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Section 301 Tariff Exemption for U.S. Goods Returned Narrowed Significantly

Wednesday, August 15, 2018

Effective Aug. 23, the use of a provision allowing goods assembled abroad from U.S. components to avoid the additional 25 percent tariff imposed on imports from China will be narrowed significantly. This action will affect the $34 billion worth of Chinese products already subject to the tariff and the $16 billion worth of such goods that will be subject to the tariff as of Aug. 23. However, there are still ways affected companies can reduce or avoid this tariff.

[Click here for ST&R’s web page providing comprehensive information on all U.S. tariffs imposed under Section 301 and Section 232 as well as the retaliatory tariffs trading partners are levying on U.S. goods.]

HTSUS 9802.00.80 provides duty-free treatment for imports of goods assembled abroad in whole or in part of U.S. components that (a) are exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity, and (c) have not been subject to operations other than those considered incidental to assembly. Until now goods imported from China and meeting the terms of this provision have been fully exempt from the tariffs referenced above, which were announced after a Section 301 investigation determined that China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation are unreasonable and discriminatory.

However, the Office of the U.S. Trade Representative has now issued a notice amending the HTSUS provisions implementing the Section 301 tariff (HTSUS 9903.88.01 and 9903.88.02) to specify that for goods imported under HTSUS 9802.00.80 the tariff will apply to the value of the article less the value of any U.S. components incorporated into the article. Similarly, for goods imported from China under HTSUS 9802.00.40, 9802.00.50, and 9802.60, the additional tariff will be assessed on the value of repairs, alterations, or processing performed abroad but not the underlying U.S. good or material.

Despite USTR’s action, there are still ways companies can lower their exposure to the Section 301 tariff. For example, USTR plans to soon announce a process for requesting the exclusion of products on the $16 billion list from the tariff, and a similar process is already in place for goods on the $34 billion list. Other options include tariff engineering to permit reclassification, supply chain modification, and qualification under other HTSUS Chapter 98 provisions.

If you think you might be negatively impacted by the Section 301 tariff, please contact Nicole Bivens Collinson at (202) 730-4956 or Kristen Smith at (202) 730-4965 to review the lists of affected goods and discuss options, alternatives, and actions that might be pursued to protect your interests.

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