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Trade Associations Urge Congress to Restore R&D Tax Deduction
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By Counterman
This article, contributed by Tom Cook, is courtesy of link hidden, please login to view
All companies engaged in the global supply chain seek to lower the “landed costs” on their goods in imports and exports sales, purchasing and operations.
While there are numerous components that make up “landed costs,” duties, taxes and tariffs are a huge factor and can often be a detriment to global trade.
Duties, taxes and tariffs are costs borne by the importer as the goods enter a country. These fees are assessed by the country’s local customs authority. In the USA, this is the U.S. Bureau of Customs Border and Protection (CBP).
These fees are determined by what the product is and where it is from. The “what” is known as the HTS (Harmonized Tariff Schedule) and the “where” is the actual origin country of the product.
While some of the guidelines are standardized from one country to another, we must understand that the customs rules and their interoperation often vary differently from one country to another. Sometimes the differences are slight and in other countries the differences are huge.
The importer of record (IOR) has the primary responsibility to determine the correct HTS and origin upon entry of the goods for customs clearance in the country of import.
Most importers utilize the services of freight forwarders, customhouse brokers and/or 3PL’s to provide these clearance services, as well as rely on their expertise to accomplish the clearance process in a successful and compliant manner.
Importers may also obtain the assistance of these service providers in determining the correct HTS classification and
the origin.
Importers are legally responsible to exercise:
• Due Diligence
• Reasonable Care
• Supervision & Control
These standards are the responsibility of the importer of record (IOR). If the IOR outsources the responsibility to a customs broker, under the “supervision & control” standard, the IOR is still responsible for supervising and controlling for the statements and information provided by this third-party on their behalf.
This standard requires the importer to have a working knowledge of the import regulations and be able to properly supervise their outsourced provider.
Customs recognizes that an importer may need guidance in the clearance process. This may be received from CBP, a qualified consultant, a customs attorney or a practitioner that has expertise in customs regulations.
It is critical to understand the steps in managing duties, taxes and tariffs. The first is to understand how the import regulations apply, followed by learning what measures can be taken to mitigate the risk and cost associated with duties, taxes and tariffs. If the origin and the classification are the controlling factors, it is important to understand that this is where the answers lie to mitigation.
For example, Section 301 tariffs on certain goods exported from China into the U.S. may add as much as a 25% surcharge to the import landed cost. This resulted in many companies seeking out alternative sourcing options to avoid this surcharge.
In addressing alternative sourcing options, nearshoring, reshoring and friend shoring – countries such as but not limited to Vietnam, S. Korea, Taiwan, Malaysia – all presented viable options.
In some situations, the acquisition cost may have been higher, but when calculating the landed cost, with the 25% duty eliminated, the comparison demonstrated a viable alternative to the importer.
Companies involved in aftermarket sales, where margins are tight, can benefit from this type of analysis and mitigation strategy.
Another strategy involves the Harmonized Tariff Schedule, or what the product is, from CBP’s perspective.
First, we want to make sure we are utilizing the proper HTS number. It can be possible that the correct HTS number, when changed, will offer a lower duty rate.
Secondly, what we refer to as “Tariff Engineering” is a legitimate manipulation of a product’s design or materials that impacts its classification and potentially lowers the duty rate.
The choice of materials, the functionality of the product, product specifications or qualities all impact how a product is classified.
For example, changing the make-up of the materials utilized in fabrics, such as the mix of cotton, rayon, nylon, etc. will change the classification of a product. Features such as changing the product to be waterproof and adding other qualities may also change the tariff classification and impact the duty rate.
Another example may be how the product is designed; for example, for personal utilization or for commercial application, may have an impact.
How parts and equipment are assembled and utilized can also have an impact on the classification as well as the origin.
The amount of “value-add” in the manufacturing or assembly process can also impact how CBP will view the origin and/or the HTS, therefore directly impacting the duty rates.
Tariff Engineering requires R&D, engineering, and technical support, as well as guidance from trade professionals that can assist in interpreting the import regulations and research prior CBP rulings.
CBP has a great resource called CROSS which is a searchable database of CBP rulings that can be retrieved based on simple or complex search characteristics using keywords and Boolean operators. CROSS has the added functionality of cross-referencing rulings from the initial search result set with their modified, revoked or referenced counterparts.
Rulings collections are separated into Headquarters and New York and span the years 1989 to present. Collections can be searched individually or collectively.
CROSS can be an excellent resource in managing the impact of duties and tariffs on
landed costs.
Duties, taxes and tariffs often emanate from political and economic positions from government offices and agencies. We witnessed this when President Trump put forward the 232 and 301 Tariffs in his first year in office.
China then secured retaliatory duties. We have seen these similar actions in the EU, Australia, Mexico and Canada.
Personnel in the aftermarket engaged in global supply chain purchasing, sales and operations need to pay attention to the political and economic situations in the countries they do business in, as regulations impacting duties and tariffs change frequently with both positive and negative consequences.
