On 4 April 2025, Singapore Customs and the Ministry of Trade and Industry issued a joint advisory on Singapore’s export controls relating to advanced semiconductor and artificial intelligence (AI) technologies (the Advisory).

The Advisory emphasised that businesses operating in Singapore must act transparently and fully comply with applicable laws and regulations on export controls. Such compliance is expected to extend beyond Singapore’s own export controls, with an express warning from the Singapore authorities that they will not condone the deliberate circumvention or violation of other countries’ export controls by Singapore intermediaries or any international business using its association with Singapore.

The Advisory noted that, in recent years, export controls had been unilaterally imposed by other countries on advanced semiconductors, semiconductor manufacturing equipment and AI-related technologies. By way of example, the Bureau of Industry and Security, which is the primary agency under the U.S. Department of Commerce charged with overseeing national security and high-technology issues, has issued export control regulations relating to semiconductors and semiconductor manufacturing equipment, as well as their derivative products.

The Advisory was issued following recent enforcement actions by the Singapore authorities (for further details, see below).

Ramping-up of export controls enforcement by Singapore authorities

Singapore’s export control regime is primarily governed by the Strategic Goods (Control) Act 2022 (SGCA) and the Regulation of Imports and Exports Regulations. The SGCA regulates the transfer of strategic goods and technologies, such as dual-use goods that are capable of military application. Goods and technologies that meet the technical specifications described in the Strategic Goods (Control) Order (SGCO) are subject to controls under the SGCA. Singapore’s export controls are aligned with major multilateral export control regimes and the sanctions imposed by the United Nations Security Council. A contravention of the SGCA may constitute an offence and can result in corporate and individual liability, with the imposition of fines and/or imprisonment. Increased penalties are prescribed for subsequent convictions. The primary enforcement agencies responsible for administering Singapore’s export controls are Singapore Customs (the government’s enforcement agency for customs and trade measures) and the Singapore Police Force.

Although Singapore’s export control regime does not oblige the relevant Singapore authorities to enforce the unilateral export controls of other countries, the Advisory makes clear that the authorities will not allow individuals or businesses operating in Singapore to use Singapore as a conduit for illicit trade activities in the areas of advanced semiconductor and AI technologies.

Recent enforcement actions confirm Singapore’s readiness to investigate companies and arrest individuals in Singapore that are suspected of engaging in fraudulent or dishonest practices to evade the export controls to which they are subject.

In February 2025 (a few weeks before the Advisory was issued), it was reported that three individuals were charged with fraud under Singapore’s criminal laws for allegedly facilitating the movement through Singapore of computer servers which were suspected of containing highly advanced chips from a well-known U.S. technology company. It was alleged that the individuals used Singapore-based entities to make false representations to two suppliers of these servers in order to mask the servers’ actual final destination. The total amount linked to these cases was reportedly in the region of S$500 million (~US$390 million). If convicted, the individuals could face imprisonment and/or fines for each fraud charge.

It was reported that the Singapore Police Force and Singapore Customs had conducted a joint operation in February 2025, raiding 22 locations in Singapore, seizing a substantial number of electronic devices and documentary records, and arresting nine individuals (including the three individuals who were charged). Since then, the authorities have also requested bank statements from various financial institutions to trace the movement of funds linked to the implicated individuals. Singapore Customs has indicated that it will continue to investigate this matter for possible violations of Singapore’s import and export control regulations.

Following the Advisory and the government probe discussed above, Singapore Customs updated its circular on 8 April 2025 to require that entities and declaring agents making declarations for the import and export of goods must state the final destination country of the goods, rather than making a declaration based on the consignee address in the commercial invoice.

In 2023, a Singapore entity was fined more than S$1.1 million (~US$0.8 million) for two counts of exporting strategic goods without the requisite export permits, in contravention of the SGCA. A sales manager and a director in charge of the entity’s import and export operations were also fined S$35,000 (~US$26,000) and S$45,000 (~US$34,000) respectively for their involvement. The entity had falsely declared to the Norwegian authorities that a multibeam echosounder system, which consisted of sub-systems listed as controlled goods under the SGCO, was for export to Indonesia. However, the true end-user was a Myanmar entity that had been rejected twice previously by the Norwegian authorities. The sales manager had fraudulently listed an Indonesian entity as the end-user to deceive the Norwegian authorities into approving the export to Singapore.

Conclusion

The Advisory, related regulatory updates and recent enforcement actions demonstrate the Singapore authorities’ readiness to safeguard the integrity of Singapore’s status and reputation as a key node in global supply chains and as a global trading hub.

Multinational companies with Singapore operations and businesses with supply chains that run through Singapore should therefore be on heightened alert in the current regulatory and trade climate, particularly in the semiconductor industry or where sensitive AI-related technologies are involved. They will need to carefully navigate the regulatory landscape to avoid being implicated in, or inadvertently facilitating transactions that could run afoul of, overlapping domestic and international export control regimes. In this regard, the Advisory encourages businesses to be proactive in taking steps to mitigate the risk of inadvertent violations of applicable export controls (including those of other countries). These steps include implementing robust internal compliance programmes, such as know-your-customer practices, end-user screenings, and risk-based screening procedures that focus on potential red flags (e.g., abnormal shipping routes).

