This article discusses recent updates on US trade policy issues in the dietary supplement industry. It focuses on the trading relationship between the US and its largest trading partners, including China, and analyzes the ongoing effects of current trade policies on companies that produce, buy, and sell dietary supplements. The authors discuss tools available to US companies to reduce financial liability when trade policies are evolving at a rapid pace.IntroductionUS trade policy has been anything but quiet in recent years. The current administration is focused on trade as a central component of its economic policy and has relied on trade tools and policies that had been dormant for decades. The administration describes its approach as making fundamental changes to US trade policy to benefit US companies and workers including reshoring supply chains, encouraging US companies to reduce their business in China, and ensuring that there is significant capacity to produce articles that touch on national security, including medicines, steel, and aluminum.1In the last two years, these trade tools have included the application of tariffs on imports of numerous Chinese goods under Section 301 of the Trade Act of 1974, an updated United States-Mexico-Canada Agreement that replaces the 1994 North American Free Trade Agreement between the three countries, and a phase one trade agreement between the US and China.2 The administrations 2020 trade agenda promises more changes to US trade policies, including increased enforcement of trade laws and agreements; potential new trade agreements with the United Kingdom, European Union (EU), and Japan; and further negotiations with China for an anticipated phase two trade agreement. For US companies, a rapidly evolving trade landscape could be a double-edged sword in that it presents novel opportunities for companies in the US and abroad but also creates a degree of uncertainty that must be taken into account.The US-China trade relationshipThe relationship between the US and China is currently center stage in trade policy. After years of negotiations on various trade frictions, the two countries announced a phase one trade agreement in January 2020 that creates new obligations by China regarding patents, trademarks, trade secrets, and pharmaceutical-related intellectual property and enhances enforcement against counterfeit goods.3 The Phase One Agreement also contains important implications for US companies doing business in China because it prohibits China from pressuring US companies to turn over their technologies as a condition of market access, business advantages, or any licensing approvals.4 This deal will have wide-reaching effects for US and Chinese companies and it lays the groundwork for a phase two deal in the future.Ongoing negotiations between the US and China will have long-lasting effects for dietary supplement companies that import Chinese goods or export to China. For example, 80% of the raw material ingredients used to produce US manufactured vitamins and dietary supplements originate in China.5 Chapter 3 of the Phase One Agreement is devoted to trade in food and agricultural products, and requires China to create a regulatory process that will facilitate US exports to China of various agricultural products, including certain dietary supplements.6 The Phase One Agreement also increases market access opportunities in China for certain US dietary products, such as fish oil. China committed to increasing imports of US goods over the next two years by at least $200 billion, from the 2017 baseline value. The list of products China committed to import as part of that increased value includes essential oils, various types of seeds (oil, flax, sunflower, colza), spices (cinnamon, cloves, ginger, nutmeg, saffron, turmeric, and others), natural gums and resins, vegetable saps and extracts, and other extracts and concentrates.7 This creates new opportunities for US companies that export these products to have more predictable and reliable supply chains to sell to Chinas growing market.Tariffs on US imports of Chinese goods, and retaliatory tariffs imposed by the China government on imports of US goods, remain largely in place, even though the two countries reached the Phase One Agreement. This includes 25% tariffs on US imports of certain essential oils, fish oils, numerous acids, salts, and compounds from China