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Section 301 Case Offers Importers a Chance at Refunds as Administration Contemplates Further Tariff Action

section 301

Section 301 Case Offers Importers a Chance at Refunds as Administration Contemplates Further Tariff Action

After a summer of wrangling, Plaintiffs in the ongoing Court of International Trade (‘CIT’) case challenging List 3 and 4A Section 301 duties on imports from China got a big win: in September the Government conceded that it is not able to administer a repository system that would require each importer to continually submit entry-specific information to preserve its rights to actual 301 duty refunds. The arguably unnecessary and burdensome repository system was the Court’s solution to the fact that the Government refused to stipulate that Plaintiffs would have the right to duty refunds on liquidated entries in the event their claims are ultimately successful. Usually, imports are “liquidated”think “finalized”on a rolling basis about a year after entry, so the Government’s position meant that Plaintiffs could potentially lose their rights to duty refunds on more and more entries each day as the CIT litigation continues to play out.

In the end though, after months of intransigence, the Government changed its position and agreed to stipulate that refunds on liquidated entries would be available post-judgment for all Plaintiffs’ entries that were unliquidated as of July 6, 2021. This about-face brings an end to this particular squabble, guarantees Plaintiffs will have access to duty refunds on this set of entries if they win, and allows the case to proceed to the merits. It also suggests that going forward, the Government intends to put forth any possible argument, however tenuous or impractical, to deny refunds to as many importers as possible even if the Plaintiffs prevail on the merits.

While the fact that the Government is vigorously defending its position may not be surprising, it does underscore the benefits of joining the litigation: if List 3 and 4A duties are ultimately declared unlawful, the next debate will center around the extent and form of relief that will be granted to importers who paid these unlawful duties, including which companies will actually get refunds. Actual Plaintiffs in the case will be in the best position to obtain these duty refunds, while the Government will likely make every effort to prevent the ruling from applying more broadly to all importers.

Door Still Open to Join Section 301 Litigation

The CIT case challenging List 3 and 4A duties, which began over a year ago, could very well reach the oral argument stage by early 2022 (barring any further tangential matters brought on by the Government’s efforts to limit potential duty refunds). This would set the stage for a CIT ruling in 2022. Yet the door is still open for other US importers that continue to pay List 3 or 4A duties on China-origin products to join the ongoing litigation and benefit from a potential Plaintiff win once the case and any related appeals are decided.

This opportunity is still available due to multiple arguments that extend the statute of limitations each time duties are assessed on an entry subject to List 3 or 4A. To boot, the burden associated with participating as a new Plaintiff will likely remain quite low in light of the fact that the day-to-day proceedings are led by a Plaintiffs’ Steering Committee that has already been established. So while the extent to which Section 301 duty refunds will be available to Plaintiffs and other importers is still up in the air, importers can still file a complaint to join the CIT litigation and improve their chances of benefiting from a favorable outcome.

More Tariffs May Be Coming

Meanwhile, hopes and predictions that the various unconventional tariff increases implemented under the Trump administration would cease and even be rolled back under President Biden have failed to materialize. So far, the Biden administration has left the additional Section 301 tariffs on many products from China untouched. And now, as a result of its ongoing months-long review of the United States’ policy regarding trade with China, the Biden administration is reportedly contemplating further action under Section 301 aimed at leveling the playing field with China.

Specifically, the Biden administration may launch a fresh Section 301 investigation into government subsidies the Chinese central government provides to the county’s manufacturers, thereby giving its manufacturers an advantage over their American counterparts. Understanding the extent of these subsidies and holding China to account for practices that violate US or World Trade Organization laws has been a longstanding US goal. However, the fact that the Biden administration is contemplating initiating its own investigation under Section 301 to address the concern suggests the use of tariffs as a tool to sway America’s trading partners is no longer considered out of bounds by either Republican or Democratic leaders.

For US companies that import goods from Chinaand are therefore legally liable for paying all duties owed to US Customs and Border Protection (‘CBP’) on those products this new normal suggests that existing Section 301 duties will not be revoked by the Biden administration anytime soon. Quite the opposite in fact: it looks like more Section 301 tariffs on more China-origin goods could be on the horizon.

Navigating this new normal in a way that keeps companies’ tariff costs down while ensuring compliance with these ever-changing CBP requirements has prompted business leaders to take a more active approach to Customs law issues including classification and country of origin determinationsboth of which have the potential to affect how much duty an importer pays to US Customs.

Other Ways to Mitigate Tariff Liability

Beyond joining the CIT litigation challenging List 3 and 4A Section 301 duties companies can identify opportunities to save on both general tariffs and additional Section 301 duties by reviewing and confirming the accuracy of the information they submit to CBP. One example of this is conducting a product-specific classification analysis to determine the correct Harmonized Tariff Schedule of the United States Code (or HTSUS code) applicable to a given product based on the product’s characteristics and the (often gray) body of rules and guidance governing classification. Each 10-digit HTSUS code has a corresponding general duty rate, so if a review of a product’s classification results in an HTSUS code correction, it could also result in a lower general duty rate for that product.

Similarly, conducting a supply chain-specific country of origin analysis to determine the correct country of origin of a given product based on where each manufacturing step is conducted and the applicable (and often gray) rules and guidance governing country of origin can result in duty savings. If a company can establish and document that its product’s country of origin is a country other than China, then Section 301 duties will no longer apply to that product.

While both classification and country of origin reviews present an opportunity to mitigate tariff costs, they also help ensure companies are not inadvertently providing incorrect information to US Customs and exposing themselves to potential penalties for such violationsanother must for US importers in light of the fact that tariff issues remain front and center in the minds of regulators and requirements continue to evolve in response to the ever-changing geopolitical landscape.


Andrew Bisbas is Counsel at Lowenstein Sandler. His practice centers on US Customs and Border Protection import requirements and tariffs. He helps clients navigate CBP requirements including classification and country of origin determinations as well as USMCA and other trade agreement implications. Andrew also assists clients in setting up and maintaining corporate import compliance programs, conducting import audits and supply chain due diligence, preparing and submitting prior disclosures to US Customs, and advising on tariff engineering and supply chain structuring efforts geared towards mitigating tariff costs.



A Fortune 500 chemicals company experienced surges in its tariff classification requests and predicted future volume would be even greater. Without support, the risk of misclassifying items was extremely high. Procuring an automated global trade system helped alleviate the strain on resources and mitigate the risk of delays and penalties. It also allowed the company to cut outsourced services, which yielded meaningful P&L savings and helped the organization manage its growth projections efficiently.

It is a timely case study as enterprises that engage in international trade continue to experience increases in tariff classification requests as their import and export shipments surge. With global merchandise volume forecast to grow 7.5% this year and 4.1% in 20221, organizations still using manual processes for product classifications — researching and applying HTS codes — may be misclassifying a variety of their products, including anything from direct materials to back-office supplies.

Misclassifications not only cost organizations shipping delays — sometimes from two to 14 days — increasing the likelihood of an audit, but they also lead to steep penalties. In fact, some companies have had more than 80% of their classifications incorrect for products and have incurred U.S. Customs and Border Protection fines of up to four times the lawful duties, taxes and fees.2

However, there is an overlooked solution. Today’s global trade management systems come equipped with automation and machine learning capabilities to streamline classification requests. They cut classification errors and the cycle time, improve a team’s productivity, and help prevent fines and border delays.

Here are the keys to success for organizations using trade systems to overhaul their tariff classification process:

1. Automate the consistent, repetitive classification requests that take up more than 60% of a resource’s time. Organizations can immediately alleviate the workload for classifiers by leveraging automation and machine learning for repetitive product classifications that have slight deviations. Those items can take hours of a resource’s time, leaving little to no bandwidth for other categories that may require more research. As the system learns more about the minor deviations in product types, it can provide accuracy of close to > 95%. Taking manual processes out of the equation helps guarantee supply assurance to an organization’s customer base while mitigating penalties from errors.

