Insight

On 12^th March 2025 customs duties of 25% on steel and aluminium products, as well as those that contain steel or aluminium, entered into force, directly impacting the fastener and fixing industry. In this article, Bettina Mertgen, tax lawyer, certified tax advisor, certified advisor for customs and excise taxes and partner at GvW Graf von Westphalen, and Philipp Hamann, senior associate at GvW Graf von Westphalen, look at the US tariffs and global retaliatory measures and outline how fastener companies can navigate a trade war.

President Donald Trump intends to improve the United States’ position towards its trading partners all over the world by imposing additional customs tariffs on the import of goods into the USA. At the beginning of April 2025, President Trump announced even further tariffs. Although he named these new measures misleadingly “reciprocal tariffs”, he simply imposed blended rates that apply to all kinds of goods imported into the United States from another country. 

Imports from the European Union will be targeted with a duty rate of 20%, including the 10% basis rate that applies to every country in the world, in addition to any already existing tariffs. Only an exhaustive list of goods stated in Annex II of the respective Executive Order is excluded from these additional tariff rates. Such products are mainly minerals, ores, fuels and energy products, chemicals, pharmaceuticals, fertilisers, plastics, rubber, wood products, electrical components, etc. In addition to these exceptions, steel and aluminium products that fall under the above mentioned separate steel and aluminium tariffs are excluded, too.

Although these measures have recently been paused for 90 days (until 9^th July 2025), businesses in the European Union should not put their hands in their lap and let time go by. They should use the remaining time to review their supply chains and their customs processes in order to mitigate the potential financial damage of high customs duties. It is essential to improve your business’ position towards competitors in the best possible way.

The same challenge applies to the tariff situation in the European Union (EU). The EU intends to retaliate against the US tariffs. It was announced to impose retaliatory tariffs on the imports of US goods with a duty rate of 10% to 25%. The goods concerned are, for example, agricultural products, certain foods and drinks, tobacco products, textiles, certain electrical goods, but also steel and aluminium goods. These EU tariffs were planned to enter into force on 15^th April 2025 but have also been paused in reaction to the above mentioned pausing of the US tariffs. Nevertheless, the supply chains and customs treatments should be reviewed in both directions.

If you want to review your imports and exports, the following steps are recommended:

Review of declared tariff classification, origin and customs value

Customs declarations should always be correct. However, tariff classification, as well as the determination of the correct customs value, is often complex and difficult. Especially in cases where the consequences of a higher customs value or a tariff code linked to a higher tariff rate do not lead to significant costs, companies often decide to not examine classification and/or customs valuation of their goods in more detail – thereby ‘saving’ the administrative efforts in this respect. 

However, in times of significant duty rates, such efforts may lead to a significant reduction of the customs duty debt. Therefore, we recommend reviewing the tariff classification, the customs value, as well as the country of origin, in more detail to take advantage of all possible duty savings.

Bonded warehouses and Free-Trade Zones

If goods are shipped into the United States or the EU and it is not yet clear whether they will be sold to local customers or reexported, businesses should consider using a bonded or customs warehouse or (in the United States) a Free-Trade Zone. While doing so, the goods can be stored locally but are not customs cleared, hence customs duties are not paid yet. 

You can decide at any time to deliver the goods to a local customer or to reexport the goods to customers in other countries. In this case, only the goods that are actually sold to local customers have to be customs cleared and customs duties are payable. 

US components are treated beneficially

The US reciprocal tariffs contain a special rule under which the US content of a product is favoured, provided that the US components constitute at least 20% of the product value. Consequently, customs duties apply only to the remaining content that does not originate in the United States. Therefore, it is worth reviewing the origin of a product’s content or, where possible, increase the US content.

However, it should be kept in mind that many countries have imposed retaliatory measures on goods originating in the United States. An increase of the US content of your business’ goods can result in high tariffs if they are shipped to countries other than the United States.

Inward and outward processing in the EU

Whereas the special customs procedures of inward and outward processing do not exist in the United States, they can be used in the EU and are always the measure of choice if material or components are imported or exported for processing purposes. 

In case of inward processing, material or components are shipped into the European Union but not customs cleared. These goods are processed or worked to an end product. Only if the end product is then customs cleared for the European market are EU tariffs levied. Should the end product be reexported, no customs duties occur in the EU at all.

Vice versa, in case of outward processing, material or components are shipped from the European Union to a third country for processing or working. The end product manufactured out of the material or components will then be shipped back to the European Union. The benefit of outward processing is that only the value added outside of the European Union is subject to EU tariffs, not the value of the end product as a whole. That is, the value of the material or components shipped abroad from the European Union is not subject to customs duties. 

Restructuring of production and supply chains

Although the half-life of President Trump’s decisions is rather short, it is apparent that tariffs and retaliatory measures will most likely be present in the months and years to come. Disputes between the United States and other countries, in particular China, will most likely remain and prevent a negotiated settlement. Therefore, businesses should carefully examine the general structure of their supply chains with respect to the origin of the components, location of storage and manufacturing facilities, as well as the countries of destination. 

Aspects such as generation of origin, usage of free trade agreements, and other optimisation potentials should be considered in this respect. However, many customs laws contain anti-circumvention rules. Thus, in order to avoid unexpected difficulties, a customs law specialist should help to review any restructuring. 

Bettina and Philipp can be contacted at b.mertgen@gvw.com and p.hamann@gvw.com.