By Admin 
Moody’s Warns on Trans-Shipment Tariffs: The 40 percent trans-shipment tariff imposed by the US is expected to create major compliance problems for companies in India and the ASEAN region. Rating agency Moody’s has expressed concern in its report that this tariff may have a significant impact on the machinery, electrical equipment and semiconductor sectors.
US rating agency expressed apprehension
On July 31, US President Donald Trump had announced the imposition of a 40 percent tariff on goods that have been sent ‘through a third country to avoid duty’. This tariff will apply in addition to the broader country-level charges. Moody’s said in its report on Tuesday focused on ‘Trade in the Asia-Pacific region’ that it is not yet clear how the Trump administration will define ‘trans-shipment’. However, the target of this move is mainly goods produced in China, which are sent to America through third countries.
The rating agency said that the ambiguity related to transit fees poses a risk to the economies of ASEAN countries. If the US keeps this definition narrow and only includes goods imported, lightly processed or relabeled from China, the impact on regional economies will be limited.
Big impact on Indian companies!
Conversely, if the US adopts a broader interpretation of trans-shipments to include goods that contain any significant amount of Chinese content, it could cause severe economic harm to Asia-Pacific supply chains. According to the rating agency, the machinery, power equipment, consumer optical products and semiconductor sectors may face the most transit risks.
Moody’s also said that products transiting third countries are mostly in the form of ‘intermediate raw materials’ and not final consumer goods. The US rating agency said the tariffs would create major compliance challenges for ASEAN’s private sector. Exporters will face additional vigilance and certification requirements to prove ‘significant transformation’ of products to avoid US tariffs.
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