Trade Regulations

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The removal or reduction of trade barriers in accordance with the former General Agreement on Tariffs and Trade (GATT) and most recently the World Trade Organization presents opportunities for businesses. Likewise, multinational agreements that remove trade barriers to create largely duty-free and tariff-free trading zones, such as the North American Free Trade Agreement, allow for freer flow of goods and services between specific countries. These agreements create tremendous opportunities for businesses because they lower the costs associated with importing and exporting, which is a primary consideration for many companies.

Companies wishing to export or import products are subject to federal trade regulations. Export controls prohibit or restrict the export of certain types of products while limiting or restricting specific products from entering a country, perhaps by way of tariffs or quotas. The U.S. government views exporting as a privilege and not as a right and has the authority to impose a total ban on exporting on U.S. companies for export control violations. Try to imagine what an export ban would do to companies such as Microsoft, Boeing, or Apple.

The activities of companies that ship products overseas are subject to federal export controls. To export simply means to transport products to another country. Export controls are regulated by several departments of the federal government. For example, the Export Administration Regulations are administered by the U.S. Department of Commerce Bureau of Industry and Security, and they regulate items that may have a dual commercial or military use, such as computers and electronics. The U.S. Department of the Treasury Office of Foreign Assets Control regulates and enforces trade sanctions. The U.S. Department of State International Traffic in Arms Regulation prohibits certain types of trade, such as the unlicensed export of weaponry and certain chemicals.http://www.census.gov/foreign-trade/aes/exporttraining/videos

Other federal agencies and programs exist in a supportive capacity, to assist U.S. businesses in their export endeavors rather than to regulate and enforce export controls. For example, the U.S. Department of Commerce’s International Trade Administration supports U.S. exports and competitiveness abroad. Check out Note 13.21 "Hyperlink: Exporting?" for several short videos designed to teach companies how to engage in this lucrative and large marketplace.

Similarly, the National Export Initiative was created by the Obama administration, and it assists U.S. businesses to operate in the global market. Check out President Obama discussing the need to boost exports at a recent import/export conference.

Companies wishing to import products are also subject to import controls. Import controls take many forms including tariffs, quotas, and bans or restrictions. The U.S. Department of Homeland Security Customs and Border Protection Agency (CBA) has a primary role in import control administration and regulation. For example, it inspects imports to classify them to establish their tariff schedule.

A tariff applies to certain goods imported from other countries. Tariffs are import taxes. They are imposed to render the imported product more expensive and to keep the cost of nonimported products (domestic products) attractive to consumers. CBA customs officers classify the imported goods, which determines the applicable tariff. However, the Customs Modernization and Informed Compliance Act places responsibility for compliance with import laws on the importer.

Quotas apply to certain goods. Quotas are simply limits on quantity. No absolute quotas exist, but certain tariff rate quotas apply to certain items, such as specific types of textiles and dairy products. A tariff rate quota simply provides favorable tariffs on certain quantities of particular types of imports.

Bans apply to goods that are prohibited by law to import, because they are dangerous to public safety, health, the environment, or national interests. Other items are restricted from import. For example, it is illegal to import items of cultural heritage from other countries without permission. Check out Note 13.28 "Hyperlink: What? These Old Rocks?" to see a recent story about 525-million-year-old fossils that were illegally imported into the United States and have been returned to China.

Along with the CBA, the U.S. International Trade Commission investigates import injuries to the United States, such as dumping and subsidized imports, and the need for safeguards. Dumping is when a foreign producer exports products to sell at prices less than its cost of manufacturing. Subsidized imports are products produced overseas for which a government has provided financial assistance for the production. When dumping or subsidized imports materially injure or threaten to injure domestic producers, the United States may impose a countervailing duty for subsidized products or an antidumping duty for dumped products. These duties, which are particular types of tariffs, reduce the negative impact that such practices could have on U.S. companies. Safeguards are limited duration growth restrictions that are imposed when domestic markets are threatened or injured from imports. This allows for domestic markets to adjust to the surge from the import market. For example, the United States imposed safeguards on Chinese textiles in response to actual or threatened market disruption of the U.S. textile industry.  1