Some of the products affected by the tariffs include single malt Scotch and Irish whiskey, French wine, citrus/fruits, mollusks, Italian cheeses/other cheeses/dairy products and Spanish olives and olive oil.
On October 9, 2019 the Office of the United States Trade Representative (USTR) issued a ‘Notice of Determination and Action’ of the specific Harmonized Tariff Schedule (HTS) items. Also known as Harmonized System (HS) codes, these identify products from the EU that will be subjected to additional import duties or tariffs.
Effect on Olive Oil
Spain is the world’s largest producer of olive oil, pressing around 56% of the global supply in 2018/19, and with around 10% of its exports going to the US. Between January and August 2019, Spain exported USD 341.22 million of olive oil to the US and, in total, it accounts for roughly one-third of all American olive oil imports.
Spanish olive oil is one of many specialist products to be targeted among the punitive tariffs. The ‘Notice of Determination and Action’ states in Part 3: ‘the products of Germany, Spain or the United Kingdom described below are subject to additional import duties of 25%’.
The section lists:
- HTS #1509.10.20 Virgin olive oil and fractions, not chemical modified, weighing under 18 kg
- HTS # 1509.10.20 olive oil, other than virgin and fractions, not chemically modified, weighing under 18 kg
Therefore, the tariff does not apply to containers weighing 18 kg or more, from outside Germany, Spain or the United Kingdom.
Due consideration must be given to the country of origin rules, determined by whether a product has been substantially changed in a country. For example, if Italian or Greek olive oil is shipped to Spain where it is bottled and packed in quantities weighing less than 18 kg, then because the oil has not been substantially changed it still retains its country of origin – of Italy or Greece.
The reverse is also true. If olive oil from Spain is shipped to Italy or Greece for bottling in packages less than 18 kg, since the olive oil is not substantially changed it remains a product of Spain, and the additional tariff must be paid.
Further complication arises if olive oils are blended. For example, olive oils from Spain, Italy, Greece and Tunisia, are blended then placed into packages less than 18 kg. Since the product is not substantially changed, the tariff would apply on the percent fraction of the olive oil from Spain in the packaging.
To enforce this, the US Customs and Border Protection (CBP) requires documentation to prove the country of origin of the olive oil. Per 19 U.S.C. 1481, 1484 the importers of record are required to declare the correct country of origin. CBP monitors these documents and may audit the merchandise and importer. Negligent or fraudulent country of origin documentation can lead to financial penalties or criminal sanctions.
Providing Proof to the Importers of Record
In many cases the country of origin is clear. For example, when olive oil is produced in Spain, bottled in Spain and labeled ‘Product of Spain’. The product is received with documentation and the additional tariff is paid.
However, in global markets the process may require certification at each location, with traceability between locations. This becomes necessary when the origin is not always certain or where blending has created multiple origins.
The active certification and traceability programs for olive oil quality, i.e. extra virgin, and origin, i.e. Product of Italy, are already in existence to ensure customers receive the product that they are paying for.
However, at times products would require a technical test to prove origin. When the US government questions the origin of garlic for instance, they will test for specific metals/elements within the product and compare the results against their database of information which can prove country of origin. One such test in use isotope testing.
The isotope fingerprint of a food is unique. Its signature comprises the ratios of five key elements – carbon, nitrogen, oxygen, hydrogen and sulfur – each affected by the environmental conditions specific to its place of origin. This signature is therefore unique to the food, its site of production and any processing it has undergone.
The isotope fingerprint of a food test sample can be assessed with reference to either an authenticated reference sample from the same geographical area or against a long-term monitoring database. It is even possible to determine a specific protected designation of origin when testing a product against certified samples from a specific origin.
Currently, determination is not possible with blended products. However, if the single origin source products are analyzed prior to blending and then portion blending is verified by an independent third party or the government, it is possible to confirm the amount of that blended product from each specific area of origin. Alternatively, the isotope fingerprints of blended products in mother lots can be used to verify the sublots across the supply chain and distribution nodes.
With a global network of experts, dedicated laboratories and a regulatory database (SGS Digicomply), SGS offers a comprehensive range of services such as certification and traceability services; including a partner lab with capability to perform isotope testing. Thus, manufacturers and suppliers that sell a diverse group of products can demonstrate that they are safe and compliant with national and international regulations.
Working together, SGS and Transparency-One support food companies by enabling them to discover, analyse, verify and monitor all suppliers, components and facilities within their supply chains. This builds consumer trust, ensures transparency and traceability, including transparency on product origins – from raw ingredients to finished products.
For the complete range of SGS services and support visit www.foodsafety.sgs.com.
Global Food Inspection Technical Manager
t: +1 973 461 1493