2. Eliminate third parties or outsourced contracts involved in classification overflow assistance. Implementing automation for tariff classifications allows an organization to remove outside brokerage services, equating to an immediate P&L savings impact. Some organizations have seen upwards of 10% savings captured by eliminating these obligations. That, in turn, helps positively impact the overall trade governance budget. Not only are the short-term effects instant, but for the long-term, global trade systems can help identify discounts for various classification codes based on trade agreements between importing and exporting countries. These discounts usually go overlooked by internal resources because of how busy they are with other tasks.

3. Use machine learning to help realize a cycle-time reduction for classification requests. Enterprises should leverage global trade services to automate customs rulings updates, ensuring compliance is current for all import/export nations. That leads to a reduction in the time spent by internal resources on researching the data each time a regulatory change occurs. Also, organizations should integrate databases with their global trade management systems to classify past and new unique classifications. Machine learning can leverage past classification mistakes for the future, but for new items, linking information flows from databases can help automate requests as they appear for the first time.

Organizations experiencing growth in their imports and exports must pay attention to global trade systems with automation and machine learning now more than ever to ensure business continuity and future scalability. While digitizing classification processes results in crucial P&L and cost savings, it’s also critical to mitigating the risk of future border delays and steep fines.


Alex Hayes is a consulting manager at GEP, a leading provider of procurement and supply chain solutions to Fortune 500 companies.



supply chain

Navigating the 12 Pitfalls of the Global Supply Chain

With over 30+ years of international trade experience, I have witnessed numerous and repeated errors made by Sales, Purchasing, Logistics Managers, Supply Chain, and International Business Executives.

There are tremendous opportunities and benefits to be derived through global sourcing and foreign business development. Along with these opportunities are considerable challenges, obstacles, and pitfalls. In order to succeed in international business, management must mitigate these concerns through gaining knowledge and implementing processes and controls over import and export operations, including the development of robust training for all personnel.

The following section contains twelve steps companies can take to manage the solutions that will allow the navigation through these challenges and delivering success to the international operation.

These twelve steps create a pathway forward in a concise, straightforward methodology and time-tested process to ensure management accomplishes their desired corporate goals of profits, growth, and sustainability.

Avoid the following:

Step 1: “We have no personal liability”.

There is significant personal liability for individuals who operate in global supply chains.

U.S. Government enforcement agencies, such as but not limited to:

– Department of Justice

– Customs and Border Protection

– Departments of State, Commerce and Treasury

– Bureau of Alcohol, Tobacco and Firearms

– United States Department of Agriculture and the Food and Drug Administration

All above are a few of the agencies that will prosecute both organizations and individuals who are seriously out of trade compliance with their import and export regulatory responsibilities.

While criminal prosecution is a rare occurrence … it does happen every day in the supply chain, somewhere in the world of international trade.

Trade Compliance Management in companies with an international footprint is a necessary evil that needs to be managed and integrated into the fabric of the organization’s culture and business model.

Step 2: “The FOB Term is Always a Safe Incoterm to Utilize”.

The FOB Incoterm has three deadly areas of concern:

-It is used in domestic trade

-It is a gray area in the loading process

-There can be ambiguity when the point in time responsibility and liability shift from the seller to the buyer (exporter to importer).

It is used in domestic trade

For domestic trade in the United States, the UCCP (Uniform Commercial Code of Practice) currently (though in contention) utilizes the FOB term as a “term of sale or purchase”, where there are two primary options FOB Origin and FOB Destination.

Within the UCCP, FOB is defined as:


2-319. F.O.B. and F.A.S. Terms.

Unless otherwise agreed the term F.O.B. (which means “free on board”) at a named place, even though used only in connection with the stated price, is a delivery term under which:

(a) when the term is F.O.B. the place of shipment, the seller must at that place ship the goods in the manner provided in this Article (Section 2-504) and bear the expense and risk of putting them into the possession of the carrier; or

(b) when the term is F.O.B. the place of destination, the seller must at his own expense and risk transport the goods to that place and their tender delivery of them in the manner provided in this Article (Section 2-503);

(c) when under either (a) or (b) the term is also F.O.B. vessel, car, or another vehicle, the seller must in addition at his own expense and risk load the goods on board. If the term is F.O.B. vessel the buyer must name the vessel and in an appropriate case, the seller must comply with the provisions of this Article on the form of a bill of lading (Section 2-323).

The UCCP Term allows any mode of transit or conveyance.

Some sources claim that FOB stands for “Freight on Board”. This is not the case. “Freight On Board” is not mentioned in any version of Incoterms, and is not defined by the Uniform Commercial Code in the USA.[10] Further to that, it has been found in court that “Freight On Board” is not a recognized industry term.[11] The use of “Freight on Board” in contracts is therefore very likely to cause confusion. The correct term is “free onboard”.

Keep in mind that a huge amount, if not a clear majority of domestic commercial transactions, are sold or purchased on a FOB basis and moved by truck, rail, or air. This would be ok if the FOB Term was the UCCP intent and not intended utilization under Incoterms 2020.

There is a very clear line of confusion between the domestic and international “FOB” terms in selling and purchasing. It is only when it causes a problem when it is seen as an issue.

Free on Board, or FOB is an Incoterm, which means the seller is responsible for loading the purchased cargo onto the ship, and all costs associated with same. At the point, the goods are safely onboard the vessel, the risk transfers to the buyer, who assumes the responsibility of the remainder of the transport.

FOB is the most common agreement between an international buyer and seller when shipping cargo via sea. This Incoterm only applies to sea and inland waterway shipments.

The 2020 edition of Incoterms opened the door for domestic utilization of the FOB term. The FOB UCCP term varies greatly from the FOB Incoterm.

Under Incoterms 2020, the preferred term for domestic utilization, since that door was opened, is FCA (Free Carrier At).

It is a gray area in the loading process

Under Incoterms 2000 and prior, the FOB term transferred risk and cost from the seller to the buyer once the goods passed the ship’s rail.

This factor was changed in the 2010 edition of Incoterms and continues in the 2020 edition. The term now read “…passes when the goods are on board the vessel”.

However, “on board” is not clearly defined. Is that when the goods are placed on the deck, in the hold, not yet secured, secured, etc.?

We had a case in our office, where a U.S. exporter, sold a huge piece of equipment, (25 Tons, $11m in value) to a customer in Europe. It was going to be shipped via ocean, secured in a cargo hold under deck.

During the loading process, the goods were being lifted onto the vessel by a crane and longshoreman crew. In the handling, the equipment was laid down on the deck of the hold several times, while the longshoreman positioned the cargo.

In that repositioning process, the freight was damaged. The issue now became who is responsible, based upon the Incoterm of FOB Port Elizabeth – the seller or the buyer?

Were the goods actually “on board” when they were damaged? The maritime judicial system will eventually resolve that issue and court precedence will be established.

But today there is an ambiguity in defining “on board” in the FOB Incoterm. There are references to being “secured in place”, but it appears ambiguous.

Sellers and buyers need to address these specific concerns in the contract of sale and attempt to minimize the gray areas of liability, that may present themselves when using the FOB term.

There can be ambiguity when the point in time responsibility and liability shift from the seller to the buyer (exporter to importer).

This is the explanation of the FOB term from the Incoterms 2020 edition.

A2 (Delivery)

The seller delivers by placing the goods on board the vessel nominated or provided by the buyer on the agreed date, or within the agreed period as notified by the buyer, or if there is no such time notified then at the end of that period.