Reed Smith has extensive experience advising on and conducting investigations in relation to export control-related matters, including in the Asia-Pacific region. Reed Smith is licensed to operate as a foreign law practice in Singapore. Where advice on Singapore law is required, we will refer the matter to and work with Reed Smith’s Formal Law Alliance partner in Singapore, Resource Law LLC, where necessary.

U.S. concerns surrounding the proliferation of the Chinese shipbuilding industry pre-date the current tariff wars.  Under the previous Biden administration, on March 12, 2024, various U.S. labor unions filed a petition requesting an investigation into the acts, policies, and practices of China targeting the maritime, logistics, and shipbuilding sectors for dominance.

Following a year-long investigation, including input from industry and a public consultation, the United States Trade Representative (“USTR”) determined that China’s targeting of the maritime, logistics, and shipbuilding sectors for dominance is unreasonable and burdens or restricts U.S. commerce and is therefore actionable under Sections 301(b) and 304(a) of the Trade Act.

Continue Reading U.S. section 301 strikes back: Additional U.S. port service fees on vessels with China nexus; potential far-reaching implications for leaseback arrangements

On April 17, 2025, the U.S. Trade Representative (USTR) announced a series of fees and restrictions intended to address China’s targeting of the maritime, logistics, and shipbuilding sectors for dominance. The announcement follows the USTR’s year-long investigation into China’s acts, policies, and practices under Section 301 of the Trade Act of 1974.

Maritime transport services fees

Effective October 14, 2025, the following maritime transport services fees will apply:

  • Fee on Chinese vessel operators and vessel owners: On or before the vessel arrives at the first U.S. port[1] or place from outside the Customs territory on a particular string, the vessel operator must pay a per net ton fee on the arriving vessel if the vessel operator or owner is Chinese. The fee will be charged up to five times per year, per vessel.
  • Fee on operators of Chinese-built vessels: Non-Chinese vessel operators must pay the higher of a per net ton or per container[2] discharged fee when a Chinese-built vessel arrives to a U.S. port or point from outside the Customs territory on a particular string. The fee will be charged up to five times per year, per vessel.
  • Fee on operators of foreign-built vehicle carriers: On or before a foreign-built vehicle carrier arrives at the first U.S. port or place from outside the Customs territory, the vessel operator must pay a fee of $150 per Car Equivalent Unit capacity.

Except for the fee on vessel operators of foreign-built vehicle carriers, the fee amounts will increase annually according to the following schedule:

FeeAmount starting Oct. 14, 2025Amount starting Apr. 17, 2026Amount starting Apr. 17, 2027Amount starting Apr. 17, 2028
Chinese vessel operators and vessel owners$50 per net ton$80 per net ton$110 per net ton$140 per net ton
Operators of Chinese-built vesselsHigher of (a) $18 per net ton or (b) $120 for each container dischargedHigher of (a) $23 per net ton or (b) $153 for each container dischargedHigher of (a) $28 per net ton or (b) $195 for each container dischargedHigher of (a) $33 per net ton or (b) $250 for each container discharged

Restrictions on the transport of LNG exports from the United States

Effective April 17, 2028, a certain percentage of all liquefied natural gas (LNG) for exportation by vessel in a calendar year must be exported by a U.S.-built, U.S. flagged, and U.S.-operated vessel. The restriction will increase by 1% to 2% every one to three years until it reaches 15% in 2047.

The percentage of LNG is determined based on the prior calendar year’s total LNG (in cubic feet) exported by maritime transport, as reported by the Department of Energy. If the restrictions are not met, the USTR may direct the suspension of LNG export licenses until industry complies.

Exceptions

The following exceptions apply:

  • Suspension of fees: Subject to certain conditions, U.S. Customs and Border Protection (CBP) will suspend the fees on operators of Chinese-built vessels or foreign-built vehicle carriers for a period not to exceed three years if the vessel owner orders and takes delivery of a U.S.-built vessel[3] of equivalent or greater capacity, measured in tonnage for vessels and CEU for vehicle carriers. If a prospective vessel owner does not take delivery of the U.S.-built vessel ordered within three years, however, the applicable fees will become due immediately. Proof of the order must be provided on demand.
  • Suspension of LNG restrictions: The LNG restrictions will also not apply to a particular vessel for a period not to exceed three years if the vessel owner orders and takes delivery of a U.S.-built vessel of equivalent or greater LNG capacity. The fees will, however, become due immediately if the prospective vessel owner does not take delivery of the U.S.-built vessel ordered within three years.
  • Exclusion from fees on operators of Chinese-built vessels: The fees on operators of Chinese-built vessels do not apply to U.S. government cargo. The fees also do not apply to the following Chinese-built vessels: (a) U.S.-owned or U.S.-flagged vessels enrolled in the Voluntary Intermodal Sealift Agreement, the Maritime Security Program, the Tanker Security Program, or the Cable Security Program; (b) vessels arriving empty or in ballast; (c) vessels with a capacity of equal to or less than 4,000 Twenty-Foot Equivalent Units, 55,000 deadweight tons, or an individual bulk capacity of 80,000 deadweight tons; (d) vessels entering a U.S. port in the continental United States from a voyage of less than 2,000 nautical miles from a foreign port or point; (e) U.S.-owned vessels, where the U.S. entity owning the vessel is controlled by U.S. persons and is at least 75% beneficially owned by U.S. persons; (f) specialized or special purpose-built vessels for the transport of chemical substances in bulk liquid forms; and (g) vessels principally identified as “Lakers Vessels” on CBP Form 1300.

