The United States, the European Union, Canada, Japan, United Kingdom, Republic of Korea, Australia, New Zealand and others have imposed a wide array of economic sanctions on the Russian Federation and Belarus as a result of Russia’s invasion of and continued war against Ukraine. More sanctions, both increased duties, and export control and financial sanctions were imposed last week flowing from the G7 meeting in Germany. A large item identified was the banning of imports of gold from Russia.
The United States also announced raising import duties on 569 8-digit HS categories of goods from Russia to 35% ad valorem. See Presidential Proclamation 10420 of June 27, 2022, 87 Fed. Reg. 38,875- 38,881 (June 30, 2022). The change in duties will apply to imports and goods removed from warehouse on or after July 30, 2022. The most recent Presidential Proclamation followed actions on March 8, 11, and April 8, 2022 in which the U.S. had banned various imports from Russia and suspended nondiscriminatory tariff treatment for products from Russia and Belarus (changing the tariff rate from the MFN rate in column 1 to the column 2 rate).
In reviewing U.S. imports from Russia covered by Presidential Proclamation 10420, data available from the U.S. International Trade Commission dataweb for 2021 and January-April 2022 showed imports in 491 of the 569 8-digit HS categories from Russia, worth $2.2 billion in 2021 and $582 million in the first four months of 2022 (up from $362 million in the first four months of 2021). Total imports of all categories from Russia were $30.1 billion in 2021 and $10.5 billion in the first four months of 2022. The vast majority of imports from Russia have been petroleum products which are now banned.
Of the 491 categories for which import data (imports for consumption) were identified, one (HS 7207.12.00, Iron or nonalloy steel semifinished products, w/less than 0.25% carbon, w/rect. cross sect. (exclud. sq.), nesoi) accounted for $886.7 million of imports from Russia or 40.32% of the total for the 491 in 2021 but just 14.93% for 2022 (Jan.-April).
The top 5 categories of the 491 accounted for 62.47% of the total for 2021 and 33.97% in 2022. The other top four categories were 9306.30.41, Cartridges nesoi and empty cartridge shells ($163.5 million in 2021); 7106.91.10, Silver bullion and dore ($143.9 million in2021); 7115.90.05, Precious metal articles, incl. metal clad w/precious metal, rectangle/near rectangle shape,99.5%/ or pure, marked only by wgt/identity ($93.4 million in 2021); 7801.10.00 Refined lead, unwrought ($86.3 million in 2021).
The top 20 categories of the 491 accounted for 87.03% of the total in 2021 and 75.84% in the first four months of 2022. The twenty 8-digit HS categories are: 4002.19.00, 4002.20.00, 4002.31.00, 4002.39.00 (rubber products); 4011.10.10 (passenger car tires); 4407.12.00 (certain sawed wood, pine and spruce); 7106.91.10 (silver bullion) 7115.90.05 (certain precious metal articles); 7202.11.50, 7202.30.00, 7202.41.00 (ferromanganese, ferrosilicon manganese, ferrochromium); 7207.12.00 (certain semifinished steel); 7224.90.00 (certain semifinished alloy (other than stainless) steel); 7304.29.20, 7306.29.20 (certain seamed and seamless steel pipe); 7408.11.60 (certain refined copper wire), 7605.11.00, 7606.12.30 (certain aluminum wire and plate/sheet products); 7801.10.00 (refined lead, unwrought), 9306.30.41 (ammunition Cartridges nesoi and empty cartridge shells).
Below are the changes in import duty rates applied to these goods from the Russian Federation. Column 1 was suspended pursuant to the Suspending Normal Trade Relations with Russia and Belarus Act (19 U.S.C. 2434 note) which brought the Column 2 rates into effect. The 35% rate will apply 30 days after the posting of the President Proclamation in the Federal Register (i.e., on July 30, 2022). The column 2 rate for HS 4407.12.00 is $1.70/m3. Imports from Russia in 2021 had an average value of imports/m3 resulting in a 0.39% ad valorem equivalent which declined to 0.31% in the first four months of 2022.
As the unprovoked war by Russia in Ukraine continues (with support from Belarus), the most important sanctions are those limiting access to western technology, the financial sanctions and seizure of assets and the efforts to drastically reduce the dependence of the allies on Russian oil, gas and coal. But the broad based efforts to deny most favored nation treatment to the countries causing the European and global national security crisis — including limiting imports of various other goods and raising duties on any imported merchandise from Russia and Belarus — are also important.
While the WTO is focused on multilateralism, it is hard to see how Russia, Belarus and those supporting them won’t be treated as largely outside of the global system for the foreseeable future. Global integration is not compatible with the need for a respect for the global order. Putin’s desire to use force to claim neighboring land creates unacceptable risks to many trading partners who cannot permit an overreliance on goods and services from the Russian Federation. While there are costs from having different trading blocks, there are greater costs of having major outliers participate in a unified system with the downsides of overreliance of undependable sources or those willing to use access to resources for coercion and intimidation.
While Russia and Belarus have clearly broken the trust of many through the ongoing war, China has also been engaged in serious efforts at coercion and intimidation, causing many to reevaluate how to make bilateral and multilateral relations with China support the global order and be mutually beneficial. The comments from the G-7 in their recent communique are an example of the unease China’s actions are causing other nations.
While there was a successful WTO Ministerial Conference concluded in Geneva last month, the major threats to the global system remain and are intensifying. While trade is but one piece of the puzzle, it is hard to see an early resumption of normal trade relations with the Russian Federation and Belarus. Whether a new normal can be established with China is uncertain but likely the most important issue for this decade.
Terence Stewart, former Managing Partner, Law Offices of Stewart and Stewart, and author of the blog, Current Thoughts on Trade.
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