The recent announcements and direction from President Trump and the U.S. administration on increased tariffs mark a significant shift in the global trading landscape and may significantly impact the global economy. The imposition of increased tariffs may have immediate and far-reaching consequences for companies exporting goods to the U.S. or for businesses engaging in cross-border business with U.S. counterparties. Future developments are difficult to predict as the direction changes on an almost daily basis and currently, several tariffs have been suspended.
The introduction of increased tariffs may drastically alter the cost structure of goods between parties, and may lead to commercial imbalance, disputes, or exposure to unexpected liabilities and costs.
It is therefore critical for businesses to assess whether goods exported to the U.S. are affected by the relevant tariffs, evaluate how their commercial contracts allocate these risks, and consider and take the relevant actions.
This Insight outlines certain key legal considerations and practical steps businesses should take to mitigate the impact of relevant tariffs when exporting goods to the U.S. or when engaging in cross-border business with U.S. counterparties.
- Mapping of goods: Start by mapping whether
exported goods are caught by any of the new tariffs and the origin
of exported goods from sub-suppliers to identify if such are
subject to increased tariffs.
- Initial mapping of existing contracts: Review
and map existing contracts with a focus on (i) allocation of risk
for increased tariffs between the parties, e.g. due to agreed
delivery terms such as applicable Incoterms, and (ii) pricing and
price adjustment clauses covering increased costs, such as
increased tariffs.
- Force majeure clauses: If affected by the
tariffs, identify force majeure clauses and scrutinize their
wording for applicability, noting that economic hardship or
increased costs due to tariffs generally do not constitute force
majeure under Danish law. If the increased tariffs constitute a
force majeure event under the applicable contract, then take the
necessary actions such as collect evidence and notify the
counterparty.
- Hardship clauses: If affected by the tariffs,
identify and assess hardship clauses, hereunder whether they
provide for suspension of obligations, renegotiation, termination
or different.
- Termination rights: Identify and consider
termination rights if the contract is no longer commercially
viable, and map the same for the counterparty, if such is
responsible for the increased tariffs.
- Dispute resolution preparedness: Consider and
prepare for dispute resolution, e.g. due to own or
counterparty's breach based on financial strain, hereunder
considering relevant dispute resolution, jurisdictional
considerations, likelihood and enforceability of damages or
injunctions, etc.
- Monitor counterparty behaviour: Keep
monitoring counterparties for signs of renegotiation or termination
intent and adapt/act accordingly.
- Proactively renegotiate, where needed:
Consider renegotiating vulnerable contracts proactively, if
commercially feasible.
- Continued fulfilment of
contracts: Continue to observe good faith duties
while contract is still in effect to avoid unnecessary and unwanted
liability.
- Strengthen your contracts going forward and considerations on the choice of the delivery term/Incoterms: Going forward, ensure contracts explicitly address risk allocation of increased tariffs, inter alia by implementing relevant delivery term/Incoterms, price adjustments, force majeure and hardship clauses, termination flexibility and dispute mechanisms, both in your contracts with U.S. counterparties and in contracts with relevant sub-suppliers.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