Key definitions

“Chinese-built vessel” means a vessel that was built in China, consistent with the definition of place of build in CBP and U.S. Coast Guard regulations, and that would be so identified on the Vessel Entrance or Clearance Statement (CBP Form 1300).

“Chinese vessel operator” and “Chinese vessel owner” mean any entity:

  • Whose country of citizenship is defined as China, Hong Kong, or Macau on the Vessel Entrance or Clearance Statement or its electronic equivalent.
  • Whose headquarters, parent entity’s headquarters, or parent entity’s principal place of business is China, Hong Kong, or Macau.
  • That is owned or controlled by a citizen or citizens of China, Hong Kong, or Macau.
  • That is owned by, controlled by, or subject to the jurisdiction or direction of China, Hong Kong, or Macau. An entity is owned by, controlled by, or subject to the jurisdiction or direction of China, Hong Kong, or Macau where: (a) the entity is a national or resident of one of those jurisdictions; (b) the entity is organized under the laws of or has its principal place of business in one of those jurisdictions; (c) 25% or more of the entity’s outstanding voting interests, board seats, or equity interests are held directly or indirectly by any combination of the governments of those jurisdictions; or (d) 25% or more of the entity’s outstanding voting interests, board seats, or equity interests are held directly or indirectly by any combination of persons who fall within (a)-(c).
  • That is owned or controlled by an entity listed on the Chinese Military Company List.
  • That is an ocean carrier[4] whose operating assets are, directly or indirectly, owned or controlled by the Chinese government or any of its political subdivisions, with ownership or control by a government being deemed to exist for a carrier if: (a) a majority of the interest in the carrier is owned or controlled in any manner by the Chinese government, a Chinese government agency, or a public or private person controlled by the Chinese government; or (b) the Chinese government or any of its political subdivisions has the right to appoint or disapprove the appointment of a majority of the directors, the chief operating officer, or the chief executive officer of the carrier.

[1] See 19 C.F.R. § 101.3(b)(1).

[2] See id. § 10.41a.

[3] As defined in the Federal Register notice.

[4] See 46 U.S.C. § 40102(7).

In recent weeks, the global trade landscape has been significantly impacted by U.S. President Donald Trump’s “Liberation Day” tariffs, which have targeted numerous countries, including those in the Association of Southeast Asian Nations (ASEAN) and China. Each country has reacted differently based on its economic relationship with the U.S., local industry concerns, and geopolitical considerations.
 
In this tenth day digest following Liberation Day, we summarise key developments and positions adopted by ASEAN members and China thus far, as two of the biggest trading partners of the U.S.

Infographic illustrating generally Liberation Day tariffs and 90-day reprieve, product-specific and existing tariffs excepted. For more information, please refer to Reed Smith’s Trump 2.0 tariff tracker.

*Infographic illustrating generally Liberation Day tariffs and 90-day reprieve, product-specific and existing tariffs excepted. For more information, please refer to Reed Smith’s Trump 2.0 tariff tracker.

ASEAN

ASEAN, as a bloc, is currently broadly united in its diplomatic approach, rather than opting for a more aggressive retaliatory stance. In a joint statement on 10 April 2025, ASEAN ministers emphasized the importance of “frank and constructive dialogue” with the U.S. to address trade concerns through an enhanced forward-looking ASEAN-U.S. economic cooperation framework.

A 90-day reprieve was announced on 9 April 2025 which provides for all U.S. trading partners to drop to the baseline 10% tariffs, with the notable exception of China.

Prior to this 90-day reprieve, ASEAN members’ responses are summarised below:

