The Economic Prosperity Deal between the United States and United Kingdom took a significant step toward implementation yesterday with the release of a Trump Administration Executive Order detailing imminent U.S. tariff changes on imports of UK goods. Three major changes are expected to take effect: (1) a 10%, 100,000-vehicle quota on UK automobiles, (2) a 10% tariff on certain UK auto parts, and (3) 0% tariffs under Section 232 of the Trade Expansion Act of 1962 and the International Emergency Economic Powers Act (IEEPA) on UK civil aircraft, engines, and parts. These tariff changes will occur with further publications in the Federal Register, expected in the near future.
The EPD “General Terms” Take Practical Shape
The United States and UK previously announced “General Terms” for the Economic Prosperity Deal (EPD) on May 8. The “General Terms” set forth non-binding commitments each country had made to the other in principle and were generally aimed at enhancing bilateral trade between the countries. Major commitments on the U.S. side included the following:
- Section 232 Autos Tariffs: Creation of a 10%, 100,000-vehicle tariff-rate quota (TRQ) for certain UK vehicles and an undefined “arrangement” for auto parts.
- Section 232 Steel & Aluminum Tariffs: construction of a quota at MFN rates for UK steel and aluminum and “certain” derivative steel and aluminum products.
- Pending and Future Section 232 Investigations: “significantly preferential” outcomes for the UK.
The details of the foregoing arrangements were not, however, spelled out in the May 8 General Terms announcement. In addition, the General Terms provided for several undertakings by the UK, in areas such as trade liberalization and supply chain security. Thus, at the time of the May 8 announcement, the sequence in and timeline over which each side’s various commitments might be implemented was not yet clear. With yesterday’s Executive Order (EO), importers and other U.S. trading partners engaged in negotiations have some further clarity on the details, timing, and sequence of EPD action anticipated under the May 8 “General Terms.”
More Clarity on Tariff Reductions, Including Reciprocal Tariffs
The UK alone was excluded from the Trump Administration’s June 4 increase in Section 232 steel and aluminum duties from 25% to 50% — an early sign that the EPD would translate to real-world tariff relief.
Yesterday’s EO goes a step further, by reducing tariffs applicable to UK goods beyond the baseline that existed when the General Terms were first announced. Changes will soon be implemented for automobiles, automobile parts, civil aircraft, and civil aircraft parts. For other articles of steel, aluminum, or their respective derivatives, further tariff changes remain in the planning stage.
First, the 100,000-vehicle tariff-rate quota (TRQ) on automobiles that are products of the UK will apply an in-quota Section 232 tariff of 7.5%, plus the 2.5% MFN rate (10% total). Although the EPD General Terms previously provided for a “10%” rate, it was unclear from the text whether this referred to a combined tariff rate, or only the Section 232 tariff rate. Yesterday’s EO clarifies that it is the former. This TRQ will take effect 7 days after the EO is formally published in the Federal Register.
Second, the “arrangement” reached for automotive parts will likewise apply a combined tariff rate of 10%, inclusive of the MFN rate. Because every automotive part subject to the Section 232 tariff is not subject to an identical MFN rate, the Section 232 tariff rate applicable to auto parts will vary. Unlike the vehicles themselves, the EO does not indicate any quota applicable to automobile parts. Nonetheless, automobile parts claiming the 10% rate must be products of the UK and for use in automobiles that are products of the UK. This change will be effective when administering agencies publish detailed HTSUS modifications, sometime within 7 days after the EO is published in the Federal Register.
Third, products of the UK that fall under the WTO Agreement on Trade in Civil Aircraft (e.g., civil aircraft; civil aircraft engines; other parts, components, or sub-assemblies of civil aircraft; and ground flight simulators) will be exempt from IEEPA Reciprocal Tariffs and Section 232 tariffs on steel, aluminum, and their derivatives. This is a meaningful expansion of the EPD General Terms, which had not mentioned any change to the IEEPA Reciprocal Tariffs. Like the change to the tariff rate applicable to automobile parts, this will be effective when administering agencies publish detailed HTSUS modifications, sometime within 7 days after the EO is published in the Federal Register.
Finally, the Section 232 TRQs on steel, aluminum, and their respective derivative articles referenced in the EPD General Terms have yet to take shape. Yesterday’s EO instructs the Secretary of Commerce (Commerce) to “design and establish” TRQs for such articles, but leaves the “when,” “whether,” and “design” of the TRQs up to Commerce, in consultation with USTR. The factors Commerce is instructed to consider suggest that, at base, Commerce is to await further progress by the UK in implementing the economic and supply chain security directives of the EPD.
Adjusting Supply Chains and Negotiating Settlements
The attorneys, licensed customs brokers, compliance professionals, economists, and trade specialists of Cassidy Levy Kent regularly assist companies in evaluating their supply chains to ensure compliant market access and adjust for tariff-related developments, both mitigating burdens and taking advantage of opportunities. Cassidy Levy Kent also leverages its thorough understanding of relevant legal regimes to advise governments on tariff policy and procedures.