperwork.
Could the "External Revenue Service" Be the Future of Tariff Enforcement?
The idea of an ERS has sparked significant debate, with critics questioning whether this new structure would be more efficient than the current system handled by CBP under the DHS.
Efficiency vs. Bureaucracy
Supporters of the proposal argue that the ERS could streamline the collection of tariffs and duties, creating a dedicated agency to handle foreign trade revenue. However, detractors worry that establishing another layer of bureaucracy could slow down the customs clearance process, creating inefficiencies and increasing costs for businesses. The risk is that businesses could face additional delays, making it harder to get their goods to market.
Trade Wars and Economic Impact
The creation of the ERS could also further escalate tensions with major trading partners. Countries such as China, Mexico, and Canada could retaliate with their own tariffs on U.S. goods, potentially triggering a trade war. This would directly affect businesses in both the U.S. and abroad, particularly in industries like manufacturing, agriculture, and technology.
Arne’s Takeaway: Navigating the Future of Tariffs
The concept of the External Revenue Service is a bold step towards shifting the financial burden of trade tariffs onto foreign nations. As a customs professional, it’s essential to stay ahead of the curve by understanding how these potential changes could impact trade policies, compliance, and international relations. You should prepare your clients for shifts in tariff rates and the potential for new regulations.
This development brings new complexities to customs clearance and enforcement. You need to adapt to these changes with integrity, professionalism, and a high level of attention to detail. It is crucial to remain vigilant as the global trade environment evolves.
Expert Recommendations:
Stay informed: Regularly check for updates on trade policies and new tariff schedules, especially regarding U.S. trading partners. Read The Customs Watch USA.
Prepare for increased documentation: Anticipate more rigorous customs procedures with the possible new tariff systems.
Offer proactive advice: Guide your clients through potential tariff hikes and what steps they need to take to avoid penalties and ensure compliance.
Collaborate: Work closely with international partners to manage potential disruptions in trade relations.
Fancy a Call?
I offer comprehensive support for navigating new tariff regulations and the potential creation of an "External Revenue Service." I would love to talk to you about your questions and challenges related to the shifting landscape of U.S. trade policy. I offer a free expert call of up to one hour, which you can book seamlessly here: www.customsmanager.org
I provide public, in-house, and on-demand training tailored for customs professionals, importers, exporters, and their partners. Our membership services include Weekly customs trade intelligence and updates. I also offer UK import and export customs clearance services. For more details on services, visit www.customsmanager.org.
Sources That I Base Our Information in This Blog On
Analysis of recent trade policy proposals by President-elect Trump
U.S. Customs and Border Protection (CBP)
The Department of Homeland Security (DHS)
Other trade and tariff updates from major news sources
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About the Author
Arne Mielken is a customs, export control, and sanctions expert with over 20 years of experience. I have worked as executive director for many years in Big 4 Consultancy, global trade management technology companies, and various international trade and export UK and EU trade associations. I am proud to be a Freeman of the City of London and a Liveryman of the Worshipful Company of World Traders. I am also a member of many customs and export control associations, including the Customs Practitioners Group (CPG), the UK’s Association for International Trade (ACITA), and the European Forum for International Trade (EFA).
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Disclaimer
The information in this blog is for educational purposes only and does not constitute legal advice. Always consult a qualified customs consultant or legal professional regarding your specific situation. Book a free consultation with me if you need specific guidance.
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