  • Cambodia (49%): Faced with one of the highest tariffs among ASEAN nations prior to the 90-day reprieve, Cambodia is actively seeking to negotiate tariff exemptions and to diversify its export markets to minimize risks associated with U.S. trade policies. In 2024, U.S. exports accounted for around 38% of the country’s total exports, according to Cambodian trade statistics. As of 10 April 2025, the U.S. has agreed to Cambodia’s proposal to begin negotiations on tariffs.
  • Laos (48%): Focused on solidarity within the ASEAN framework to address the challenges posed by the tariffs. Laos is likewise evaluating the tariffs’ impact on trade agreements and looking at diversifying its export markets.
  • Vietnam (46%): Like other ASEAN members, Vietnam has engaged in diplomatic efforts rather than retaliation. The U.S. is the biggest export market for Vietnam, and the two countries had on 10 April 2025 opened discussions on a reciprocal trade agreement.
  • Myanmar (44%): Appears to be more cautious likely due to ongoing economic and political challenges. The government has called for collaboration within ASEAN to navigate the tariffs’ implications.
  • Thailand (36%): Thailand has yet to announce specific retaliatory measures and is presently part of ASEAN’s collective diplomatic approach. Thailand is working to stabilize the key affected sectors, such as automotive and agriculture, through domestic support and regional trade agreements, particularly within ASEAN. Prime Minister Paetongtarn Shinawatra on 8 April 2025 said a meeting between Thailand and the US Trade Representative had been confirmed.
  • Indonesia (32%): Indonesia has likewise not announced retaliatory measures but likely to engage in diplomatic efforts alongside other ASEAN members. On 8 April 2025, Indonesia announced concessions, such as lowering import taxes on electronics and steel, and is preparing to send a high-level delegation to the U.S. on 17 April 2025 to negotiate.
  • Brunei (24%): Brunei largely maintained a diplomatic stance, emphasizing the need for multilateral trade agreements. On 3 April 2025, the Ministry of Finance and Economy of Brunei announced that it would engage with its U.S. counterparts to seek clarification on the new tariff regime and continue supporting affected exporters.
  • Malaysia (24%): Reacted decisively by engaging in bilateral and multilateral talks aimed at reducing the impact of the tariffs on its economy. Malaysia hosted the Special ASEAN Economic Ministers’ Meeting on 10 April 2025 where the ASEAN countries made the decision not to retaliate. The government has assessed industries vulnerable to the tariffs, specifically electronics and palm oil, and exploring diversification of trade arrangements.
  • Philippines (17%): Philippines is exploring opportunities and pursuing free trade agreements with other countries. As of 8 April 2025, the government has sought a united front with other ASEAN members to respond to the U.S.
  • Singapore (10%): While subject to baseline tariff of 10%, the lowest among ASEAN countries, Singapore observed that it actually runs a trade deficit with the U.S. Singapore’s present position is that it will not impose retaliatory tariffs, but urge diplomacy with the U.S. together with other ASEAN countries.

China

China expressed grave concern and has taken a more assertive stance against the U.S. tariffs, reflecting differing economic, political and even cultural dynamics. While the U.S. has increased tariffs on Chinese imports by up to 125%, China has imposed additional retaliatory tariffs of 125% on U.S. goods. Various other measures have been put forth, including complaints filed with the World Trade Organisation (WTO), implementing export controls on certain heavy rare earths, adding certain U.S. entities on the Export Control List and the Unreliable Entity List, and suspending the qualification of some U.S. entities to export soybeans to China. China has expressed its willingness to engage in talks with the U.S., but any such talks must be based on mutual respect and equality.

The Hong Kong government expressed its strong disapproval and dismay regarding the U.S. tariffs. In response to these tariffs, the government introduced various enhanced measures aimed at supporting the export trade in Hong Kong and assisting enterprises in accelerating their expansion into new markets to navigate the current circumstances. Furthermore, the Hong Kong Government asserted that it will continue to evaluate the measures imposed by the U.S., which it views as inconsistent with fair trade principles, and intends to take appropriate actions to defend Hong Kong’s interests, including filing a complaint in accordance with the WTO dispute settlement mechanism.

What lies ahead?

Against this varied backdrop, businesses operating in Asia would be wise to re-examine their supply chain and customer base. Of immediate relevance would be questions raised on:

  • Origins: Determining the Country of Origin (COO) is a fundamental step in customs compliance and along with other factors will determine the applicable tariff to be applied to imported products. How and to what extent are products subject to the new U.S. tariffs? This can be a particularly complex analysis in instances where product components come from various origin countries of differing tariffs and assembled in a jurisdiction faced with yet a different tariff. It is likely that under current circumstances, U.S. Custom and Border Protection (CBP) will be undertaking a deeper examination of COO declarations for products imported into the U.S. Determining the COO early and basing that determination on factual information will help ensure that the product remains compliant with CBP import rules and regulations.
  • Pricing: We are increasingly seeing commodities counterparties dealing with the implications of the latest round of tariffs, in particular those levied by the U.S. and China on each other’s commodities. Sale and purchase agreements for commodities often contain price adjustment clauses that give parties the right to renegotiate pricing terms upon the occurrence of certain events. The imposition of tariffs, duties and other events (geopolitical or otherwise) which may materially affect commodity pricing indexes are often including as trigger events to price adjustment clauses. Counterparties must then seek to negotiate alternative pricing that is feasible for both parties or face termination of their agreements. As a result of recent tariffs and rather unsurprisingly, we are seeing that the spot market for commodities unaffected by the U.S. and Chinese tariffs are trading at a premium, as parties look for alternatives to commodities originating in the U.S. for delivery into China, and vice versa.
  • Materially Adverse? Force Majeure?: Can a transaction, whether an investment or acquisition, continue as planned or will it risk being impacted by so-called “material adverse event” and “material adverse change” clauses? Additionally, can such events constitute sufficiently adverse conditions to justify the exit from or dissolution of a joint venture? Contracting parties are also increasingly concerned (and cautious) on the operation of the doctrines of “frustration” and “force majeure” on existing contracts. Generally speaking, increase in pricing (or costs) may not be sufficient to, in itself, trigger the operation of these doctrines in seeking to terminate or avoid what may have become an unprofitable contract.