There is still a belief that the ship’s rail is the defining point, i.e.: before the notional vertical line above the rail is the seller’s cost and risk, and after is the buyer’s cost and risk. A court ruled that the delivery point was when the goods were on the deck but that then caused the question was the notional vertical line replaced with a notional horizontal one in line with the deck itself and what if the goods were being placed below deck? This ship’s rail concept was removed in the Incoterms® 2010 version. Typically, then, “on board” is taken to mean when the goods are safely on the deck or in the hold. If the cargo needs to be then further secured for transportation such as being lashed or separated with some material or spread evenly throughout the hold for bulk goods like grain the seller and buyer should agree in their contract what is needed and at whose cost and risk this is done.

B2 (Delivery)

The buyer’s obligation is to take delivery when the goods have been delivered as described in A2.

FOB A3 / B3: Transfer of Risk

A3 (Transfer of risk)

In all the rules the seller bears all risks of loss or damage to the goods until they have been delivered in accordance with A2 described above. The exception is loss or damage in circumstances described in B3 below, which varies depending on the buyer’s role in B2

B3 (Transfer of risk)

The buyer bears all risks of loss or damage to the goods once the seller has delivered them as described in A2.

If the buyer fails to inform the seller of where and when the vessel will be presented or if the vessel fails to arrive on time, or it fails to take the goods so that the seller cannot deliver, then the buyer bears the risk of loss or damage to the goods from the agreed date or at the end of the agreed period.

On an operational level, the seller delivered the goods to the terminal, carrier, or other agreed named place, and the goods were not loaded on board as anticipated for an array of reasons, such as but not limited to the carriers having vessel timing or loading issues and the seller appropriately notified the buyer than delivery has been made and risk of loss and damage has passed from the seller to the buyer.

The important aspect to note here is that the buyer expected to take delivery “on board” and now that did not occur as the buyer will take delivery and assume all risks at a point short of “on board”.

In general, Incoterms need to be understood in their entirety including the consequences associated with using the incorrect Incoterm or not understanding the specific responsibilities as the buyer or seller. Incoterms training is a must for all personnel engaged in global trade and more particularly those operating in Procurement, Sales, Operations, Finance, and Customer Service.

Companies involved in international trade using best practices will switch Incoterms 2020 rules in quotations, purchase orders, contracts, commercial invoices, and other commercial documentation when determining the level of responsibilities and costs they want to take on; dividing the responsibilities for risk transfer, costs, and responsibility for carrier selection between the buyer and the seller.

Step 3: Contracts Override Relationships

In international trade, relationships trump contracts. Relationships will drive a successful deal and a long tenure. I have always extolled “you can contract out risk”, but you can seriously minimize and mitigate risk by establishing favored relationships that allow the best opportunity for problem resolution and working out issues that will likely occur over time and trade.

Contracts are important to make the deal have legal standing, but it is foolish to believe that the contract eliminates any risk in the transaction. In fact, sometimes contracts can cause risk when a false sense of security is at hand.

Obtaining legal support is prudent but spending money and time at building relationships with suppliers, vendors, agents, and customers will go a long way in mitigating many of the risks in global trade.

Step 4: Service Providers are Experts in all Aspects of the Global Supply Chain

Just not so! While a small percentage of service providers are clearly experts, professionals, and aligned with teams of knowledgeable staff the majority have serious limitations.

While many have the expertise to arrange affreightment, pick up and delivery many lacks:

-the necessary local connections in all foreign markets

-trade compliance knowledge

-an understanding of how best to eliminate risk and cost from the supply chain

A high degree of scrutiny, vetting, and discerning should take place when choosing service providers, 3PL’s, freight forwarders, and customhouse brokers.

Areas of evaluation:

Service providers can be very valued partners in your global supply chain. Just because they hang out a shingle does not mean they can provide real benefit. Scrutinize robustly and vet diligently. It will pay off in the long run. Having a quality partner will make your job easier and with a greater ability to meet all the challenges successfully.

Step 5: Manage the Supply Chain with Robust Technology

Supply chains that have expansive technology in every aspect of the operation will gain great leverage in performance metrics.

Areas of technology in the supply chain are:

Technology creates efficiency, ease of operations, robust information flow, security, and other benefits. It allows for the highest levels of performance in any organization, but more particularly in the global supply chain. Technology advances forward and expands every day. Keeping contemporary is a challenge that all supply chain executives face.

Cyber Security has grown to be a significant threat. It must be contemplated and managed in every moment and keystroke of the day. There are cybersecurity solutions that must be integrated into all aspects of operation, where there is a technology interface.

Step 6: We have been doing it this way … for over 5 years with no problems.

We hear this often and clearly because a company has not encountered a specific problem, does not necessarily mean things are being done correctly.

A volcano is not a problem until it erupts. The underlying problem is waiting for emergence. Dealing with potential issues proactively and anticipating “what ifs” are a much better option.

Potential problems along with potential betterments must be proactively pursued to assure you do not have serious issues and are doing all possible to reduce risk and cost and/or business process improvements.

Continually updating a logistic SWOT Analysis, risk management assessments and process evaluations are all necessary steps in mitigating any unanticipated problems in the future.

Because no one is complaining does not mean everything is ok. You must be proactive in making sure everything is ok, without assumptions. Err to the side of conservativism as it will prevent future headaches.

The pandemic was a complete disaster and disruption to all global supply chains. Having said that, some good came out of it as companies had time for internal introspection at risk and threats leading to proactive steps in mitigation.

Step 7: We Handed it to the Carrier, so it must be “on board”

Tracking and tracing need to be accomplished at a very detailed and exhaustive level.

Just because you have confirmation that a carrier has received freight, does not assure it made it on board the vessel, aircraft, railcar or truck.

You need affirmation that in fact the goods have actually made it on board the conveyance with an updated ETA, followed up with daily frequency, in case of any unanticipated delays, which occur all the time.

Step 8: We Always Check the Denied Parties List

Many international executives believe their companies are consistently checking and reviewed the various lists making up the “Denied Party Screening” regulations for importers and exporters.

In many years of auditing companies engaged in global trade, only a small percentage is fully compliant with the review, checking and compliance responsibilities associated with Denied Party Screening.

There are available direct connections into the government agencies and numerous third-party technology companies with DPL Screening Capabilities.

Step 9: I am the Ultimate Consignee on these Goods, but not the Importer of Record.

Many companies who are the recipients of imported merchandise who are not participative in the import process believe they have no import responsibilities.

That is potentially and totally incorrect! Customs (CBP) has the right to evaluate any import situation and determine that the ultimate consignee could be considered the “importer of record” and therefore has all the responsibilities as the importer of record”. This would then require adherence to all import regulations HTSUS, valuation, recordkeeping, etc.

Step 10: Domestic Packing will work for my International Shipments

Claims for loss and damage on international shipments occur every day and a major cause is inadequate packing, marking and labeling.

Just check with any marine insurance companies they will advise of the frequency and the severity of claims occurring on import and export shipments directly attributed to inadequate packing marking and labeling which could jeopardize marine cargo insurance coverage as an implicit or explicit warranty.

Step 11: Do we really need to ensure the shipment?

Loss and damage to international freight is a daily occurrence worldwide. In the overall cost of the global supply chain, marine insurance is an inexpensive purchase offering a high value of the return.

Just looked at what happened this year in the Suez Canal, with the grounding of the Ever Given (Evergreen Lines) which potentially caused losses in excess of $ 1billion.

Direct claims in delays and damage and indirectly caused by a General Average Claim. The fines, penalties, delays and lost cargo is still mounting, as only in early July, has the vessel finally exited the Suez Canal.

Marine cargo insurance is a solid, responsible, value-driven, and best practice purchase for any company shipping goods internationally.

