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There are effective strategies for Italian SMEs, such as opening a US subsidiary and using alternative customs protocols.
[→ click here to listen to the full interview on Class CNBC's website]
Italian SMEs can cope with the 15% US tariffs by opening a US subsidiary and using strategies like "first sale" or "industrial cost," which allow tariffs to be calculated on lower values than the sales price.
With the trade agreement between the United States and the European Union, European goods destined for export to the US will be subject to a uniform 15% tariff. For many Italian companies, especially SMEs, the news has raised concerns, but according to Alessandro Colnago, vice president of ExportUSA, there are concrete strategies to successfully face this scenario.
“For the first time, companies have a clear and stable framework to plan on. The 15% replaces all previous tariffs, thus simplifying customs management”.
Another change is the elimination of the "De Minimis" regime, which until now allowed goods valued under $800 to enter without tariffs. This particularly affects companies that sell through e-commerce but also represents an opportunity to revise distribution strategy.
“Today, it is advantageous to have a minimum stock already on American soil. This allows for greater competitiveness and reduced delivery times.”
ExportUSA suggests two protocols that legally reduce the taxable base from which the tariff is calculated :
“With these techniques, even SMEs can be competitive without relocating, simply by organizing better.”
Many businesses fear the bureaucratic complexities of opening a company in the US. However, according to Colnago, the procedure is simpler than one might think:
“In three weeks, you can open an operational US subsidiary, with costs and formalities lower than those of an Italian SRL.”
Thinking about an expansion with a production site in America, like an industrial plant, may seem like a bold step, but it is a tangible possibility. The United States offers incentives, reimbursements, and tax advantages to companies that invest locally.
“Producing in the US doesn't mean outsourcing, but strengthening your presence in the world's most dynamic market.”
Emerick De Narda
Hello to all Class CNBC viewers and welcome to the segment dedicated to Borsa Italiana Euronext's Growth area. Today, we are pleased to discuss the current situation faced by Italian SMEs, both listed and unlisted, regarding the issue of tariffs. And for this, we turn to heavyweights like Alessandro Colnago from ExportUSA.
Hello Colnago, and thank you very much for your availability.
And especially, since Colnago is based in New York, thank you for the early wake-up call we subjected him to.
So Colnago, the agreement has been concluded, although a few small things theoretically need to be reviewed, including the tariff issue on wine, which hasn't been clearly identified yet. Nevertheless, we're talking about 15% on European goods, which will represent an additional cost compared to before. First, how have Italian companies received this news? Let's remember that ExportUSA is the company where Alessandro Colnago is vice president, a consultancy helping companies, SMEs, and not just large firms understand how to develop their export to the US, ExportUSA.
So Colnago, let's start with the impact, the news is 15% on European goods.
Alessandro Colnago
Exactly, the news can be interpreted in different ways, but in reality, it's not negative news. First, because there is finally a sense of certainty allowing companies to prepare, do their accounting, and strategize considering the 15% tariffs on their exports to the US, which, mind you, does not add up as it did with the reciprocal 10% tariff compared to previous tariffs, but replaces all those that were previously calculated.
So if you want even a simplification compared to the previous situation, it's an almost definitive agreement but with some details that need to be defined in the coming days. One thing that may have gone a little unnoticed at the moment because it's a decision made only two days ago, an executive order by President Trump, is the elimination of the De Minimis rule, which however has a quite notable impact. It's a somewhat archaic rule that is currently in the spotlight because it's a law dating back to 1930, which has been constantly updated, and essentially it was or rather was meant to facilitate all low-value exports, a value below $800 from abroad to the US. All these exports until the day before yesterday passed under a facilitated regime, paid no tariffs, and reached the final consumer more quickly and easily. From today, with Trump's executive order, which should change the law on August 29, even these exports will be subject to the tariff, in our case 15%.
Emerick De Narda
It makes me think it's more to go against China, at least I presume, then there may also be some business aspects for SMEs, but I presume if an SME exports, it goes over $800.
Alessandro Colnago
Exactly, it's the treatment Trump had reserved for China, and no one thought he might extend it to the export of other countries, but he just did. So it could be interpreted as negative news because, in reality, to start with, a small and medium Italian enterprise that primarily sells via e-commerce, thus selling low-value products, could take advantage of this facilitated procedure. Today, it can no longer do so and must therefore change its strategy by getting even closer to the American customer and considering having a small stock in the US to be faster in serving it, on par with tariffs.
Emerick De Narda
What are SMEs asking ExportUSA these days? What do they need? What are their requirements? What is the most frequent request? How do you help them?