What is increasingly clear today is the urgent need to understand, confirm, and evaluate the commercial, legal, and other implications for existing arrangements. In the short to mid-term, businesses in affected countries would undoubtedly be considering new, alternative or hedging strategies for trade diversification, while also seeking to enhance domestic and regional collaboration and integration. The situation is still dynamic, with ongoing negotiations and the possibility of additional changes in trade policies that could further influence global trade relations.

Trump 2.0 tariff tracker

In addition to the post above, don’t miss our Trump 2.0 tariff tracker which tracks the latest threatened and implemented U.S. tariffs, as well as counter-tariffs from other countries around the world.

Access the tracker.

With President Donald Trump’s return to the White House, the legal environment has been ever-changing. On Wednesday, April 9th, we gathered a group of regulatory attorneys from across Reed Smith’s global platform to provide a 90-minute CLE that outlines the key changes that have occurred during Trump’s first 100 days, as well as highlights practical steps companies should take to minimize risks associated with these latest developments. In their latest alert, our lawyers recap the top takeaways from the event, which touch on the following topics:

  • Pause on FCPA Enforcement & UK Bribery Act
  • State AG Consumer Protection Enforcement Trends 
  • DEI and Government Contracts
  • False Claims Act Enforcement Trends
  • Trump’s Executive Orders on Harassment and Focus on Immigration Enforcement
  • State of Sanctions Enforcement
  • Tariffs & Counter-Tariffs
  • Shutdown of the Consumer Financial Protection Bureau
  • SEC & CFTC Priorities
  • Antitrust and AI: Algorithmic Collusion

Updated: April 3, 2025 at 3:30 p.m. ET to reflect the specific exemptions outlined in the unofficial version of the Harmonized Tariff Schedule of the United States (HTSUS) modifications that will implement the reciprocal tariffs.

On April 2, President Trump signed a pair of executive orders as part of a “Liberation Day” ceremony in the White House Rose Garden. The first executive order implements Trump’s reciprocal tariff plan. The second executive order ends the duty-free de minimis exemption for Chinese-origin goods.

Reciprocal tariffs

Effective at 12:01 a.m. (ET) on April 5, 2025, the United States will impose a 10% ad valorem baseline tariff on imports of all foreign-origin goods. This baseline tariff is in addition to any other applicable duties or tariffs.

Effective at 12:01 a.m. (ET) on April 9, 2025, the United States will impose country-specific tariff rates on imports from certain trading partners, which will apply even if goods are imported under a free trade agreement. These rates already include the 10% baseline tariff, so these countries may be able to reduce their tariff rate (e.g., by removing monetary and non-monetary trade barriers, Algeria may be able to reduce its 30% ad valorem tariff rate down to the 10% baseline rate). All other duties and tariffs will also still apply. Thus, imports from China (including Hong Kong and Macau) will also be subject to the existing 20% ad valorem tariffs imposed earlier this year, as well as the Section 301 tariffs.

The country-specific rates included in an annex to the executive order are:

CountryAd Valorem Tariff Rate
Algeria30%
Angola32%
Bangladesh37%
Bosnia and Herzegovina36%
Botswana38%
Brunei24%
Cambodia49%
Cameroon12%
Chad13%
China34%
Cote d’Ivoire21%
Democratic Republic of Congo11%
Equatorial Guinea13%
European Union20%
Falkland Islands42%
Fiji32%
Guyana38%
India27%
Indonesia32%
Iraq39%
Israel17%
Japan24%
Jordan20%
Kazakhstan27%
Laos48%
Lesotho50%
Libya31%
Liechtenstein37%
Madagascar47%
Malaysia24%
Mauritius40%
Moldova31%
Mozambique16%
Myanmar (Burma)45%
Namibia21%
Nauru30%
Nicaragua19%
Nigeria14%
North Macedonia33%
Norway16%
Pakistan30%
Philippines18%
South Africa31%
South Korea26%
Sri Lanka44%
Switzerland32%
Taiwan32%
Thailand37%
Tunisia28%
Venezuela15%
Vietnam46%
Zambia17%
Zimbabwe18%

From 12:01 a.m. (ET) on April 5 to 12:00 a.m. (ET) on April 9, imports from these countries will be subject to the 10% baseline reciprocal tariff instead of the country-specific rate.

The Harmonized Tariff Schedule of the United States will be modified to reflect these new tariffs.