“All Risk”, “Warehouse to Warehouse” with contemporary customized underwriting terms under standard policies are available.

Step 12: Do I need to train my global supply chain team?

The challenges of the global supply chain are numerous and daunting. These challenges can only be met by experienced well-trained managers and staff. The training needs to be consistent, contemporary and robust. Key areas to include are:



-Negotiating Freight

-Sourcing Management

-Logistics Management

-Technology Management

-Warehousing & Distribution

-International Contracts

-Risk and Spend Directives

-Foreign Trade Zones

These outlined above show a handful of the necessary skill sets required for import and export personnel to master. And “training” is the pathway to successful global supply chain management.


The twelve examples outlined above provide a synopsis and evidence that mistakes based upon a lack of knowledge and skillsets can cause great disruption in import and export activity in the global supply chain.

Developing resources, providing training, and implementing procedures will assist in mitigating the problems and challenges identified in the above article.

Resources in international business and supply chain management will provide informed intelligence that will allow for making better decisions.

Training and skill set development will better prepare supply chain, import & export executives, managers, and staff to better deal successfully with all the challenges of global trade.

Procedures, protocols, and disciplines in management are always critical to a company’s success in business. In the global supply chain, SOPs are an integral component of freight, logistics, trade compliance, foreign sales, and overseas procurement that assure a company’s success in its international footprint.

The author can be reached at: for questions and comments.

customs value

Eliminating Non-Dutiable Charges from Customs Value

Similar to how taxable income is a primary element to determining income tax, the customs value is used to calculate duty liability. To determine an accurate customs value, companies must factor in certain dutiable additions and non-dutiable deductions. In today’s high-tariff environment, maximizing every deduction is critical and many importers are leaving money on the table. 

For U.S. importers using transaction value, which is “the price actually paid or payable for the merchandise when sold for exportation to the United States,” the focus is often on validating that the enumerated additions to the price are properly declared to U.S. Customs & Border Protection (CPB). While this is a necessary step for maintaining compliance, trade teams should also consider whether they may appropriately deduct or exclude certain charges. 

Historically, these savings opportunities have not been fully explored because the resources required to sustain some of these programs exceeded the savings. However, with the Section 301 tariffs in place for China-origin products, many companies are paying significantly more in duties. Removing these non-dutiable costs can provide substantial savings–making it worth taking a second look at them for many importers.

Eight Overlooked Non-Dutiable Charges

For importers using transaction value, the following savings opportunities should be considered. While some of these programs provide ongoing savings and some are only used in specific circumstances, they all may play a role in reducing the tariff spend. 

1. Freight and Insurance

Foreign inland freight, international freight and insurance costs may be deducted from the transaction value if you meet certain requirements. More specifically, with accurate incoterms and supporting costs and documentation, this can provide long-term cost savings. Importantly, importers must verify that they are deducting the actual, not estimated costs, and that the supporting documentation is adequate. While the requirements around deducting these costs may be daunting, the advances in technology make freight deductions more approachable than ever.

Further, insurance costs may be deducted from the entered value when they are separately itemized and the actual costs (not estimated) are claimed. It is important to verify with sellers that they are providing actual costs because CBP will reject deductions based on estimates, even in cases where the importer paid more than it claimed on the entry.

2. Supply Chain (“Origin”) Costs 

International transportation costs typically include certain other fees, often referred to as “origin costs.” In many cases, CBP considers these origin costs to be “incident to the international shipment of merchandise” and, therefore, possibly excluded from the customs value. Examples of these charges include security charges, documentation fees, and logistics fees. 

On a per-shipment basis, these miscellaneous fees may appear insignificant. However, on an annual basis, they can result in a significant expense for the company by driving up duty payments. As a general rule, the importer must deduct the actual costs, validate that commercial documentation meets all requirements and understand where services are being provided. However, once these steps have been taken, it is likely that little additional work will be required to realize ongoing savings.

3. Warehousing Costs 

CBP has found that warehousing costs paid by the buyer to third parties are not included in the price actually paid or payable of the imported merchandise. However, CBP has distinguished this scenario from instances where the seller, or a party related to the seller, provided this same service and the warehousing costs are included in the price actually paid or payable. In that case, those payments were found to be dutiable and may not be deducted. 

For importers interested in using this opportunity, a careful review of payments and terms of sale should be conducted to validate that the transaction meets all of CBP’s criteria prior to taking this deduction.

4. Inspection or Testing Fees

Often before shipment, an importer will arrange for products to be inspected or tested to validate it satisfies a buyer’s quality standards. Under certain conditions, these fees may be excluded from the dutiable value in instances when they are made to third parties unrelated to the seller of the goods. 

It’s also important to understand that testing that is “essential to the production of that merchandise” is dutiable. In such cases, CBP would consider payments to unrelated third parties for these services as assists that are part of the transaction value. For importers who rely on the seller to perform inspection or testing services, an analysis should be conducted to assess the ROI for engaging a third party to perform these services.

5. Latent Defect Allowances

In certain circumstances, importers may be able to reduce dutiable value post-importation based on repair costs attributable to manufacturing or design defects. For importers with high-value products, such as those in the automotive industry, repair costs can be substantial and this allowance in value provides an opportunity to manage those costs by reclaiming duty. 

With proper planning, a program can be implemented to help ensure the importer does not overpay duty on goods that were defective at the time of import. While there are a number of requirements that must be satisfied to receive a duty refund, high-value importers should explore whether this may be an opportunity for them.

6. Instruments of International Traffic – Reclassification of Packaging

In certain cases, pallets, cartons, hangers and other packaging material may be considered instruments of international traffic (IIT), exempting them from duty. To qualify as an IIT, CBP has determined that the article must meet criteria, including that it is “substantial, suitable for and capable of repeated use, and used in significant numbers in international traffic.” Further, the article must be used in commercial shipping or transportation more than twice to qualify as an IIT. 

For importers whose supply chains include the reuse of certain containers or other materials used to transport international goods, it may be valuable to assess whether these goods qualify as IIT and are, therefore, duty-free. 

7. Post Importation Price Adjustments

When companies make post-importation price adjustments they may be entitled to a duty-refund on the amount adjusted. This typically occurs when downward transfer pricing (“TP”) adjustments are made between related parties, causing a reduction in the products’ customs value. 

For companies that routinely make retroactive transfer pricing adjustments, having in place the documentation to support a refund can have a powerful impact on duty spend.

8. Taxes and Other Fees

Companies may be entitled to deduct Value Added Tax (“VAT”) or Goods and Services Taxes (“GST”) from the declared value of the imports when these payments are refunded. Not only should importers maximize their refunds where possible, but in doing so they open another opportunity for savings. When VAT is remitted by the U.S. importer to the foreign seller, separately identified and refunded to the importer, then the refunded amount is not included in transaction value.

Importers should team with their tax departments and foreign suppliers to understand if VAT refunds are obtained and create documentation that reflects separate itemization of the refunded VAT.

The Big Picture

Potential cost savings through the reduction of non-dutiable charges from the dutiable cost basis of imported goods are often overlooked. However, in this high-tariff environment, these programs can help companies easily achieve cost savings. 

Additionally, with advancements in technology, managing these programs is more straightforward than it used to be. 

Of course, like with any duty-savings program, strong controls must be implemented to preserve compliance. However, as it is likely that steep tariffs will be in place for some time, companies should evaluate which of these programs can help reduce costs, potentially improve the return on investment and then develop an implementation roadmap.