classified under the US Harmonized Tariff Schedule Chapter 29 (Organic Chemical).8 Likewise, US companies that export dietary supplements to China face various retaliatory tariffs. In response to US tariffs, China has placed tariffs ranging from 5%-25% on thousands of US products, including animal and fish oils; certain extracts; various chemicals used in vitamins, food, and medicine; medicinal capsules; and plants used in medicines.9 The extent to which the US industry relies on raw materials from China has been a source of concern for US companies. For example, the Natural Product Association testified at a June 2019 hearing held by the Office of the US Trade Representative to address challenges faced by small- and medium-sized US companies that source from China.10 On the whole, the tariffs remain in place at this time, even though several companies have sought and received product-specific exclusions from them.11The duration of these tariffs remains uncertain. During negotiations for the Phase One Agreement, Chinese officials lobbied to have US duties on Chinese imports lifted, but the US agreed to reduce tariffs on a specific tranche of goods only.12 Negotiations for a phase two agreement were expected to continue immediately after the Phase One Agreement was signed, but the COVID-19 pandemic has caused a significant delay in talks until further notice. A phase two agreement is expected to cover a range of issues, including the Chinese governments provision of subsidies to domestic industries, intellectual property violations and enforcement of those violations, and forced technology transfer as a condition for access to Chinas market.Tariffs on imports from the EUA separate set of tariffs, stemming from the long-standing World Trade Organization (WTO) dispute between the US and the EU, affects US companies doing business in an EU member country. The dispute stems from the EUs provision of subsidies to aircraft manufacturer Airbus and has, for years, been the source of tariffs on US goods imported into the EU and EU goods imported into the US.Most recently, the US issued a new set of tariffs on EU imports after a WTO panel determined in October 2019 that the US was entitled to impose countermeasures against the EU for subsidies provided to Airbus.13 Although the WTO panel determined that the Airbus subsidies caused lost sales and revenues to the US aircraft industry, its ruling does not limit the US to imposing countermeasures (e.g., tariffs) to any particular industry or product. In previous years, the US has imposed duties on EU imports on a rotating, or so-called carrousel, basis, whereby products were subject to duties for a certain period and then removed from the tariff list. In April 2019, the US proposed applying additional duties to a range of EU imports, including various essential oils (orange, lemon, grapefruit, peppermint, eucalyptus, and others), concentrates of essential oils, and resinoids.14 Ultimately, and after much input from the industry including comments submitted by the Council for Responsible Nutrition explaining that many US companies source key raw ingredients from the EU15 none of those items were included on the final list of Section 301 duties for EU imports that is currently in effect.16 The duties went into effect on 18 October 2019, and will remain in effect until further notice.17Country of origin and marking issues for importsAs companies evaluate their supply chains in the midst of this new trade landscape, one option available to any US company is to confirm the country of origin of products it imports from overseas. US Customs and Border Protection (CBP) is experiencing an enormous uptick in requests for country-of-origin rulings from US companies. For decades, companies have requested country-of-origin determinations for imported products made of component parts from various countries or processed in a third country before entering the US. The country of origin of an imported product is more relevant than ever today because of the varying tariff levels that apply to imports depending on product and country. Since the Section 301 duties applicable to most Chinese imports went into effect in 2018, CBP has issued hundreds of country-of-origin rulings to advise companies whether their imported products are subject to tariffs. The correct classification of imports is crucial to businesses for financial and