If at least 20% of an imported item’s value is U.S. originating, the ad valorem reciprocal tariff will only apply to the non-U.S. content. In this context, “U.S. content” means the value of an article attributable to the components produced entirely, or substantially transformed in, the United States. U.S. Customs and Border Protection will establish a process to collect and verify claims related to the value of an item’s U.S. content.

Exceptions

The new reciprocal tariffs will not apply in the following circumstances:

  • Goods loaded onto a vessel at the port of loading and in transit on the final mode of transport before the reciprocal tariffs take effect will not be subject to the baseline or country-specific ad valorem tariffs (as applicable).
  • Articles and derivatives of steel and aluminum that are already subject to Section 232 tariffs are excluded.
  • Automobile and automobile parts that are subject to Section 232 tariffs at the time of import are excluded.
  • Additional articles listed in Annex II to the executive order, including copper, pharmaceuticals, semiconductors, lumber articles, certain critical minerals, and energy and energy products, will be excluded.
  • Imports from Belarus, Cuba, North Korea, and Russia (known as Column Two countries) will continue to be subject to their separate duty rates only.
  • Future goods subject to Section 232 tariffs will be excluded.
  • Canadian- and Mexican-origin goods will not be subject to the reciprocal tariffs as long as Trump’s existing executive orders remain in place. Under those executive orders, the current exemption for goods that qualify as originating under the United States-Mexico-Canada Agreement (USMCA) will also continue.

If the existing executive orders related to Canadian- and Mexican-origin imports are terminated or suspended, goods from both countries will be subject to 12% ad valorem reciprocal tariffs. Those tariffs will not apply to items that qualify as originating under the USMCA, energy or energy resources, potash, or any items eligible for duty-free treatment under the USMCA that are a part or component of an article substantially finished in the United States.

End of the de minimis exemption for Chinese-origin goods

Effective at 12:01 a.m. (ET) on May 2, 2025, the United States will end the duty-free de minimis exemption for imports of Chinese-origin goods (including goods originating in Hong Kong). The de minimis exemption typically applies to goods imported by one person on one day having a fair retail value not exceeding $800.

For goods valued at or under $800 that would otherwise qualify for the de minimis exemption, the duty rates will vary depending on the shipping method:

  • For goods sent through means other than the international postal network, all applicable duties and tariffs will be due upon import.
  • For goods sent through the international post network, the import will be subject to duties of 30% ad valorem or $25 per item (at the transportation carrier’s discretion) in lieu of any other duties, including those previously imposed by executive order. The per item dollar amount will increase to $50 per item on June 1, 2025. Carriers must apply the same duty collection methodology to all shipments but may change collection methodologies monthly.
Next steps

To assess and mitigate the impact of these new tariffs and any counter-tariffs, companies should:

  • Review the country of origin, valuation, and classification of their imports. For imports into the United States, country of origin and valuation will be most important for these across-the-board tariffs. Classification will also be important for some of the product-specific carveouts and could be important for counter-tariffs imposed by other countries.
  • Assess existing contractual provisions to determine which party bears the cost of these tariffs, whether the force majeure or termination provisions can be invoked based on these new government orders, and how surcharges can be used to mitigate the unexpected expenses. Companies may also consider modifying contract templates to reflect these developments and potential counter-tariffs.
  • Monitor updates in each jurisdiction, including the extent to which the United States grants further exemptions or other countries impose counter-tariffs or reduce monetary and non-monetary trade barriers to try to reduce their country-specific tariff rate.

Background to the Reciprocal Plan on Trade

On February 13, the U.S. administration introduced its Fair and Reciprocal Plan on Trade, outlining its approach to reciprocal tariffs. The policy aims to address what the administration perceives as an unfair trade imbalance, where the U.S. maintains relatively low import tariffs while other countries impose higher tariffs on U.S. exports. According to the administration, this lack of reciprocity is unjust and “contributes to [the U.S.] large and persistent annual trade deficit“.

This rationale was challenged during the first Trump administration by economists (example), who pointed out that bilateral trade deficits are not primarily caused by trade barriers. Instead, they result from structural factors, global supply chain dynamics, and the way trade is measured. Economic data suggests that countries with lower tariffs do not necessarily experience larger trade deficits.

A Notice from the United States Trade Representative (USTR) indicates that reciprocal tariffs will primarily target countries with the largest trade deficits with the U.S., which are also some of its biggest trading partners, including the United Kingdom and the European Union. In response, the EU has pushed back against the policy, emphasizing that while the U.S. runs a trade deficit in goods, it enjoys a significant trade surplus in services with the EU, effectively balancing the overall trade relationship.

U.S. Treasury Secretary Bessent indicated last week that the administration’s primary focus – at least for the most significant reciprocal tariffs – is on the so-called “Dirty 15”: the 15 countries with persistent trade imbalances with the United States. In 2024, the U.S. recorded its largest trade deficits with Cambodia, Canada, China, the EU, India, Indonesia, Japan, Malaysia, Mexico, South Africa, South Korea, Switzerland, Taiwan, Thailand, and Vietnam. Notably, the UK is not on this list, suggesting that it may avoid major tariffs on the announced “Liberation Day” next week.