Andrew Siciliano is a Partner and U.S. Trade & Customs Leader at KPMG LLP. and Elizabeth Shingler is a manager at KPMG’s Trade & Customs Practice.

duty drawback

New Customs Duty Drawback Refund Program Helps Mitigate the Impact of China Tariffs

The Trade Facilitation and Enforcement Act of 2016 (known by its acronym TFTEA) profoundly liberalized the unique tariff mitigation strategy commonly referred to as duty drawback refunds. This represented the culmination of a nearly 12-year collaboration effort between the Drawback Trade Community and Customs and Border Protection in an effort to modernize the drawback refund program to make this valuable export incentive program more accessible to U.S. Business.

The duty drawback law originally enacted in 1789 by the first U.S. Congress allows for the refund of Customs duties on imported merchandise subsequently exported from the U.S. either in the same form or following a manufacturing process.

As an example, a producer of eyewear in China imports sunglasses into its distribution facility located in the U.S. at a duty rate of 2.5%. Eighty percent of the glasses are sold in its stores in the U.S. but twenty percent are exported to its stores in Canada and Latin America. Upon reexport to Canada and Latin America, the eyewear company is eligible for a refund of the 2.5% regular duty and if applicable, the 25% China tariff.

The implementation of the new drawback program in 2018 could not have been timelier as it coincided with the Trump Administration’s decision to levy 25% punitive tariffs on nearly $400  billion in value on imports from China. The purpose of the tariff was an effort to balance a massive trade deficit, address a variety of alleged unfair trade practices by Beijing, and benefit American manufactures, and by extension, U.S. factory workers.

One major electronics company we represent went from paying under a few million a year in duty to nearly $50 million following the impositions of the China Tariffs. The duty drawback program will allow them to recapture nearly $20 million in duties thus substantially reducing the cost impact of the tariff. Another alcohol company we work with withstands to recover nearly $15 million in federal excise tax (also eligible for a refund via the drawback program in addition to duties and tariffs). They are taking advantage of the drawback program that allows not only for the refund of future imports and exports but provides refunds on duties associated with 5 years of historical activity!

The imposition of these massive tariff increases disrupted supply chains as it sent U.S. importers scrambling for compliant strategies to mitigate the additional 25% cost on much of the import activity from China. Selecting the correct strategy for U.S. importers among a number of options was further complicated by one primary unknown variable – how long would the tariffs last? In addition to duty drawback refunds, U.S. businesses evaluated many strategies that included petitioning the Trump Administration for product exclusions, shifting supply chains to source products from outside of China, adjustments to classification/valuation, foreign trade zones, and bonded warehouses.

The duty drawback program with its minimal start-up costs and with no disruption to existing product flows and supply chains offers significant advantages to other tariff mitigation strategies but is limited to those companies with significant export volumes from the United States. Companies that only import into the U.S. with no offsetting export volume, are better served by other compliant tariff minimization methods.

Understanding the Drawback Substitution Methodology  

The new drawback law substantially liberalized the substitution rules to allow more flexibility when matching import and export activity for drawback purposes. Understanding how substitution works is key to determining a company’s recovery potential. The substitution method allows a drawback claimant to match “like” merchandise instead of directly linking an export back to the original importation using lot number or serial number tracing. Under the previous substitution drawback rules prior to the 2018 amendment of the law, the imported and exported merchandise needed to share the same material code and/or product specifications. With the new rules implemented in 2018, the import and the export need only share the same tariff classification number at either the 8th or the 10th digit of the HTS number.

As an example, under the previous drawback regime, a U.S. importer and exporter of orange juice would need to match on the basis of grade and specification. Since many Florida orange juice distributors source juices from multiple countries including Mexico and Brazil (two of the world’s largest producers of OJ) in addition to procuring domestic juice, the exported juice and the imported juice needed to be commercially interchangeable in the marketplace, a very narrowly defined standard. Today, the same company can match export Florida grade A juice and reclaim the duty assessed on imported Brazilian Grade B juice because both fall under the same general tariff classification – grade, specification, or material code are no longer relevant.

The liberalization of this substitution standard places additional recovery on the table for a number of industries while simplifying the process of preparing drawback claims. Returning to the example of sunglasses, the eyewear company could now export a pair of U.S.-made sunglasses and offset the duty paid on imported glasses from China. In the case of beer, there is only one harmonized tariff classification for beer, so an exported Coors light would be interchangeable with Molson beer imported from Canada.

The first step in the drawback process is to conduct a thorough evaluation of a company’s drawback potential both for the past five years as well as moving forward. As the saying goes, a company must first determine if the “juice is worth the squeeze.” For many large importers/exporters, the answer is a resounding “yes”, and given the opportunity for retroactive recovery, the first-year refunds can provide a significant boost to the bottom-line while assisting many importers in reducing the impact of the Trump tariffs.


Anthony Nogueras, the founder and current CEO of Alliance Drawback Services, brings nearly 30 years of drawback specific experience to Alliance’s  extensive list of clients that includes many Fortune 500 firms. In 2020, Alliance cumulative drawback filings exceeded $100 million in drawback refunds.

During his extensive career as a drawback specialist, he has spoken on drawback matters before a host of organizations including National Associations of Purchase Managers, The Juice Products Association and  the International Titanium Association in addition to many international trade organizations.    He has also been published in the Journal of Commerce, and numerous other trade industry publications.

Mr. Nogueras drawback experience includes the management of drawback accounts in a variety of industries including retail, petrochemicals, metals, and agricultural products.  In 1989 he graduated with high honors from San Francisco State University with a bachelor’s degree in International Relations and Economics.  He is also a Licensed Customs Broker.


BIS Implements New Burma Export Controls and Adds Four Entities to the Entity List

The U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) issued final rules amending the Export Administration Regulations (“EAR”) by implementing new export controls on Burma (Myanmar), and adding four entities linked to the recent coup to the Entity List. These final rules effective March 8, 2021 come less than a month after President Biden imposed sanctions blocking U.S. property and interests of Burmese military and government officials.

Burma Removed from Country Group B with Significant Repercussions

As of March 8, Burma is now in the more highly controlled Country Group D:1 (it was previously in Country Group B). Because of Burma’s move to Country Group D:1, transactions involving Burma are no longer eligible for the following License Exceptions under the EAR:

-Shipments of Limited Value (“LVS”);

-Shipments to Group B Countries (“GBS”); and

-Technology and Software under Restriction (“TSR”).

Additionally, the move to Country Group D:1 limits the availability of the following EAR License Exceptions for transactions involving Burma:

-Temporary Imports, Exports, Reexports, and Transfers (in-country) (“TMP”);

-Servicing and Replacement Parts and Equipment (“RPL”);

-Aircraft, Vessels, and Spacecraft (“AVS”);

-Additional Permissive Reexports (“APR”);

-Encryption Commodities, Technology, and Software (“ENC”); and

-Computers (“APP”)

–(APP was suspended for use to Burma along with LVS, GBS, and TSR effective February 17, 2021, but with the March 8 final rule APP is now available again on a limited basis with Burma now placed in Computer Tier 3.)

Burma’s new Country Group D:1 status will also impose new restrictions on exports, reexports and in-country transfers to Burma involving microprocessors under EAR Section 744.17, export activities to certain foreign vessels and aircraft under EAR Section 744.7, and reexports to Burma of foreign-produced direct products of certain U.S.-origin technology and software under EAR Section 736.2.

MEU and National Security Restrictions Now Apply

Burma joins China, Russia, and Venezuela as one of four countries subject to BIS “military end-use” and “military end user” restrictions. Exports, reexports, and transfers (in-country) of specific items listed in Supplement No. 2 to 15 CFR Part 744 to Burma with “knowledge” that the items are intended for a “military end-use” or a “military end-user” will now require licensing from BIS and BIS will evaluate these license applications with a presumption of denial. The EAR’s definitions of “knowledge”, “military end-use” and “military end-user” are all quite broad and as a result, these new rules could potentially capture a large amount of transactions.

