“La formula descritta nella comfort letter, comunque interpretata, porta a risul…
1. OVERVIEW OF THE NEW CUSTOMS TARIFFS
By order issued by the President of the United States on April 2, the U.S. government adopted new tariffs which provide for additional ad valorem duties on imports of products from all foreign countries.
The new protectionist policies adopted by the U.S. government – which took effect at midnight on April 2 – also apply to imports from the European Union.
Below are the main provisions introduced by the new measures:
in the automotive sector, a 25 percent tariff is introduced on imports of cars, trucks and related components from all foreign countries (for components, the measures will take effect by May 3);
imports of all goods from foreign countries into the U.S. customs territory are subject to an additional ad valorem rate of duty of 10 percent, effective April 5;
for many countries, the rate is expected to rise from April 9. In particular, the European Union (and, consequently, Italy) will be subject to a rate of duty of 20 percent; for China, the rate goes up to 34 percent;
certain products are currently excluded from the new tariffs. These include pharmaceuticals, lumber and semi-conductors, several precious metals (including gold, silver, platinum and copper), energy products (including oil) and critical minerals, as well as all goods subject to specific measures.
The new provisions complete an initial set of measures previously issued on February 10, whereby the U.S. government had imposed a rate of duty of 25 percent on steel and aluminum imports.
2. THE IMPACT OF CUSTOMS TARIFFS ON COMMERCIAL AGREEMENTS
Besides the clear economic and commercial impact, the introduction of additional duties may have a direct effect on all commercial agreements - whether existing or yet to be signed - involving the supply of goods to the United States.
In particular, for agreements already in place, fulfilling contractual obligations in light of the increase in tariffs may prove to be significantly more burdensome than expected – or reasonably foreseeable – at the time of signing.
First and foremost, it is advisable to conduct a preliminary review of the individual contractual clauses, checking for the presence of:
provisions on governing law and jurisdiction, to determine whether the agreement is subject to Italian law (and, consequently, to the possible remedies provided by the Italian Civil Code);
any delivery terms (so-called “Incoterms”) to verify the allocation between the parties for customs duties related to import/export;
any clauses on renegotiation and/or early termination upon occurrence of certain circumstances (e.g. force majeure clauses or hardship clauses).
2.1 Remedies under the Italian Civil Code
For commercial agreements subject to Italian law – lacking specific contractual remedies agreed upon by the parties – the Italian Civil Code provides for certain legal instruments that may mitigate the impact of the new tariffs on the original contractual terms. In particular:
supervening impossibility of performance due to causes not attributable to the debtor (pursuant to Articles 1218, 1256 and 1463 et seq. of the Italian Civil Code);
supervening hardship (pursuant to Article 1467 et seq. of the Italian Civil Code);
provisions on supplementary equity (pursuant to Article 1374 of the Italian Civil Code) and obligations to interpret and perform the contract in good faith (pursuant to Articles 1366, 1375 of the Italian Civil Code).
Supervening impossibility of performance refers to any situation preventing performance that cannot be foreseen and cannot be overcome with the effort that may be legitimately required of the debtor. According to the general principle laid down in Article 1218 of the Italian Civil Code, if the non-performing party proves that the default was a consequence of the impossibility of performance for “reasons not attributable to such party”, the latter may be held not liable.
In cases of definitive supervening impossibility, the contractual obligation is extinguished, resulting in the automatic termination of the agreement (either in full or partially, if the impossibility affects only part of the performance). If the impossibility is only temporary, the performance of the obligation may be legitimately suspended.
That said, while each commercial agreement should be assessed on a case-by-case basis, the new tariffs (at least in general terms) do not seem to constitute a genuine case of supervening impossibility. However, a temporary impossibility may be invoked in specific circumstances, resulting in a suspension of the contractual obligation.
It is arguably more feasible to rely on the instrument of supervening hardship. This remedy allows the termination of agreements whose balance is altered by supervening events – extraordinary and unpredictable when the agreement was entered into – which do not fall within the normal contractual risk and which make the performance of any of the obligations underlying the contract excessively burdensome or objectively debased in value and/or usefulness.
In such a case, the counterparty that is interested in maintaining the contractual commitment in place may offer to rebalance the relevant agreement within the limits of normal risk, thus avoiding termination.
In any event, it is worth noting that both remedies – aside from the option to take the contract back to fairness – often face a practical obstacle: in the context of commerce, contract termination may not be a suitable remedy, as it would completely erase the business relationship. In this regard, during the Covid-19 pandemic (an exceptional event par excellence), the Italian Supreme Court expressed support for the existence of an obligation to renegotiate the contract rather than seeking termination (see Corte di Cassazione, Ufficio del Massimario, relazione tematica no. 56/2020).
An alternative might be to invoke the application of general principles of supplementary equity and good faith in contractual performance, with respect to which scholars has already acknowledged the possibility of claiming a general duty to renegotiate the contract upon the occurrence of supervening circumstances.
2.2 Contract remedies
As discussed, the provisions of the Italian Civil Code mainly offer remedies that lead to contract termination, which often do not align with the commercial need to preserve existing business relationships.
To encourage the use of conservative remedies, one solution may lie in the prior arrangement of specific contractual renegotiation clauses.
In this regard, commercial contracts often include certain clauses that are commonly used in both domestic and international commercial practice, that contractually regulate the effects of supervening events that may impact the contractual balance.
The most common contractual provisions in business practice include:
force majeure clauses;
hardship clauses;
material adverse change (MAC) clauses.
Force majeure clauses regulate cases in which the contractual obligation becomes impossible due to the occurrence of an event specified in the relevant agreement. The application of the force majeure clause results in the suspension of the affected party’s obligations and may, subsequently, lead to the termination of the contract or grant the parties the right to terminate it.
The applicability of such clauses in relation to the introduction of tariffs must be assessed in light of their precise wording, even though – as previously noted – the new customs duties generally do not result in an actual impossibility of performance. A detailed review of the specific events covered by the clause is therefore necessary.
On the other hand, hardship clauses place an obligation to renegotiate contractual terms upon the occurrence of certain circumstances that make it excessively onerous for either party to perform the contract.
This remedy seems to offer a more viable solution in the context of the newly introduced tariffs. First, hardship clauses do not strictly refer to impossibility of performance (similarly to the Italian remedy of supervening hardship). Second, the preservative nature of the remedy may represent a more suitable solution for commercial purposes.
Finally, MAC clauses entitle one party to terminate the contract upon the occurrence of a specified “material” event (unless a so-called “right to cure” is provided, allowing the other party to remedy the consequences of the supervening event. However, it is still appropriate to undertake a case-by-case assessment to determine the actual applicability of the clause.
3. CONCLUSIONS
The introduction of the new customs tariffs by the United States raises several questions regarding the future of trade relations between the United States and Italy.
Pending the developments of the policies undertaken by the U.S. government, it is advisable to consider the inclusion – in commercial agreements under negotiation – of adequate provisions aimed at mitigating the risks arising from the high degree of uncertainty in the international context, with an eye to any potential mitigants that may be adopted by the European Union – such as providing specific clauses that clearly allocate the burden of newly imposed customs duties and/or provide for price revision mechanisms.
As for commercial agreements already signed, the performance of which may be impacted by the tariffs, it will be necessary to assess on a case-by-case basis the potential triggering of legal and contractual remedies.
