2021 Processed Foods Report

Josh Gellert
Camerican International

I was hoping my second and final report as chair of AFI’s Processed Foods Section could focus on a different topic than last year. However, tariff issues continue to plague members of AFI’s Processed Foods Section.

Tariffs and the threat of tariffs create uncertainty for everyone in the supply chain. Rather than get into a philosophical discussion on the overall effectiveness of tariffs, I’ll instead provide an update on where things stand on four tariff-related issues impacting our section.

The first two involve punitive tariffs levied by the Trump Administration. China is the longer running of the two disputes. There are five lists of existing and potential tariff items. Agricultural products were spared on the first two lists. We weren’t so fortunate on the third and fourth lists. In fact, hundreds of food items were included on the third list and continue to be subject to an additional punitive duty of 25 percent. The fourth list also contained hundreds of food items. Duties of 15 percent were imposed on Sept. 1, 2019. Following the announcement of a partial agreement between the two countries, the U.S. reduced the duties on the items on that list to 7.5 percent as of Feb. 14, 2020. Imposition of tariffs on the fifth proposed list, which contains only a few food items, was postponed following the partial agreement.

While we’re all pleased to see some progress, U.S. companies are still paying penalties designed to punish China and there’s still no indication as to how long the tariffs will remain in place. There’s also no way to plan for what might happen if the negotiations hit a roadblock. 

The Biden Administration has signaled a more trade-friendly approach in international affairs, though with it being so early in the term, it’s not clear yet how dealings with China will be addressed.

We’re all happy to see some progress in the U.S.-EU dispute on aircraft parts. A four-month suspension of punitive tariffs related to this dispute is in place from March 11-July 11. That’s a relief for anyone importing products subject to those tariffs but we’ll all rest easier when a permanent solution is announced. But as with all these situations, the threat of renewed tariffs on products on the existing list and/or other products that might be added creates complications in purchasing and shipping decisions. 

Two other tariff-related issues – both of which involve tariff relief that expired at the end of 2020 – are of concern for AFI’s Processed Foods Section. As has been the case since the middle of 2020 on both, we’re at the mercy of Congress. Both have support among members of Congress; it just seems to be a matter of getting either or both issues to the forefront.

One program is the Generalized System of Preferences. GSP has been around since 1975 and gives duty-free treatment to some products from developing countries. It needs to be renewed every few years and that’s where the problems arise. Each time Congress begins to discuss renewal, one or more members of Congress holds things up by requesting changes be made to the program. So, for the past several renewal cycles, the program has expired until Congress, well after the fact, decided to renew the program with no changes – with a promise to make changes before the next renewal.

That’s where we are today. The program is in limbo; those bringing in product normally covered by the program are holding their collective breath, hoping the program is renewed retroactively and that no changes are made that would impact planned purchases.

We’re in the same boat with another tariff issue. As it’s done since the early 2000s, AFI coordinated efforts to help its members seek temporary duty suspensions on several products via the Miscellaneous Tariff Bill. 

Through the MTB, requests are made for temporary duty reductions or eliminations on products where there is little or no domestic production. Essentially, the MTB allows for a reduction in duties collected for each Harmonized Tariff Schedule number submitted of up to $500,000 per year. So, every time AFI is successful in getting items included on the MTB, we’re eliminating up to $1.5 million in costs from the system for each of those HTS numbers over three years. It’s a process that’s supposed to take place every three years, though Congress has not always kept to that schedule. Though Congress doesn’t keep to its schedule, those of us filing MTB petitions must. The current suspensions expired at the end of 2020 and as with GSP, we’re waiting on Congress to act.

Ongoing updates on these tariff issues serve as yet another example of the benefits of AFI membership, as member companies have better intelligence to rely on in making purchasing and shipping decisions.