Additionally, items that are “subject to the EAR” and controlled for national security (NS) reasons will continue to require BIS licensing when exported, reexported or transferred (in-country) to Burma. However, BIS will now add an additional layer of review when reviewing those applications in order to determine whether the transactions present a risk of diversion to a “military end-user” or a “military end-use”.  BIS will then apply a presumption of denial when it evaluates whether the subject transactions would materially contribute to Burma’s ability to develop, produce or operate weapons systems, subsystems and assemblies.

Four Entities Added to BIS Entity List

BIS announced on February 18 that “[e]ffective immediately, BIS will apply a presumption of denial for items subject to the EAR requiring a license for export or reexport when destined to Burma’s Ministry of Defense, Ministry of Home Affairs, armed forces, and security services.”  Most recently, on March 8, BIS added four military or military-linked entities to the Entity List. Licenses are required for exports, reexports, or transfers in-country of all items “subject to the EAR” (including EAR99 items) to entities on the Entity List. The four newly designated entities are:

-Ministry of Defence, a.k.a. Ministry of Defense or MOD;

-Ministry of Home Affairs, a.k.a. MOHA;

-Myanmar Economic Corporation, a.k.a. MEC;

-Myanmar Economic Holdings Limited, a.k.a. MEHL, Myanma Economic Holdings Limited, Myanma Economic Holdings Public Company Limited, Myanmar Business Holdings Public Company Limited, Myanmar Economic Holdings Public Company Limited, UMEH, Union of Myanmar Economic Holdings Company Limited, Union of Myanmar Economic Holdings Limited.

The Federal Register notice clarifies no license exceptions are available for export activities to the four newly designated entities above. Anyone applying to BIS for a license to export to the named entities will face a presumption of denial review policy.


Cortney O’Toole Morgan is a Washington D.C.-based partner with the law firm Husch Blackwell LLP. She leads the firm’s International Trade & Supply Chain group.

Grant Leach is an Omaha-based partner with the law firm Husch Blackwell LLP focusing on international trade, export controls, trade sanctions and anti-corruption compliance.

Tony Busch is an attorney in Husch Blackwell LLP’s Washington, D.C. office.



Managing a streamlined supply chain for cross-border cargo transportation entails much more than identifying the fastest, most efficient method of getting cargo from point A to point B. Current market challenges have been amplified due to the pandemic and now go beyond ensuring cargo arrives at the final destination on time. The safety of transportation workers as a result of internal processes is now at the forefront of cross-border transportation. After all, if the truck driver is not healthy enough to deliver the products, the products do not move. In the new normal, worker safety is more important than ever.

“Some of the challenges out there are found more so in the area of the trucks that are crossing and the drivers,” says Michael Ford, vice president of Government and Industry Affairs at BDP. “If I was a trucking company, how do I ensure my driver’s safety? When that driver gets in the cab every day, do I know they are healthy?”

Ford continues, “Setting up those types of protocols internally, ensuring that I’m putting a safe driver on the road and that they’re able to perform those tasks as if there’s any type of cross border is critical, especially now. Coordinating, communicating, setting that up, and ensuring that everything is in play really becomes important.”

When driver safety has been established, coordination efforts are challenged once again depending on the region the cargo is crossing. Each region presents a unique set of roadblocks from customs to short and long-haul planning times. Cross-border transport from the U.S. to Canada is a much different process than what U.S. to Mexico transport requires for success.

Although these challenges are not new, they include more variables that require streamlined coordination from the very beginning. Trade lanes are now more open and traveler impact has shifted, presenting opportunities along with the challenges.

“In the past, we have seen much more congestion than we do currently,” Ford notes. “It has always been there between the U.S. and Mexico. But now, while there is less cargo and less traffic running back and forth, it has improved processing time. So, less cargo, less travel. If anything, it has improved and allows U.S. and Mexico customs to do what they need to do–which is all about security and ensuring the right cargo is coming through.”

Technology continues to play a critical role in ensuring worker safety and the efficient transport of cargo. The pandemic created an environment where technology is no longer simply an option but a requirement for the continuation of operations as it provides alternatives to paper-processes and close-contact for workers and customs agents.

“Previously when trucks cross, the driver pulls over, gets out of the cab, and hands paperwork over,” Ford says. “So, the question now is how do we achieve that full paperless experience on both sides in the U.S., Canada, and Mexico? When the driver pulls off, I need to know I have the driver, the driver’s ID, etc. and technology supports the keeping up with this information. It also keeps the driver in the cab and allows whatever information needed to be accessed.

“Advanced data has allowed a lot of that to take place. Being able to share and obtain better inter-agency  cooperation goes a long way to helping the flow of cargo across the borders.”

Technology is a part of the bigger picture. Without technology, the constant exchange of information and obtaining updated data is slowed down. Without inter-agency communications along with customs collaborations, cross-border operations are at risk for further delay. Collaborations between customs agents are the key to making operations for cross-border providers more simplified and accelerated. This incorporates security and accuracy while verifying the right cargo continues to its final destination.

“U.S. Customs has been working with Mexico and vice versa to establish points inside of the other’s country and allowing personnel to set up there,” Ford says. “In the case of letting Mexican Customs come into U.S. territory and process the clearance, it allows that truck to go all the way through, eliminating the need for stopping at the border area. This makes a world of a difference and it speeds everything up. It requires the need for cooperation of the companies that want to improve their business flow. Changing to a brand-new environment for cross borders is big.”

Beyond reducing interactions, the overall reduction of paper processes and redundancies continues to be at the top of mind for companies engaging in cross-border operations. Along with its other supply chain disruptions, COVID-19 has pushed logistics players toward paperless and contactless operations, adding more pressure to the already complex market. For some, utilizing the technology toolbox (such as blockchain) could be the very thing that overcomes the hurdles presented by the pandemic.

“We hear a lot about blockchain, and there are applications inside of this cross-border sector where blockchain can be used as a piece of technology,” Ford says. “Instead of paper, using a blockchain technology to prove that your goods qualify under the USMCA agreement should be in play, for example.”

Regardless of whether the world is battling a pandemic, streamlined collaboration will ultimately pave the way for successful cross-border trade. This requires the latest data for every participant, thorough internal and external communications, and solid business relationships with a common goal to ensure products are received safely and accurately.

“Everybody needs to be involved,” Ford maintains. “It is everybody working together: the carrier, the custom-house broker, the government, and all others. It is also about forming that type of relationship where information is being shared and collected, and as much in advance as possible is part of the success that needs to happen.”

He concludes: “Things can’t just stay the way they have been. But on the other side of things, we need cargo security and the customs officers from the U.S. and Mexico need to be safe. We talk about COVID-19 and workers, but we are also asking those officers to be on the front lines. Keeping that in play becomes a big challenge.”


Michael Ford is a career professional with more than 40 years of experience in international transportation, specializing in import/export documentation and regulatory compliance. Among his other affiliations, Mr. Ford is the co-chair for Trade on the Export Committee in the development of the new Customs ACE system and has served with Customs as a member of COAC (Commercial Operations Advisory Council), chair of the Mid-Atlantic District Export Council and the partner sector with the American Chemistry Council, Responsible Care Committee. He can be reached at

This article was originally published in December 2020



As we all saw throughout the 2020 elections, Americans and those around the world anxiously awaited the results while international and domestic trade players planned for anticipated policy and regulatory changes to come in the short and long terms. For now, some things are here to stay. Flexibility is a must for maintaining the current trends within the international trade atmosphere. Trade relations with China and Vietnam as well as new tariffs on the horizon remain critical questions. 

The next four years will undoubtedly require careful strategic planning with an emphasis on digital innovation for trade policy experts as COVID-19 continues to add an additional layer of complexity to operations while adjusting to a new administration and policy changes. 