Alessandro Colnago
They undoubtedly need to stay competitive and enter a market highlighting the added value of everything Made in Italy. And for this, we help them first by analyzing their situation, trying to position their service and product among competitors in America, and especially by exploiting customs protocols that all Italian companies have at their disposal if they take the step towards the market and open their subsidiary on-site. Because in reality, there are strategies that can be used and that have always existed to cope even with these 15% from the latest negotiation.
Emerick De Narda
Give me some examples.
Alessandro Colnago
Essentially, there are two protocols that can be used in these situations, and they are the first sale protocol, for which the subsidiary of the Italian company, let's call it, for example, Denarda S.P.A., which exports to Denarda Corporation, its American subsidiary. And in this scenario, the Corporation can pay the tariffs not on the invoice of Denarda S.P.A. but on the invoice of Denarda S.P.A.'s suppliers, who will obviously have sold to Denarda S.P.A. at a lower value. And so, it's a very effective strategy.
Emerick De Narda
So the added value, the transformation value performed by Denarda S.P.A. in Italy is not calculated in the tariffs of the American Denarda Corporation, but I only have to pay the tariffs concerning the goods or what the suppliers gave me. Very interesting!
Alessandro Colnago
And the second strategy, even less known, is the industrial cost one, which allows Denarda Corporation to pay tariffs not on the commercial invoice of Denarda S.P.A., but on a custom-calculated value, which reflects the industrial cost of the value produced in Italy. So here too, there is a clear advantage over the cost that Denarda Corporation would normally consider.
Emerick De Narda
These are interesting little technicalities. And practically, let me understand, but I have to have a base in America, but a small office is enough, because in the end, it's an accounting operation. I don't need who-knows-what to be able to take advantage of these two systems?
Alessandro Colnago
Many SMEs are frightened by the idea of having a subsidiary in the USA, but in reality, managing an American subsidiary involves an economic and administrative weight much lower than that of managing a medium Italian SRL. So with this strategy, if obviously the American market is of interest, one can take advantage of both the strong demand that has always existed and still exists today from consumers at all levels, both private and industrial, and on the other hand, a minimization of entry tariffs.
Emerick De Narda
You convinced me, sticking with our example, Denarda S.P.A. wants to do everything with Denarda Corporation, I call ExportUSA, and I want to talk with you. How long does it take for you to do everything so that I can effectively start? How long does it take for an SME?
Alessandro Colnago
In line with the speed of American bureaucracy, the subsidiary can be opened, can be operational in about three weeks, so an extremely short time, and you can be on the market in a month.
Emerick De Narda
And once I'm on the market, for now, we've always talked about tariffs and the transfer of goods between the Italian company and the American subsidiary. But then, once I might want to start a production system in America, do I have advantages, are there possibilities? Here, we are talking about the real Denarda Corporation, at the level of commercial push, the Americans are the best for the push and everything, what benefits can I have?
Alessandro Colnago
Certainly, first of all, thinking about producing or assembling in the US doesn't mean outsourcing from Italy and depriving jobs in Italy or having an economic impact in Italy, it simply means expanding and duplicating a part of your production on the territory. And in return, the US offers a truly important and attractive range of economic benefits such as tax credits, reimbursements for investments on the territory, free training of resources, and a very, very favorable bureaucratic economic climate.
Emerick De Narda
I was glancing at your services on exportusa.us, let's see if there's something interesting: we have "Company Formation and Compliance," so you do everything yourself?
Alessandro Colnago
Yes, right now, Italian companies are calling us to get a strategic overview concerning their market entry and development situation, especially in light of the latest tariff negotiations. And from there, we generally proceed to create a structure, whether international or local, to make them more competitive and especially to manage the group in a fiscally and operationally intelligent way.
Emerick De Narda
Always about branding, branding, branding? In the American style?
Alessandro Colnago
Branding is one of the buzzwords, without a doubt. Saying Made in Italy is no longer enough to convince the American customer to buy. There are small hurdles regarding trust and also on how to do business in America, which is different from Italy. So in this context, having strong communication, a strong brand identity is fundamental to being memorable.
Emerick De Narda
And then beyond branding, how do you do business in America? Let's explain it to the many SMEs listening to us
Alessandro Colnago
Without a doubt, the first thing to verify is product or solution compliance. So get in touch with American agencies that may have jurisdiction over what you're selling, from food to fashion, to alcohol or industrial products. Once you're sure your product, as you make it in Italy, can be exported, you then move on to more strategic and operational activities. So try to understand who the American competitors are, how they sell, and at what prices they sell, and position yourself among them according to your own positioning.
Emerick De Narda
In short, even with tariffs at 15%, it's possible, if you want, to work with Americans, solutions can be found.
Alessandro Colnago
As long as the American market maintains a positive consumption sentiment and economic data that are, quarter after quarter, increasingly positive, then there's justification to take these additional steps, get closer to the American customer, and structure your group to make it work.