liability purposes.For example, if fish oil capsules are made of fish oil that is sourced and processed in Peru and is then shipped to China, where the fish oil is placed in capsules, should those fish oil capsules be labeled as a product of Peru or China when they are imported to the US? CBP answered that question in August 2019 and determined that the fish oil capsules should be marked with Peru as the country of origin.18 In its ruling, CBP explained that the fish oil retains its chemical and physical properties throughout the production process and is merely put into the capsules for dosage in China. For that reason, no substantial transformation of the fish oil occurs in China, and Peru remains the country of origin of the final product. CBP has confirmed in other rulings that the country from which the fish oil is sourced is the country of origin for fish oil capsules, even if the encapsulation process occurs in a third country before the product is imported into the US.19CBP has concluded that a substantial transformation occurs in cases where the processing performed in a third country, or in the US prior to sale, is more involved or complicated. For example, in 2018, CBP considered the country of origin for three different multivitamins.20 In 2018, CBP considered the country of origin for three different multivitamins.20 The multivitamins contained raw material ingredients from numerous countries, including China, India, Spain, Malaysia, Brazil, and the US. The raw materials were all imported into the US, where they were processed into multivitamins at a production facility in Michigan. CBP found that the combining and mixing of the raw materials in the US was substantial because each of the raw materials loses its original identity when combined to create a new finished product, the multivitamins. The multivitamins were, therefore, a product of the US. In another 2019 ruling, however, CBP found that a vitamin product whose active ingredient was sourced in Switzerland, imported to India to be mixed with inactive ingredients, then imported into the US, had Switzerland as the country of origin.21 CBP continues to process hundreds of country-of-origin requests as companies evaluate how to optimize the competitiveness of their production process and supply chain given the current trade climate.ConclusionWhere does this leave US companies? The industry has been vocal about the impact of current trade policies on dietary supplement companies. The dust has settled in certain respects, in that companies understand the impact of tariffs that have now been in place for a couple of years, but there are likely to be further changes ahead. Once the US emerges from dealing with the COVID-19 pandemic, companies can expect trade to return to being a top priority. US-China trade negotiations will continue, the United States-Mexico-Canada Agreement will be implemented, and new trade agreements will be negotiated all of which will require successful companies to understand the applicable rules and how to structure their operations within those rules to maximize the ability to compete.AbbreviationsCBP, Customs and Border Protection; EU, European Union; HTS, harmonized tariff schedule; USTR, US Trade Representative; WTO, World Trade Organization.References
View original post here:
Update on trade issues affecting the dietary supplement industry - Regulatory Focus
- Creatine and Caffeine: Benefits, Risks, Dosage - Health.com - April 16th, 2024 [April 16th, 2024]
- Fiber Supplements Are Once Again Popular But Pick The Right One | mindbodygreen - mindbodygreen - April 16th, 2024 [April 16th, 2024]
- The Ministry of Health Warns the Public Against Use of Food Supplements Manufactured by Kobayashi Pharmaceutical ... - Gov.il - April 16th, 2024 [April 16th, 2024]
- Study: Vitamin D and Calcium Supplements May Reduce Cancer Risk - Prevention Magazine - March 20th, 2024 [March 20th, 2024]
- Magnesium for Sleep: The Best Type, When to Take It and More - Good Housekeeping - March 20th, 2024 [March 20th, 2024]
- Food ingredients drive growth in beauty supplements - IngredientsNetwork.com - March 20th, 2024 [March 20th, 2024]
- Best Ozempic Weight Loss Alternative Supplements Money Can Buy (Top OTC Semaglutide Alternatives) - Vashon-Maury Island Beachcomber - March 20th, 2024 [March 20th, 2024]
- Can Fiber Help with Ozempic, Wegovy Side Effects? - Health.com - March 20th, 2024 [March 20th, 2024]