Additionally, trade organizations’ lobbying efforts should be followed with the Executive Branch and Congress. These efforts seek to keep open free trade concepts and minimize the utilization of duties and tariffs as political and economic weapons in global affairs.
Studies have been accomplished that clearly demonstrate the negative impact of tariffs on manufacturing, distribution, and trade costs in the global supply chain.
While many tariffs are designed to protect industries or certain markets, they generally wreak havoc in global trade and have negative impacts.
The automobile industry, its suppliers and ancillary industries such as the aftermarket are significantly impacted by duties, taxes and tariffs.
In controlling “landed costs,” duty and tariff mitigation as outlined above are all good strategies, but there are other options that also should be considered:
• Utilization of Foreign Trade Zones
• Consolidating Transportation Providers and Carriers
• Running annual Freight RFP’s
• Choice of INCO Terms
• Alternative Sourcing
• Free Trade Agreements
• Location and methodology in warehousing, fulfillment, and distribution
• Utilization of Technology
• Demand Planning Systems
In summary, developing strategies in tariff mitigation is a viable solution to duty and tariff management and ultimately lowering landed costs and enhancing your company’s competitiveness in both import and export purchasing
and sales.
Thomas Cook is Managing Director of Blue Tiger International, a global consultancy advising on supply chain management, trade compliance, purchasing, trade and disruption management, global business and logistics. For more information, go to www.bluetigerintl.com. Tom can be reached directly at [email protected].
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By Counterman
The ASE Education Foundation is partnering with auto dealer associations to conduct student automotive competitions designed to increase awareness of career opportunities in the automotive industry.
“The goal of the student competitions is to connect businesses with schools and increase the interest of students, encouraging them to work and stay within the automotive field,” said Mike Coley, ASE Education Foundation president. “The most recent competition was held in December in Texas and was a big success with 40 teams competing and over 700 students participating in a career fair. These types of events are another way the ASE Education Foundation is working to reduce the industry’s technician shortage.”
Three student competitions are currently scheduled for 2024, with more being planned. Competitions are scheduled for March in Charlotte and the fall in Houston.
During the December event at Texas Motor Speedway, 117 high school seniors from ASE accredited training programs competed in the North Texas Automobile Dealers Auto Tech Competition. Dealer technicians were paired with each of the 40 teams for several weeks leading up to the event, which featured students trying to diagnose and repair bugged vehicles where the problems were notated on repair orders.
The competition format is flexible and can be modified for local or organizational needs. Unlike traditional student competitions where school instructors train and prepare students, these competitions are based on a partnership between schools and the local businesses.
The students selected for the competition job-shadow at a local employer’s service facility and prepare for the contest alongside the technicians in the shop. A list of specific skills for the students to experience is provided to each employer.
The goal is to provide real-world experience to the students while exposing them to job opportunities in the local market, the foundation noted.
To learn more about the student competitions, contact George Arrants, vice president of the ASE Education Foundation, at [email protected].
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By Counterman
Super Bowl Sunday is as much about the commercials as the game itself – and Valvoline was part of it.
Valvoline Global featured its new Restore & Protect full-synthetic motor oil in a 30-second commercial that aired during the pre-game coverage of the big game.
Valvoline Global recently announced the global launch of the premium full-synthetic motor oil. The “first-of-its-kind innovation” removes up to 100% of engine-killing deposits with continuous use, restoring engines to run like factory clean while protecting against future damage, according to the company.
“This latest addition to the Valvoline product portfolio is a paradigm shift in motor oil performance and challenges traditional thinking about the category,” the company said. “With a history steeped in trust and innovation, Valvoline has consistently been at the forefront of the automotive lubricant category.”
You can watch the Super Bowl Sunday commercial below:
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By Counterman
Valvoline Global announced the global launch of its premium full-synthetic motor oil, Restore & Protect.
Restore & Protect removes up to 100% of engine-killing deposits with continuous use, restoring engines to run like factory clean while protecting against future damage, according to the company.
Valvoline calls the latest addition to its portfolio “a paradigm shift in motor-oil performance [that] challenges traditional thinking about the category.”
“We are thrilled to introduce Valvoline Restore & Protect on a global scale,” said Jamal Muashsher, president and CEO of Valvoline Global. “This product truly redefines what motor oil can achieve and positively impacts consumers and customers like never before. Restore & Protect is a testament to our commitment to pushing the boundaries of innovation in the automotive industry.”
Restore & Protect is designed for gasoline-engine automobiles, from brand-new to older, high-mileage vehicles. The premium full-synthetic motor oil is “the culmination of three years of relentless development, resulting in Valvoline’s most technologically advanced engine oil ever,” the company noted.
Restore & Protect presents two of Valvoline’s proprietary new technologies: Active Clean, which removes deposits and restores engines to run like new; and Liqui-Shield, which works proactively to prevent deposit formation and protects against future damage.
