AUGUST 6, 2018
A seventh-generation Wisconsin kidney bean processor and supplier recently became an unexpected victim of the Trump administration’s trade spat with Europe, a major trading partner.
The 28-nation European Union imposed tariffs on about 2.8 billion euros (over $3 billion) worth of U.S. products, effective June 20. Kidney beans, along with bourbon, peanut butter, cranberries and orange juice are also on the list.
Ahead of a June 20deadline, Chippewa Valley Bean Company (CV Bean) sent an order of kidney beans to a British client, confirming delivery on June 18. Nevertheless, documents shown to CNBC by CV Bean reveal that the shipment was hit with a UK retaliatory tax two days early.
The bill of lading, a document that confirms the acknowledgement receipt of cargo for shipment, was dated on June 18. The 25 percent tariff on kidney beans was scheduled to take effect on June 20. A UK Customs representative did not immediately reply to CNBC’s request for comment.
“That bill of lading should have exempted us from the tariff,” said Cindy Brown, president of CV Bean. The EU is CV Bean’s largest international market, accounting for 60 percent of the company’s export sales, with an annual value of $25 million.
“Our client did pay the tariff, but they told us they might not take their additional orders because the tariffs are expensive,” she added.
Email exchanges between CV Bean and their client, who requested anonymity, detail the customer’s surprise at being told by their trade adviser they had to pay the tariff, and how the company needed to file a request with European Union customs for a refund — a cumbersome process in itself.
In a message given to CNBC, the client told CV Bean that it could possibly cancel four more planned orders because the tax on each represented “the difference between profit and loss.”
Robert Gosselink, a trade law attorney and founding partner of Trade Pacific, told CNBC that in CV Bean’s case, “the bill of lading was an acknowledgement that the goods were received by the carrier on a particular date for transportation to the U.K.”
While CV Bean’s case appears isolated, it showed how tariffs are likely to impact the flow of future trade, the lawyer added. “With new tariffs, there is a dilemma and conflict over which side should be responsible for paying the additional duty cost,” Gosselink said.
“Fortunately, the EU appears to have a mechanism whereby the duty must be paid at the time of entry, … but [it] can be refunded later if documentation can establish that the merchandise was shipped prior to June 22.”
Kinga Malinowska, a European Commission spokesperson, confirmed to CNBC that officials were aware of CV Bean’s dilemma. Malinowska said that according to EU regulations, goods en route to the bloc before June 22 “are not subject to additional tariffs” — meaning CV Bean should be eligible for a refund.
Vanessa Mock, a spokesperson for the commission’s Financial Services, Taxation and Customs, also told CNBC that a claim should be submitted, which “should be treated directly by the EU custom authorities.”
Yet according to Gosselink, “the refund process is not guaranteed, and it is unclear how long the process will take. It is for this reason that potential additional duties can create a devastatingly chilling effect on trade.”
‘The uncertainty is killing us’
According to the International Maritime Organization, over 90 percent of the world’s trade is carried by sea. That made Gosselink believe that CV Bean isn’t the only exporter finding unpleasant surprises in the new tariff regime.
“Governments are imposing these new tariffs and retaliatory measures at a very broad level generally, without considering how the duties will be applied, or how exemptions or exclusions to the duties (or refunds of the same) actually will be implemented by the administering agencies,” he said. “The unpredictability of the measures is as disruptive as the measures themselves.”
CV Bean’s Brown told CNBC that although last month’s joint appearance between President Donald Trump and EC President Jean-Claude Juncker suggest a deal can be made, the tariffs are still in effect — and the collateral damage is real.
“The uncertainty is killing us. Not only do we have clients who are declining future orders, we have also had some containers refused at the port by our clients because of the tariff,” Brown said, adding that other CV Bean clients are cutting back on orders, or taking partial shipments. The uncertainty has made Brown put a stop to future investments.
“We are currently working with our clients to see what we can do and negotiate to see how we can rectify their damages,” Brown said. “Each delivery is a moving target for us where we are negotiating with the buyers.”
Brown also explained that another client forced to pay the 25 percent tariff early is now waiting for a refund — but there’s a catch. “The buyer was told that they may wait up to 12 months for the refund!”
With the political network funded by billionaire industrialist Charles Koch having unveiled a new multi million dollar campaign against Trump’s tariffs, Brown echoed a line being used in ads that will hit the airwaves this week.
“Trade is far better than aid,” Brown told CNBC. “As we look at $12 billion in aid to farmers …. it’s going to be pennies on the dollar,” she said. “Give us back the opportunity to sell our products.”