One of Europe’s biggest farm machinery companies, Krone, has been forced to pause exports of large equipment to the US because of “alarming” and little-known new tariffs that are hitting hundreds of products from knitting needles and hairdryers to combine harvesters.
Among the products on the steel derivatives list drawn up in consultation with US manufacturers, Donald Trump is taxing 407 specific products ranging from tiny embroidery stilettos to cooker hoods, barbecues, fridges, freezers, dishwashers, hair curling tongs, grills, elevators, bridge and railway structures, agriculture equipment and wind turbines.
It has meant that since 18 August, companies such as Krone and the construction company Liebherr in Germany have to provide an unprecedented level of detail to customs border authorities certifying the origin, weight and value of any steel in their products right down to nuts and bolts.
“You have to get paperwork from the supplier to the supplier to the supplier. That is pretty much impossible,” said Oliver Richtberg, the head of foreign trade at the German engineering federation VDMA, one of the most influential trade bodies in Europe.
He described the EU/US trade deal, struck in July, as “not worth the paper it is written on”.
“[Ursula] Von der Leyen speaks of stability – for our industry, that is 100% not true. The bureaucratic hurdles are so high that some companies have just stopped exporting to the US,” added Richtberg.
Krone, which is based in Lower Saxony in Germany and has 10,000 employees, was among those immediately hit.
Bernard Krone, the fourth generation chair of the company, said the new tariffs, which fall outside the EU deal, came as “a big shock” as the US was its second biggest market, worth $130m (£97m) a year.
He thought the EU-US deal struck in July was “not perfect” but offered predictability until the steel derivative list was published on 18 August.
“That list was very alarming for us. Added to that, nobody could tell us what to do. Did the tariffs depend on weight, origin or the price of raw steel?” said Krone.
While international headlines have focused on the 15% blanket tariff agreed by the EU, this separate list of 407 products is a rolling nightmare for exporters as the US has also set new rules allowing it to be changed several times a year.
To get their machines into the US, Krone and every other exporter has to certify the value and origin of any element of steel in their product.
With as many as 18,000 parts in the super-machines farming some of the world’s biggest farms, that has proved a challenge for Krone.
And getting paperwork work wrong could prove costly.
Flexport, a US logistics and freight company, says the guidelines advise customs authorities to apply the 200% tariffs on Russian imports to any steel derivative product on the hitlist with “incorrect” paperwork, withholding refunds until paperwork is in order.
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Bernard Krone has spent the last seven weeks addressing the new issue. In August he immediately extended holidays for his workers by two weeks, pausing exports to the US and temporarily suspending production on some lines.
But after weeks of talking to lawyers on both sides of the Atlantic and officials in the US, he is still not confident he knows what paperwork US customs authorities need.
Instead of risking shipping its bigger and costliest machines, such as forage harvesters that can cost £600,000, the company will send a “test container” of smaller machines in the coming weeks with mowers, rakes and tedders, which turn and cut grass to speed up the drying process for haymaking.
“This week, maybe next week, we will ship them over, and then four weeks later we will know if we have the paperwork right. It is nerve-racking,” Krone said.
Asked what his US customers were saying, he said: “Many of them are surprised. When they saw Mr Trump talk about tariffs, they got the impression that the foreign companies are paying these tariffs, but what they now figure out is that it is the customer who pays.
“If the farmers’ prices go up, then at the end of the day it is the US citizen who goes into Walmart or Target who has to pay more for their daily goods.”
Providing a paper trail that essentially proves to the US that every nail, nut or bolt did not originate in China is a bureaucratic nightmare.
The EU’s trade commissioner, Maroš Šefčovič, told a conference in Dublin last week that the new paperwork was “very, very challenging” and he has written to the US commerce secretary, Howard Lutnick, to address them.
Bernie Hart, the vice-president of customs and business development at Flexport, says the new requirements are in the “top tier” of complexity his business has dealt with as they “require new, granular data, country of melt and pour (steel), and country of primary smelt and cast (aluminium), often down to a stock-taking unit” level which can track minutiae such as colour and size of a product.
Have you been impacted by the steel derivative tariffs? If you want to share your story, get in touch: lisa.ocarroll@theguardian.com