Valvoline Restore & Protect is poised to hit shelves and Valvoline business partners globally in 2024. For more information on the technology and availability, DIY customers can visit
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By Counterman
Earlier this week, the Automotive Service Association, the Society of Collision Repair Specialists and the Alliance for Automotive Innovation sent a letter to Congress reaffirming their commitment to a 2014 national agreement on automotive Right to Repair.
In the letter, the organizations “commit that independent repair facilities shall have access to the same diagnostic and repair information that auto manufacturers make available to authorized dealer networks.”
While the organizations hailed the letter as a show of unity between independent repairers and OEMs on the principle of consumer choice, the Auto Care Association and MEMA Aftermarket Suppliers swiftly dismissed the letter as an act of subterfuge on the part of automakers.
“Auto Care Association objects to the so-called right-to-repair pact between ASA, SCRS and the Alliance for Automotive Innovation,” Auto Care President and CEO Bill Hanvey said in an email blast. “Auto Care Association, an original signatory to the 2014 memorandum of understanding, was not consulted about, was not a party to and does not support the agreement.”
Hanvey noted that neither ASA nor SCRS signed or supported the 2014 memorandum of understanding, and asserted that the associations “represent a small fraction of the independent repair market and do not speak for the automotive aftermarket.”
“Auto Care Association, on the other hand, is a national trade association representing over 536,000 companies and affiliates that manufacture, distribute and sell motor vehicle parts, accessories, services, tools, equipment, materials and supplies,” Hanvey said. “Auto Care Association serves the entire supply chain of the automotive aftermarket for the nation’s 292 million registered motor vehicles. Those businesses include over 280,000 repair facilities and 915,000 technicians nationwide.”
Ultimately, Hanvey called the agreement “a thinly veiled response by the automotive OEMs to HR 906: The REPAIR Act.”
“While the agreement purports to be relevant, all it does is affirm the 2014 memorandum of understanding rather than implement a meaningful solution to preserve the entire automotive aftermarket and the competition and consumer choice that it creates,” Hanvey said. “The agreement between the Alliance, ASA and SCRS is not only designed to create confusion, but also has numerous flaws.”
Among those flaws:
The agreement is non-binding. There is no way to force OEM participation or to enforce OEM compliance. The agreement does not cover all automakers and there is no requirement for new OEMs to join. The agreement does not obligate OEMs to provide vehicle owners or aftermarket direct access to telematically generated repair and maintenance data. Instead, the OEMs have agreed to make repair and maintenance data available through OEM-controlled systems and tools. Regarding telematics and the wireless transmission of vehicle repair and maintenance data, the OEMs only agree to give access if the data “is not otherwise available” through the OBD II port. This means an independent shop could be forced to subscribe to multiple third-party tools to get access to telematics data, rather than through a single direct source. The agreement fails to address the safety and security of the wirelessly transmitted vehicle data. “The efforts we’re seeing this summer to stop our industry’s momentum of securing our right to repair are only ramping up,” Hanvey concluded. “From the recent NHTSA letter to this new right to repair ‘pact’ from the automakers, there has never been more of a critical time to speak up and make our voices heard in Washington. I hope to see you all in D.C. with us this fall during our Legislative Summit on Capitol Hill, where we will speak in one unified voice with members of Congress on the importance of supporting our industry by passing the REPAIR Act.”
‘Agreement Falls Short’
In a statement, MEMA Aftermarket Suppliers called the agreement “a step in the right direction to ensure that consumers are protected.” However, the pact “falls short of all the protections necessary to ensure consumer choice now and into the future for all parties, not only signatories of the pact.”
“As a transportation industry, we believe that we have one opportunity to pass federal legislation and that legislation must include the ability to prioritize and protect consumers’ access to both light-duty and heavy-duty vehicle repair and maintenance through all iterations of vehicle technology on the road today and to come,” MEMA Aftermarket Suppliers added.
The association asserted that Right to Repair legislation must include:
All vehicles in operation – light-duty, medium-duty and heavy-duty Access to telematics and diagnostics data beyond that available just through the OBD II port An enforcement mechanism The ability for independent repair shops, using bi-directional communication, to update vehicles and parts to the latest software Addressing the risk of repair monopolies Language to protect consumers’ access to both light-duty and heavy-duty vehicle repair, maintenance and parts of their choosing through all iterations of vehicle technology on the road today and to come “The agreement does advance the conversation around right to repair and consumer choice, but if automakers and repair shops are prioritized over consumers, fair competition and a free market would not be realized,” the association said. “As a key stakeholder in protecting consumers’ rights and an essential part of the value chain, MEMA Aftermarket Suppliers must be a part of the conversation.
“MEMA Aftermarket Suppliers welcomes the opportunity to work with all parties to align on a federal solution that reflects the principles of consumer choice and a free market, includes the expertise of the supplier community, has a mechanism for real enforcement and prioritizes consumers, their safety and their economy – and the innovative industry we serve. The Right to Equitable and Professional Auto Industry Repair (REPAIR) Act (H.R. 906) addresses these needs, and MEMA Aftermarket Suppliers continues to support this bill that addresses the above concerns and creates a repair ecosystem that puts consumers at the center.”
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