Background

The Biden administration has not only determined to maintain all existing Section 301 tariffs on imports from China but is planning to increase some of them starting Aug. 1 (with comments due June 28). Further, former president Donald Trump is threatening to more than double those tariffs and impose a 10 percent duty on all U.S. imports if he is elected this November. However, there are a number of proven and legitimate ways for importers, exporters, and manufacturers to effectively escape or limit the impact of these tariffs.

Exclusions. Most previous exclusions from the China tariffs expired June 14, but 164 products (listed in Annex C in this notice) remain eligible. In addition, the Office of the U.S. Trade Representative is accepting comments through June 28 on possible exclusions for hundreds of specific subheadings under HTSUS Chapters 84 and 85. More information is available here.

ST&R continues to press USTR and allies in Congress to re-establish a broad exclusion process, renew expired exclusions, and provide for retroactive application of those exclusions. For more information, or to become part of this effort, please contact strdc@strtrade.com.

Refunds. A lawsuit first filed in 2020 and since joined by thousands of importers argues that the Section 301 tariffs on List 3 and List 4A goods from China were wrongly imposed. In March 2023 the Court of International Trade ruled in favor of the federal government, leaving the tariffs in place for now. The case is currently before the Court of Appeals for the Federal Circuit, which could render a decision this year.

Importers of List 3 and 4A goods from China can still preserve their rights to possible refunds of tariffs paid on such goods by joining this case. For more information, or assistance filing a claim, please contact us at 301Litigation@strtrade.com.

Tariff engineering. As much as U.S. Customs and Border Protection has resisted the idea in the past, the courts have continually affirmed that CBP can only levy tariffs on goods in their condition as imported. This has led importers in a variety of industries where high duties prevail to import products in unfinished or embellished forms to legally take advantage of classification provisions carrying a lower or free rate of duty. For instance, components imported separately may fall into an entirely different tariff provision than the finished product and may thus be excluded from a higher tariff.

Further, classification concepts are particularly useful for certain U.S. or other products that fall within the special HTSUS Chapter 98 provisions, many of which may enable importers to partially or fully avoid Section 301 tariffs. These provisions cover numerous types of products used for specific purposes as well as specific production or sourcing scenarios involving U.S. or previously imported components.

Operational engineering. If you cannot modify the tariff classification of an imported product, explore changing its country of origin. For instance, CBP has found that the complex assembly of numerous parts, modules, or subassemblies into dedicated machines results in a substantial transformation of the components so that their country of origin is where the finished product was produced. Shifting operations away from China to another country may thus enable you to escape the higher duties.

Valuation. First sale valuation has long proven useful to industries that have been subject to high duties. Here duty is paid on the price a trading company pays the manufacturer instead of the higher price the importer pays the trading company. While additional tariffs still apply in this scenario, the dutiable value is significantly lower, resulting in a lower duty bill.

Various criteria must be met to ensure the first sale price reflects a sale that is clearly destined to the U.S. and conducted at arm’s length, but, once validated, a viable first sale value can provide substantial duty savings. It can also serve as a type of long-term annuity; i.e., even if the Section 301 tariffs expire, use of first sale valuation would continue to provide a lower declared value and thus reduce the regular duties assessed on a company’s products.

Importers should also consider (1) whether certain amounts typically included in the price, such as buying commissions, shipping-related charges, inspection fees, and post-importation assembly charges, can be excluded from dutiable value, and (2) how the use of transfer pricing rules can lower dutiable value. 

For more information on these issues, please contact Mark Segrist or Mark Tallo.

Bonded facilities and movements. For those companies involved in manufacturing as well as import for export trade, bonded facilities can provide a safe haven from the Section 301 tariffs. Goods admitted to a foreign-trade zone in privileged foreign status retain their character and tariff classification as admitted even if they are manufactured into a product affected by the tariffs that may be withdrawn from the zone and exported out of the U.S. to avoid the tariffs. In addition, goods otherwise subject to the tariffs could be entered and stored in a bonded warehouse for up to five years to avoid those duties if they are (1) exported directly from the warehouse or (2) entered for U.S. consumption once the tariffs have lapsed or a product-specific exclusion has been granted. Temporary importation bonds and bonded movements also enable companies to avoid tariffs for products transiting or undergoing processing prior to exportation out of the U.S.

For more information on any of these strategies, please contact attorney Lenny Feldman at (305) 894-1011 or via email.

Copyright © 2024 Sandler, Travis & Rosenberg, P.A.; WorldTrade Interactive, Inc. All rights reserved.

ST&R: International Trade Law & Policy

Since 1977, we have set the standard for international trade lawyers and consultants, providing comprehensive and effective customs, import and export services to clients worldwide.

View Our Services 

Close

Cookie Consent

We have updated our Privacy Policy relating to our use of cookies on our website and the sharing of information. By continuing to use our website or subscribe to our publications, you agree to the Privacy Policy and Terms & Conditions.