Most Common Trade Barriers Encountered by European Companies Attempting to Enter the U.S. Market

Economic partnership between the United States and the European Union is the largest and strongest in the world. Despite the success of the US-EU trade relations, European companies seeking opportunities to enter the U.S. market face barriers that often slow down or reduce the volume of trade.

Green Gate Consulting has identified the most common trade barriers that European exporters encounter while entering the U.S. market. Below we briefly describe these barriers to outline the export process of European goods to the U.S. market.

Custom duties and tariffs are the first and most obvious barrier to international trade, because they require that a European exporter become familiar with U.S. customs regulations. Contrary to first appearances, however, duties and tariffs are one of the easiest trade barriers to overcome.

One should know that the United States has generally low tariffs for products coming from the European Union, including Polish products (their average rate fluctuates around 4%), and that the duty rates are usually calculated as a percentage of the trade value of goods entering the United States.

American agency U.S. Customs and Border Protection-USCBP (www.cbp.gov) regulates certain aspects of international trade in the U.S. and is responsible for the collection of duties. The exact list of customs duties, as well as guidance on the classification of goods can be found on the website of the U.S. International Trade Commission under the Harmonized Tariff Schedule-HTS (http://www.usitc.gov/tata/hts). All goods imported into the U.S. have to go through the customs procedures and are subject to the United States customs law.

It is important to remember that it is the responsibility of an exporter (or a U.S. importer of European goods) to fill out the appropriate customs declarations and to properly classify products imported to the United States, which directly translates into the amount of duties. Once classified, such goods receive a 10-digit customs code located in the U.S. tariff schedule. The first 6 digits of this code are compatible with the world’s Harmonized System (HS) customs codes, and the last 4 digits are determined by the U.S. HTS system for statistical purposes. American and European customs codes are different and it is important to remember this difference.

Additional useful information relates to unique products that might not be included in the HTS’s classification of goods. If an exporter encounters such a situation, he or she should request that USCPB grant a customs code for a certain product. Perhaps this is a rare situation, but it helps to know what to do when a certain commodity has no official customs code.

In case of errors in customs declarations, USCPB can stop the incoming goods and refuse to accept them in the United States. It can also impose fines for failure to comply with customs formalities. In order to avoid such penalties, European companies exporting goods to the U.S. often employ U.S. customs agents, who help them comply with customs formalities. This is probably the safest solution in cases where an exporter is responsible for his or her own goods after they cross the U.S. border (unless a U.S. importer of European goods is responsible for all customs procedures).

Another barrier category associated with entering the U.S. market and increasing the cost of trade transactions Green Gate Consulting named “non-tariff bureaucratic barriers”. They include, for example, restrictions on the amounts of goods imported to the U.S; additional certification requirements, including quality or origin certificates; requirements to adapt packaging and product descriptions to U.S. standards; handling fees, licenses and permits; technical prohibitions and other technical barriers to trade.

“Non-tariff bureaucratic barriers” are the results of American laws related to issues such as certification, standardization, technical standards and compliance procedures, marking of goods, product safety or consumer and environmental protection.

Bureaucratic requirements are not only expensive, but they are also the most time-consuming to meet, which translates into their relatively large and negative impact on transatlantic trade. Abolition of even some of these requirements and barriers would be a great relief to trade between the European Union and the United States, and it would undoubtedly increase the size of the transatlantic trade exchange.

Green Gate Consulting considers “non-tariff bureaucratic barriers” to be the most significant factors impeding the European-American trade exchange. Right after them appear discrepancies in the U.S. Federal and state regulations.

European exporters must meet the requirements included both in the Federal Law, which is applicable in the entire territory of the entire United States, as well as State Laws, which are applicable in the territory of a certain state. Generally, federal regulations are the “overriding regulations” and each state must enforce them. Individual states, however, have their additional own rules and regulations, and European exporters must familiarize themselves with these regulations while exporting goods to a certain state.

Transportation costs can also be notable barriers to transatlantic trade and they can increase costs of transatlantic trade exchange. Air transport is obviously expensive. In turn, land transport is time consuming and sometimes logistically difficult. Poland, for example, does not have direct access to the transatlantic ports, and Polish goods shipped to the United States must be first transported by land to one of the main Western European ports such as Rotterdam, Hamburg or Antwerp. This, of course, is a significant, negative cost factor.

U.S. regulations related to national defense and terrorism prevention are additional factors slowing transatlantic transport. These regulations are changing and being modified on regular basis. They may complicate exports to the United States while slowing such export and imposing additional safety monitoring requirements on it. It is worth it to have this in mind when planning exports to the United States.

The last barrier to trade between the United States and the European Union, which Green Gate Consulting considers to be significant, are the expectations of European exporters.

The goal of most exporters is to gain a large segment of the U.S. market, and hence start selling goods on a large scale, preferably through major U.S. retailers such as the Walmart chain. It seems to be an optimal scenario. Often, however, it so happens that an European exporter is not physically able to meet the demand from U.S. consumers (assuming, for example, that he or she starts working with a large retailer such as Walmart), and overestimates his or her own abilities when planning trade expansion to the U.S. market.

It also happens that a European exporter establishes trade exchange with a small American distributor, and his or her export expectations are not met, because, for example, this exporter counted on, or imagined, immediate large scale sales.

Therefore, proper planning and preparation for the U.S. market entry are important to prevent unrealistic expectations from becoming a trade barrier or a discouraging factor in continuation of a trade exchange.

All the above mentioned barriers to the U.S. market entry are definitely possible to overcome! Green Gate Consulting encourages European exporters to familiarize themselves with the U.S. trade rules and regulations, because in most cases they are not as complicated as it may appear at first glance.