- Vitamin B12 and Magnesium: Benefits, Risks, Dosage - Health.com - March 20th, 2024 [March 20th, 2024]
- Taking a Daily Fiber Supplement Might Help Boost Brain Function in Older Adults - Health.com - March 20th, 2024 [March 20th, 2024]
- Moringa: Benefits, Side Effects And Risks Forbes Health - Forbes - October 22nd, 2023 [October 22nd, 2023]
- What to Know About California's New Law Banning Food Additives ... - Smithsonian Magazine - October 18th, 2023 [October 18th, 2023]
- How to Treat Iron Deficiency - The New York Times - October 18th, 2023 [October 18th, 2023]
- The Importance of Micronutrients for Optimal Health - Everyday Health - September 11th, 2023 [September 11th, 2023]
- How can companies stand out in the immune health category in 2023? - Nutritional Outlook - June 20th, 2023 [June 20th, 2023]
- Kemin's BetaVia Pure immune and gut health ingredient gains ... - Nutritional Outlook - June 20th, 2023 [June 20th, 2023]
- Steadfast Nutrition expands its portfolio with four supplements - Asia Food Journal - June 20th, 2023 [June 20th, 2023]
- Martyn Ford Reveals Food & Supplements of 10000 Calorie Diet for ... - Fitness Volt - June 20th, 2023 [June 20th, 2023]
- Nutrition & Longevity Experts Love This Metabolism Supplement ... - mindbodygreen - June 20th, 2023 [June 20th, 2023]
- Ric Flair Reveals Diet, Training & Supplements to Stay Jacked at 74 ... - Fitness Volt - June 20th, 2023 [June 20th, 2023]
- ADM licenses gut-health ingredient from Gnubiotics for pet food ... - Nutritional Outlook - May 18th, 2023 [May 18th, 2023]
- Global Sorbitol Market Report 2023: Increasing Demand for Non-medical Dietary Supplements Drives Growth - Yahoo Finance - May 18th, 2023 [May 18th, 2023]
- Fat-Soluble Vitamins: What They Are and How To Get the Most Out of Them - Health Essentials - May 18th, 2023 [May 18th, 2023]
- Six of the Best... food, treats & supplements - Dogs Today Magazine - May 18th, 2023 [May 18th, 2023]
- 9 Anti-Inflammatory Supplements Backed By Science Forbes Health - Forbes - May 18th, 2023 [May 18th, 2023]
- Dietary Supplements Market Size to Reach Globally with Growing ... - Digital Journal - May 18th, 2023 [May 18th, 2023]
- These 11 Vegan Vitamins Are Made With Fruits and Vegetables - VegNews - May 18th, 2023 [May 18th, 2023]
- Hemptown's Kirkman Subsidiary Named One of the 50 Most Admired Companies to Watch in 2023 - Yahoo Finance - May 18th, 2023 [May 18th, 2023]
- What is biotin? Foods to eat and if you should take it every day - USA TODAY - May 18th, 2023 [May 18th, 2023]
- Best vitamins to be taking as seasons change, according to health expert - Daily Record - May 18th, 2023 [May 18th, 2023]
- KITTEN YOGA RETURNS TO EAST BANK REGIONAL LIBRARY ... - Jefferson Parish - May 18th, 2023 [May 18th, 2023]
- 8 Best Fiber Supplements of 2023, Tested by Experts - Good Housekeeping - May 18th, 2023 [May 18th, 2023]
- FDA Passes the Buck (Back) to Congress for Legislative Solution on ... - JD Supra - May 18th, 2023 [May 18th, 2023]
- The Wellness Trap: Break Free from Diet Culture, Disinformation, and Dubious Diagnoses, and Find Your True Well-Being - Next Big Idea Club Magazine - May 18th, 2023 [May 18th, 2023]
- Fruit And Vegetable Supplements: A 2023 Guide Forbes Health - Forbes - May 18th, 2023 [May 18th, 2023]
- FDA: SARMs not worth the health risk 'for a few extra likes' - NutraIngredients-usa.com - April 29th, 2023 [April 29th, 2023]
- Are Melatonin Gummies Safe? Here's What (Kinda Scary) New Research Says - POPSUGAR - April 29th, 2023 [April 29th, 2023]
- New paper discusses the rationale for proprietary blends in ... - Nutritional Outlook - April 29th, 2023 [April 29th, 2023]
- The Best Brain Supplements For Cognitive Health Forbes Health - Forbes - April 29th, 2023 [April 29th, 2023]
- Protein powders: Are they bad for your health? - BBC - April 29th, 2023 [April 29th, 2023]
- New Regulation on Turkish Food Codex Nutrition Claims Has Just ... - Lexology - April 29th, 2023 [April 29th, 2023]
- Selenium: Benefits, Side Effects, and More - Verywell Health - April 29th, 2023 [April 29th, 2023]
- FDA Warns of Use of Selective Androgen Receptor Modulators ... - FDA.gov - April 29th, 2023 [April 29th, 2023]
- Probiotic supplements may do the opposite of boosting Gut Health ... - WholeFoods Magazine - April 22nd, 2023 [April 22nd, 2023]
- Do hangover supplements actually work? - Nutritional Outlook - April 22nd, 2023 [April 22nd, 2023]
