Background

Importers are seeing increased scrutiny by U.S. Customs and Border Protection regarding supply chain changes made in response to the Section 301 tariffs on goods imported from China. However, Sandler, Travis & Rosenberg can help importers take actions to mitigate any negative effects.

Importers have recently been receiving CBP audit letters that appear to be focused on the use of Section 301 tariff exclusions and changes to classification, valuation, and origin that led to an avoidance or reduction of Section 301 tariffs. The letters identify goods “potentially subject” to these tariffs and request comprehensive information relating to such products (e.g., specifications) and their production (e.g., factory profiles, bills of material, raw material purchase records, and production flow charts). 

Consequences for importers resulting from these reviews may include not only liability for underpaid duties but also significant penalties for any misclassification, undervaluation, or misdeclaration of origin or misuse of a Section 301 exclusion. In the absence of a valid prior disclosure (i.e., appropriately self-reporting an error to CBP), penalties are typically assessed at two or four times any underpayment found by CBP. With a valid disclosure, potential penalties are capped at the interest on any underpayment.

Importers are strongly encouraged to review past entries where Section 301 tariffs were avoided or mitigated due to the product’s tariff classification or re-classification, an origin claim, a reduction in value, or the use of a Section 301 exclusion. While self-reviews are encouraged, ST&R’s former CBP classification, value, and penalty attorneys and regulatory auditors emphasize that reviews should be undertaken under the protection of attorney-client privilege. Importers receiving an audit letter of this type should therefore contact ST&R prior to providing a response to CBP.

For more information, please contact attorney Larry Ordet (at (305) 894-1003 or via email) or  attorney Lenny Feldman (at (305) 894-1011 or via email).

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