More than 150 products imported from China will become subject to the Section 301 additional 25 percent tariff on List 1 and List 2 goods when their exclusions expire Oct. 2. Exclusions are being extended for some products but only through Dec. 31. Importers of goods that will now be subject to this tariff should consider using the first sale rule to mitigate its impact.

Tariff Exclusion Decisions

The Office of the U.S. Trade Representative considered extending tariff exclusions covering 188 List 1 and List 2 goods from China. However, USTR has declined to extend 151 of these exclusions, meaning those goods will be subject to the 25 percent tariff as of Oct. 2.

USTR did approve extensions of nine List 1 exclusions (list here) and 28 List 2 exclusions (list here). These exclusions, which must be claimed using new HTSUS 9903.88.60 (List 1) or 9903.88.61 (List 2), are available for any product that meets the specified HTSUS number or product description, regardless of whether the importer filed an exclusion request.

However, while USTR said it would consider extending these exclusions for up to 12 months, it ultimately only extended them through Dec. 31. USTR states that this shortened extension is due to “the cumulative effect of current and possible future exclusions or extensions of exclusions on the effectiveness of” the Section 301 tariffs. USTR explains that it has granted more than 6,800 exclusion requests to date, has extended some of these exclusions, and may consider further extensions. USTR states that it will take account of the cumulative effect of exclusions in considering the possible further extension of these and other exclusions.

For more information on Section 301 tariffs and exclusions, please contact Nicole Bivens CollinsonMarilyn-Joy Cerny, or Kristen Smith.

First Sale Rule

Under the first sale rule, the dutiable value of a qualifying transaction may be based on the purchase price between the middleman/vendor and the manufacturer rather than the price paid by the importer to the middleman/vendor, resulting in a lower duty bill. First sale has long been useful to industries subject to high U.S. tariffs, such as apparel and footwear, which use it to save millions of dollars in import duties each year.

However, utilization of the first sale rule has increased dramatically over the past few years as companies seek to lessen the impact of the Section 301 tariffs on imports from China; Section 201 and 232 tariffs on steel, aluminum, and other products; and tariffs on European Union goods imposed in a long-running World Trade Organization dispute on aircraft subsidies. Additional tariffs also remain a possibility on imports from EU countries (due to their proposed digital services taxes) and automobiles and auto parts from many countries (following a Section 232 national security investigation).

For more information on the first sale rule, including ST&R’s proprietary First Sale Portal that can aid importers in substantiating claims, please contact Mark Segrist or Mark Tallo.

Click here to register for ST&R’s upcoming webinar on mitigating Section 301 tariffs with first sale valuation.

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