- Common Sense Health: Fish oil is the superhero of supplements - The Independent - April 22nd, 2023 [April 22nd, 2023]
- Red yeast rice nutritional supplements health benefits, risks ... - Chicago Sun-Times - April 22nd, 2023 [April 22nd, 2023]
- From forest to fork - All About Feed - April 22nd, 2023 [April 22nd, 2023]
- Could Certain Foods Help With Hot Flashes? - The New York Times - April 22nd, 2023 [April 22nd, 2023]
- Consumer interest in cognitive, immune health rising - Food Business News - April 22nd, 2023 [April 22nd, 2023]
- 15 Best Vitamin Brands of 2022: A Dietitians Picks - February 24th, 2023 [February 24th, 2023]
- Dietary supplements for weight loss - Mayo Clinic - February 24th, 2023 [February 24th, 2023]
- Emergency Food Supplements | DSHS - Washington - December 28th, 2022 [December 28th, 2022]
- Guidance & Regulation (Food and Dietary Supplements) | FDA - December 25th, 2022 [December 25th, 2022]
- Food Labeling & Nutrition | FDA - December 25th, 2022 [December 25th, 2022]
- Health & Food Supplements Information Service - HSIS - November 21st, 2022 [November 21st, 2022]
- Food Security Community Food Security Coalition - November 21st, 2022 [November 21st, 2022]
- Expert Voices: Diet and Nutrition for People With Parkinson's... - Parkinson's News Today - October 19th, 2022 [October 19th, 2022]
- The regulatory state of play of the sports and active nutrition sector - NutraIngredients.com - October 19th, 2022 [October 19th, 2022]
- The Digestive Health Supplements Market Is Set To Grow At A More Than 9% Rate Due To Rising Cases Of Digestive Diseases As Per The Business Research... - October 19th, 2022 [October 19th, 2022]
- FSAI highlights incidents, recalls and fraud in its annual report - Food Safety News - October 19th, 2022 [October 19th, 2022]
- Global Cannabidiol Legalization Trend to Shape the CBD Market's Future Growth - PR Newswire - October 19th, 2022 [October 19th, 2022]
- The FoodNavigator Podcast: Mood food for mental wellbeing how can the industry capitalise? - FoodNavigator.com - October 19th, 2022 [October 19th, 2022]
- 6 Ways to Find Relief from Your Menopause Symptoms - Health Essentials - October 19th, 2022 [October 19th, 2022]
- NutraCast: How amendments in the 2023 Farm Bill could shape the hemp industry - NutraIngredients-usa.com - October 19th, 2022 [October 19th, 2022]
- South Korea starts year-long inspection of probiotics imported from US, Europe - NutraIngredients-Asia - October 19th, 2022 [October 19th, 2022]
- Nveda employs a variety of dietary supplements made of natural ingredients for a fit and healthy life - The Hindu - October 13th, 2022 [October 13th, 2022]
- Vitamin C Market to See Healthy Growth of USD 1,899.69 Million with Excellent Compound Annual Growth Rate of 7.60% by 2029, Size, Opportunities,... - October 13th, 2022 [October 13th, 2022]
- Global Microalgae Market to Reach $1.3 Billion by 2027 - GlobeNewswire - October 13th, 2022 [October 13th, 2022]
- Dietary supplements that are safe to take, which to avoid: experts - Insider - September 27th, 2022 [September 27th, 2022]
- 6 Best Fiber Supplements That Will Keep Your Gut Happy - CNET - September 27th, 2022 [September 27th, 2022]
- Do You Actually Need To Take A Multivitamin? The Answer May Surprise You - The Zoe Report - September 27th, 2022 [September 27th, 2022]
- Global overview for probiotics: Trends, markets, and harmonization - Regulatory Focus - September 27th, 2022 [September 27th, 2022]
- Combining Your Medication With This May Have "Life-Threatening Effects" - Best Life - September 27th, 2022 [September 27th, 2022]
- Aroma-Zone opens a new store in Paris and prepares to grow abroad - Premium beauty - September 27th, 2022 [September 27th, 2022]
- Fertility Supplements And Vitamins For Women: What You Need To Know - Forbes - September 27th, 2022 [September 27th, 2022]
- ITA offers webinar focusing on supplements and informed decision-making (part 1) - IHF - September 27th, 2022 [September 27th, 2022]
- Awards recognize the latest innovative pet food products - Pet Food Processing - September 27th, 2022 [September 27th, 2022]
- On-mind and on-trend: formulating products for cognitive well-being - Nutraceutical Business Review - September 27th, 2022 [September 27th, 2022]
- The #1 Sign You're Taking "Too Many Vitamins" Eat This Not That - Eat This, Not That - September 7th, 2022 [September 7th, 2022]