To help you navigate the future, Global Trade talked with Washington, D.C.-based law firm Miller & Chevalier’s international trade experts Richard Mojica and Dana Watts. They weigh in on the 2020 election outcome, how international and domestic trade lane shifts can be anticipated and what traders can do to prepare now for the near future. 

“President Biden will likely continue a trade policy of protectionism,” Mojica says. “Biden’s approach would be more subtle than Trump’s, but his trade policy agenda is centered around the familiar themes of taking a hard line on China and boosting U.S. industries by increasing government purchases of U.S.-based goods and services. Further, although Biden would certainly seek to restore trade relations with long-time allies, he has signaled that his administration would focus on domestic investments before pursuing any new trade agreements. That probably includes not pursuing Phase II of the U.S.-China Agreement, in part due to growing animosity between the countries.

“On the topic of tariffs, Biden has not yet pledged to remove the tariff regime he inherited from Trump and is not likely to do so without getting something in return that would satisfy his base supporters,” Mojica adds. “Biden has also vowed to use other tools to keep China at bay, which may include economic sanctions, the tightening of export controls, anti-dumping investigations, restrictions to foreign investment and investigations into human rights abuses.”

The question on the minds of global traders is what can be done now to prepare for what’s to come and how proactive measures can solidify operations for the future. Supply chains experienced new levels of disruption throughout 2020, requiring changes in established production locations and tapping into new market opportunities for outsourcing. However, these moves do not come without a cost in some form, and right now, the right move is hard to determine beyond what has already been implemented. 

It’s important to note that prior to Donald Trump’s departure from the White House, the U.S.-China deal still remained a key issue for many American manufacturers. With Biden now officially sworn in, relations with China are a constant question. 

“For the last 2-3 years, many companies with supply chains involving China have moved all or some production out of China and into Vietnam, Malaysia and elsewhere in Asia,” Watts explains. “U.S. companies are also considering moving production to Mexico because of its proximity to the United States and the potential cost-savings associated with the U.S.-Mexico-Canada Agreement (USMCA) implemented on July 1.” 

President Biden’s “Made in America” plan–a $400 billion, four-year increase in government purchasing of U.S.-based goods and services–will further incentivize companies to take a closer look at sourcing from the U.S., where there is capacity. “Still, we continue to hear from companies that China’s supply chain ecosystem is unrivaled, so they are experiencing growing pains as they ramp up production in other countries,” Mojica notes.

Having previously served as a U.S. Customs Headquarters attorney, Mojica predicts that under the Biden administration, tariff compliance enforcement from U.S. customs will most likely continue and even become more significant. Not only does this increase the chance for penalties and investigations but also the enforcement of USCMA and importer auditing protocols. Starting from the inside out, USMCA mirrors NAFTA while adding drastic changes to specific sectors, where operating procedures are not a “one-size-fits-all” approach. For many companies, USMCA requires a careful comparison and evaluation from compliance to anticipated penalties. 

“Companies that seek to benefit from cost savings under the USMCA must have a compliance infrastructure in place to verify that its products qualify for preferential treatment under the agreement, Mojica says. “Based on our experience working with multinational companies, developing adequate internal controls requires an effort that may involve stakeholders in various departments, including procurement, finance, supply chain and legal. U.S. Customs afforded companies through the end of 2020 to get up to speed, but that grace period has since expired and will be followed by USMCA audits.”

The Phase One trade deal is an additional key topic that companies are grappling with. Which strategic planning efforts will support business and whether there will be additional conflict between the already strained relationship with China are in question. Future agreements are at a standstill as Phase One requirements have yet to be fulfilled on China’s end and show no progress. 

The question is: Now that Biden is the 46th U.S. President, what will the Phase One Deal look like? 

“Biden has criticized the Phase One deal for not addressing Chinese subsidies and support for state-owned enterprises, cybertheft, and other unfair practices,” Watts points out. 

Mojica and Watts both expect an uptick in investigations into forced labor in the supply chains of companies that import merchandise into the United States.

“The U.S. government has taken a keen interest in human rights abuses around the world, and it is charging companies to ensure that there is no forced labor in their supply chains,” Mojica says. “In response to the rise in U.S. Customs-led investigations and enforcement cases concerning imports made with forced labor, companies are taking steps to enhance their supplier due diligence efforts.”

Short-term resolutions are bleak, and the inevitable shift in policy adds more of a strain on companies aiming to determine what preparations are within their control. Specific strategies can support forward-thinking approaches in the interim, but without concrete provisions, the future does not look favorable for peaceful international relations but rather growing tensions, which are already being felt. 

The future of policies in place and the possibilities for policy implementation have yet to be fully felt under the Biden administration. The future of trade could be completely different from what companies are currently navigating on a domestic and international scale in the coming weeks and months. Nevertheless, companies would do themselves a favor by extending strategic approaches and ensuring compliance while anticipating another year of change.


Richard Mojica is a member of Washington, D.C.-based law firm Miller & Chevalier, where he counsels U.S. and international companies on how to minimize the cost of importing merchandise into the United States through strategic customs planning and duty-savings programs.

Dana Watts is counsel of Miller & Chevalier’s International Practice, focusing on customs law. She advises clients with all aspects of import compliance.


Exclusive White Paper: Sourcing Globally – Senior Managements Guide to “Thirteen Key Practices”

Sourcing globally will continue to grow and expand into new markets as we enter the third decade of the new millennium.

Multinational companies down to smaller family-owned organizations are learning the critical importance of developing multiple and varied sources of raw materials, components, and finished products.

Traditional foreign sourcing options, such as China are being challenged aggressively for the first time in its 40-year tenure as the fastest and expansively growing foreign source of manufactured goods.

Tied into this are the 301 Tariffs under the Trump Administration, that our newly elected President Biden is likely to continue on with for at least the balance of 2021. Which have increased “landed costs” by as much as 25%.

Senior management is best guided by setting up policies, protocols, and SOP’s in how their management teams and staff operate in their global sourcing opportunities and initiatives.

The goal should always be to reduce the risk and cost of goods sourced globally.

In public companies, these guidelines would help meet Sarbanes- Oxley regulations and in private companies … “Best Practices”. The SOP’s create a standard with the following benefits:

-Documented and written commitment to follow government regulations

-Consistent approach to regulatory adherence

-Foundation and resource for all global supply chain personnel to follow

-Creates training module to make sure everyone knows how to operate in their companies following all necessary regulations.

Having said all of that …. The following Best Practices outlined in Thirteen Steps offer the international executive a blueprint for either new or matured global sourcing initiatives:

1. Learn how to navigate the opportunities offered through the numerous Free Trade Agreements that can be leveraged for economic advantage in the global sourcing arena

Utilizing FTA’s lower lands costs by reducing or eliminating duties and taxes.

2. Diversify sourcing into multiple countries so dependence on single sourcing is not relevant

This becomes a risk management concept in spreading the sourcing exposure over Variable options.

3. Learn the culture of the countries you source from. This will maximize your opportunity to negotiate better deals and build stronger relationships.

Keep in mind in overseas markets … “relationship” drives the success of the business deal and the long-term partnership with the vendor/supplier.

4. Utilize specialized professional attorneys who can guide you through the maze of foreign regulations, laws and policies that will influence sourcing options, agreements and contracts.

Legal expertise can be expensive, but it is a necessary expenditure that can help avoid pitfalls, mistakes, and serious financial consequences.

Laws vary greatly in foreign countries and companies that learn how to proactively avoid litigation and other legal issues will always minimize risk and maximize opportunity.

Purchase Orders (PO’s) also have different legal consequences in various countries, that need to be reconfigured to work better.