Reciprocal Tariffs and their Feasibility

At this stage, it remains unclear what the reciprocal tariffs set to be announced on April 2 will entail. Much will depend on how the U.S. defines reciprocity and the data it chooses to use.

The most likely scenario is that for each country with a trade deficit in goods, the U.S. administration will analyze differences in average tariff rates and impose country-specific tariffs to offset those disparities. Alternatively, the administration may adopt a more targeted approach, implementing sector-specific measures or reliefs, particularly for industries such as automotive and pharmaceuticals. A hybrid model, combining both country-level and sector-specific measures, appears the most probable outcome. That this is the most likely scenario also seems confirmed yesterday with the announcement of 25% automotive tariffs on passenger vehicles, light trucks, and spare parts, with no country exempted.

A key question is how the U.S. will account for other measures it views as trade barriers for U.S. companies. These include Digital Services Taxes (DST) and Value-Added Tax (VAT), which are quantifiable, as well as broader regulatory issues, such as online content moderation rules in the UK, which are under scrutiny by the White House. Notably, some of these concerns – such as the DST – are reportedly already part of ongoing UK-U.S. trade negotiations. This confirms that the U.S. announced tariffs are in part negotiation tactics rather than the implementation of long-term, enforceable measures.

VAT, a non-discriminatory consumption tax applied to all goods regardless of origin, has attracted significant attention. If VAT were to be factored into reciprocal tariffs, the impact would be substantial – given the UK VAT rate of 20%. It is of course true that VAT is not a tariff and should theoretically be neutral for businesses. In practice, however, compliance obligations in some countries are perceived as very burdensome and sometimes difficult to meet – particularly for non-established companies with occasional imports that need to move quick. As a result, some businesses ultimately treat VAT as a cost of doing business rather than a recoverable expense.

Impact of Reciprocal Tariffs on the United Kingdom

The imposition of U.S. tariffs on UK-originating goods would significantly increase their cost in the U.S. market. This may impact demand. Businesses on both sides of the Atlantic will adjust their strategies accordingly. We recently explored the importance of origin in the context of tariffs. Businesses will likely reassess their customs processes and optimize their supply chains, considering factors such as supplier relationships, manufacturing locations, and key customer markets. Whether the tariffs will genuinely result in reshoring – the intended revival of U.S. domestic production – remains highly uncertain.

In a time of escalating tariff tensions, companies are investing heavily in analyzing the impact of tariff changes on their business and adapting to the shifting trade landscape. To mitigate tariff impacts and maintain competitiveness, many explore supply chain adjustments, such as alternative sourcing or relocating production. While “tariff engineering” is becoming an increasingly popular strategy, it carries significant risks. Businesses must ensure that their sourcing and relocation strategies align with legal standards, economic rationality, and customs scrutiny to minimize trade disruptions and financial exposure. In this article, we examine common tariff-related pitfalls that businesses should consider when making sourcing and relocation decisions.

Customs country of origin and its importance in destination markets

As governments impose specific tariffs on imports from certain countries, the (non-preferential) customs country of origin (COO) plays a critical role in determining whether a product is subject to these tariffs. COO directly influences tariffs, trade barriers, and economic policies, making it essential for businesses to correctly identify and assess the origin of their goods.

Determining COO is a technical customs analysis, independent of the location from which a product is shipped. Instead, it depends on where the product is substantially transformed as part of the production process. Under the globally harmonized, yet incomplete, COO framework, an assembled product is considered to originate in a country if it undergoes its last substantial transformation there. At a high level, this means the last point in the supply chain where the product was fundamentally altered or where it acquired new functionalities.

In other words, not all processing activities confer COO. Various “minimal operations”—such as screwdriver assembly, simple packaging, or minor alterations like cutting and sorting—do not qualify as substantial transformation. Additionally, jurisdictions may define product-specific binding and non-binding rules for substantial transformation, making it a complex issue for companies operating across multiple markets. With each jurisdiction applying its own legal framework, companies must assess COO requirements separately for each destination market.

Three key pitfalls in sourcing and relocation decisions

Businesses considering alternative sourcing or relocation in response to tariff changes must navigate several risks. We have identified three major pitfalls in the decision-making process.

  1. Ambiguity around substantial transformation
    The determination of “substantial transformation” is not harmonized across jurisdictions. Each importing country interprets the concept differently, leading to inconsistencies in COO assessments. Customs authorities evaluate supply chain facts based on country-specific frameworks, making borderline cases—where the transformation’s substantiality is questionable—common. The ambiguity can be rooted in several causes. For instance, import countries use different legal standards, causing identical production processes to yield different COO conclusions depending on the jurisdiction. In addition, if final assembly is moved but critical components still originate from a high-tariff country, customs authorities may question whether the relocation meaningfully alters the product’s COO.
  2. Misrepresentationon origin and supplier dependence
    When importers rely on third-party manufacturers for production, additional risks emerge. Suppliers may have commercial incentives to misrepresent COO, leading to potential compliance violations for importers. Common tactics to manipulate COO include transshipment – where goods are routed through an intermediary country and repackaged or relabeled to mask true origin; minimal processing—where minor, insufficient modifications are performed to claim a new COO; and falsified documentation—where forged certificates of origin are used to deceive downstream importers and customs authorities.

