Will Tariffs Impact Japanese Participants in the Derby?

by Sue Finley and Dan Ross

Few commercial sectors appear immune from the current administration's sweeping import tariffs, and that includes horse racing's biggest Saturday of the year, with Japan's participants in the GI Kentucky Derby potential targets of the trade war.

Stressing a general air of uncertainty surrounding the tariff specifics, Matt Haug, general manager of International Racehorse Transport (IRT), said that, as he and his customs broker understood the situation, the Japanese-trained Luxor Cafe (American Pharoah) is exempt from any tariff being a U.S.-bred runner.

For foreign-bred horses–like the Japanese-trained Admire Daytona (Jpn) (Drefong)–they would be subject to a tariff, said Haug. However, these foreign-born runners would be eligible to import on a “Temporary Import Bond,” Haug added.

“Technically there is not a deposit required, but rather a guarantor who is USA based. The horse must be exported out of the USA within one year. Once proper documents have been submitted to U.S. Customs, the bond will be closed out,” wrote Haug.

If a Japanese runner hit the board, would their earnings also be subject to an additional tariff?

According to Tom Rooney, president and CEO of the National Thoroughbred Racing Association (NTRA), he does not believe a horse shipping in from another country would have to pay an additional tariff on purse earnings.

“But there's a lot of uncertainty as to what qualifies as tariff and what doesn't. We've been having trouble getting answers from the administration itself. But once the tariffs go into effect, we'll have clarity at some point,” said Rooney.

As to the Temporary Import Bond, that is based on the horse's value when they cross the U.S. border, said Rooney.

A Japanese horse leaving the country after winning the Derby would not have to pay an extra bond, said Rooney, either based on a newly increased value, or on whatever part of the Derby purse they took home.

“One of the parties involved will have to pay the bond. The bond is refundable upon exit of the country. So, whoever posts the bond will get it back. It's just a matter of one of the parties involved being willing to do that,” explained Rooney.

“Customs really didn't get that far into the weeds as to how that value is established, and I know there's some thought that they might be simply treated as livestock. But if you have horses coming from Japan or the UAE for the Kentucky Derby, I think it would be harder to look at those horses as livestock,” he added.

More broadly, horses imported for sale would pay a tariff based on their sales price, Rooney said, though the NTRA was hoping to alleviate that.

“We have worked with Congressman [Andy] Barr's office to request an exception for horse sales, but that might be a very heavy lift. I wouldn't think that horse sales would be at the top of the list,” Rooney said.

In these early days of the trade war, are the tariffs already causing connections to think twice about shipping to the U.S. to race?

“Not so much to race,” said Haug. “But it will certainly have an impact on the importation of horses in general.”