    Importers must be aware that certificates of origin, which are commonly used in practice, do not guarantee compliance. Customs authorities actively monitor trade flows and conduct onsite verifications in export countries. If COO misrepresentation is uncovered, importers bear the legal and financial consequences, even if the misrepresentation was made by a supplier. Companies must therefore implement rigorous due diligence measures to validate COO claims and protect against liability.
  3. Tariff circumvention and the importance of intentionality
    Relocation decisions made in response to tariffs are scrutinized by regulators, particularly when they appear to be motivated solely by tariff avoidance rather than genuine economic reasons. Trade policies are often driven by political considerations, meaning that even legally sound COO claims can be challenged if authorities suspect an attempt to circumvent tariffs.

    A key precedent for this occurred during the “trade war” under the first Trump administration (2017-2021). In response to EU rebalancing duties on U.S. goods, Harley-Davidson shifted production of EU-destined motorcycles to Thailand to escape the tariffs. However, the EU ultimately rejected the COO change, ruling that the relocation was primarily tariff-driven rather than economically justified. This case underscores that customs authorities may disregard COO claims if the relocation lacks a genuine commercial rationale beyond tariff mitigation.

Steps to mitigate country of origin risks

To navigate COO complexities and avoid regulatory pitfalls, we recommend that companies adopt risk-mitigating strategies:

  1. Different jurisdictions have unique COO rules, requiring a comprehensive analysis of legal standards across all destination markets before making supply chain adjustments.
  2. Importers must verify production processes through robust due diligence on suppliers and take contractual steps to protect against supplier misrepresentations.
  3. Companies must ensure that relocations have genuine business justifications; if a shift in production is primarily driven by a desire to avoid tariff changes, customs authorities may reject the new COO claim. Many jurisdictions offer advance customs rulings on COO, providing legal certainty before goods are imported. Companies should carefully weigh the benefits and risks of seeking an advanced customs ruling.

In 2024, the Department of Justice saw a record number of qui tam actions under the False Claims Act (FCA), with total settlements and judgments exceeding $2.9 billion. Throughout this next year, we expect to see this uptick in enforcement continue, especially in light of the Trump administration’s crackdown on diversity, equity, and inclusion policies and the imposition of new tariffs and trade policies. In a recent blog post, our team provides an overview of key FCA enforcement trends from 2024 and what federal contractors, grant recipients, and private sector companies should be on the lookout for this year.

On February 10, President Trump signed two proclamations adjusting the already-existing Section 232 tariffs on imports of steel and aluminum. He also directed U.S. Customs and Border Protection (CBP) to “dramatically increase” its enforcement efforts to prevent circumvention.

Increased tariff enforcement

The proclamations direct CBP to prioritize reviews of the classification of imported steel and aluminum products. If classification errors result in underpaid Section 232 tariffs, CBP:

  • Must impose the maximum penalty permitted by law.
  • May not consider evidence of any mitigating factors in its penalty determination.

Adjustments to steel and aluminum tariffs

Under the proclamations:

  • The previously granted exclusions for steel and derivative steel articles from Argentina, Australia, Brazil, Canada, the European Union, Japan, Mexico, South Korea, Ukraine, and the United Kingdom will be revoked, effective March 12, 2025 at 12:01 a.m. (ET). Imports of steel and derivative steel articles from these countries will then be subject to 25% ad valorem duties.
  • The previously granted exclusions for aluminum and derivative aluminum articles from Argentina, Australia, Canada, the European Union, Mexico, and the United Kingdom will be revoked, effective March 12 at 12:01 a.m. (ET).
  • The ad valorem tariff rate for aluminum and derivative aluminum articles will increase from 10% to 25%, effective March 12 at 12:01 a.m. (ET).
  • The Secretary of Commerce’s ability to consider or renew product exclusion requests is revoked, effective February 10. Granted product exclusions will remain in effect until they expire or the excluded product volume is imported.
  • The Secretary of Commerce must terminate all existing General Approval Exclusions, effective March 12.
  • The lists of derivative steel and aluminum products subject to Section 232 tariffs will be expanded by yet-to-be-published annexes to the proclamations. Tariffs on these derivatives will be suspended until the Secretary of Commerce gives public notice that adequate systems are in place to fully, efficiently, and expediently process and collect the tariffs.
  • Steel and aluminum products impacted by these proclamations that are admitted to foreign trade zones on or after March 12 must be admitted as “privileged foreign status” unless they are eligible for admission under “domestic status.”
  • Importers may not claim drawback on these newly imposed tariffs.
  • The Secretary of Commerce will establish a process within 90 days to include additional derivative steel and aluminum articles within the scope of the Section 232 tariffs. Domestic producers and related industry associations may request that derivative products be included within the tariffs’ scope. The Secretary of Commerce must then issue a determination within 60 days of the request.