5. Develop sourcing reach into Mexico where maquiladora programs and near sourcing initiatives can prove to be a valuable option as a sourcing alternative.

Near sourcing can prove to significantly lower landed costs, reduce risk and enhance demand planning sand lead time reductions.

6. Utilize the service of specialized freight forwarders who can provide local support in the sourcing countries in arranging local freight needs, outbound logistics requirements, handle export specifics and the inbound process into the United States.

The freight forwarder or Customhouse broker can be a valuable partner in impacting risk and cost along with huge benefits in managing inbound supply chain needs.

7. Tread cautiously through all Intellectual Property Exposures (IPR) that can happen once you start to trade in foreign markets, share business models. Trade secrets and confidential manufacturing data.

Managing IPR issues needs to always be addressed proactively when forming relationships in global sourcing models. The headaches and costs in chasing and dealing with IPR breaches can be costly, aggravating and a waste of time and effort. And litigation in markets such as China typically create less them robust results … leaving both parties dissatisfied and filled with angst.

Managing IPR issues needs to always be addressed proactively when forming relationships in global sourcing models. The headaches and costs in chasing and dealing with IPR breaches can be costly, aggravating and a waste of time and effort. And litigation in markets such as China typically create less them robust results … leaving both parties dissatisfied and filled with angst.

8. Pay close attention to the choice of INCO Term (International Commercial Term of Purchase or Sale). The choice impacts risk and cost between the supplier and the buyer.

There are 11 INCO term options in the revised 2020 Edition: Ex Works, FAS, FCA. FOB, CIF, CIP, CPT, CFR, DAP, DPU and DDP.

Importers need to choose a term where they typically control the international freight inbound, the customers clearance process and delivery to the ultimate consigned.

This helps reduce both cost and risk and typically will offer better options and performance on the inbound logistics.

9. Make sure you:

-Understand all the regulatory issues with Customs and other regulatory agencies.

-Make sure you have a “point person” who takes ownership of regulatory concerns … typically referred to as the “trade compliance manager”.

-Develop SOP’s to integrate into the sourcing business model.

-Train all stakeholders in the global supply chain on all the aspects of regulatory controls and just how it is related to their specific responsibilities.

10. Always make sure you have supported your sourcing decision by working up “landed cost modeling” to affirm the purchasing decision utilizing specific metrics.

Landed cost modeling creates a metric to do comparison shopping and to evaluate options or choices by adding up all the direct, indirect and ancillary costs added to the origin purchase or acquisition cost.

Landed cost modeling creates a comprehensive formula to measure the method and process in making a sourcing decision on foreign shores.

11. Document these protocols in written SOP’s to evidence adherence to government regulations and best practices. This provides clear and concise senior management influence on managing with good intent, behavior, due diligence and reasonable care.

12. Create internal training programs for your management teams and your operating staff in all these guidelines and best practices. Solid training initiatives are an excellent and proven method to make sure everyone has comprehensive information flow, know what is expected and how best to execute.

13. Combine the utilization of Bonded Warehouses and Foreign Trade Zones, with various sourcing options, that can leverage risk and spend to your favor. This would include inventory, distribution, manufacturing and assembly operations in a secure FTZ, that could significantly lower landed costs to the USA based importer.

The role of Senior Management is to lead. Following these thoughts and turning them into effective actions within your business models is the best way to assure the opportunities to minimize risks and maximize profits within your global sourcing business models.

Senior management is best off by leading their teams into best practices and always exercising due diligence in their business behavior patterns. Any short-term costs and inconvenience will be outweighed by long-term benefits to any organization.

Benefits will include: reduction in risk and cost, business process improvement, more efficient operations, sustainability and significant growth potentials.


Thomas A. Cook is a 30 year seasoned veteran of global trade and Managing Director of Blue Tiger International, based in New York, LA and West Palm Beach, Florida.

The author of 19 books on international business, two best business sellers. Graduate of NYS Maritime Academy with an undergraduate and graduate degree in marine transportation and business management.

Tom has a worldwide presence through over 300 agents in every major city along with an array of transportation providers and solutions.

Tom works with a number of Associations providing “value add” to their membership services and enhancing their overall reach into global sourcing and in export sales management.

He can be reach at or 516-359-6232



This is the fifth in a series of articles by Eversheds Sutherland partners Jeff Bialos and Ginger Faulk explaining the legal and regulatory impacts of certain recent US sanctions and export control actions targeting various Chinese entities. Each article explains the regulatory context of the recent rules and intends to be explanatory in nature.

During a seemingly interminable and challenging transition period, the Trump administration has layered on an array of additional China sanctions. What are the impacts of these actions? What approach is the Biden administration likely to adopt and what changes can we expect? These are the topics that are addressed in this article, the last in this five-part series.

China-related Sanctions since November 6, 2020

Specifically, since November 6, 2020, the Trump administration has:

1. issued an Executive Order banning US persons from trading in the publicly traded securities of more than 35 “Communist Chinese Military Companies;”

2. named no less than 60 Chinese entities to the US Commerce Department Entity List, which establishes a license requirement for nearly all exports to such firms and general presumption of denial for such exports;

3. designated 58 entities as China “Military End Users” under the Export Administration Regulations (EAR), which also results in restrictions on a wide range of high-tech exports; and

4. removed Hong Kong as a separate destination from China under the Export Administration Regulations, which removes its preferential treatment for export licensing.

Moreover, during the same period, President Trump signed an executive order blocking transactions with companies that “develop or control” certain Chinese connected mobile and desktop applications and related software – namely Alipay, CamScanner, QQ Wallet, SHAREit, Tencent QQ, VMate, WeChat Pay, and WPS Office. At the same time, earlier executive orders banning transactions with the owners of TikTok and WeChat were halted by federal courts and the effective date of these orders has been suspended pending the outcome of ongoing litigation.

In particular, compliance with the recent securities trading ban has proven challenging for the financial community, forcing banks and investment companies to divest or restructure hundreds of products containing publicly traded securities of the named “Communist Chinese Military Companies” and other companies whose names “closely match” the names of the listed companies. The term “securities” is broadly defined under US law, and OFAC has interpreted the ban to apply to any security that “designed to provide investment exposure” to the securities of a named entity. Thus, the ban includes, for example, a mutual fund which includes in its portfolio one or more of the subject securities or an insurance policy that has a mutual fund option for insureds holding the securities of such named entities. The ban also applies to securities held on a US or foreign exchange if the investor is a US person. The NYSE has announced the delisting of these companies, and both the NASDAQ and MCSI have announced they will remove the listed companies from their indices.

In short, while other lame duck presidents have taken actions that make things easier for their successors, the Trump administration has taken the opposite tack in an apparent effort to lock in a hard-line China policy. It will be more challenging for the Biden administration to easily unwind. In response, China has adopted its own regulations prohibiting Chinese companies and individuals from complying with “punitive measures mandated by foreign governments.”

Outlook under President Biden 

Whether and to what degree the Biden administration will implement, unwind or limit the scope or applicability of these and other pre-existing Trump administration restrictions against China remain to be seen. As a threshold matter, we expect an initial waiting period as the Biden administration gets its new team in place, evaluates its overall strategic approach toward China, and considers these particular restrictive measures in the context of its overall strategy.

Generally, based on public statements to date, we believe that the Biden administration will in all probability share the basic view that China is a strategic competitor and potential adversary. However, how to deal with China, a major power whose cooperation the United States needs on some important issues, is another matter – there are a range of possible approaches. In this regard, at this early juncture, we believe that US policy toward China under President Biden is likely to reflect a number of elements:

-selective disengagement with China in certain areas viewed as more central to national security and cooperative in other areas where national security risks are considered less significant;

-more cooperation with allies to shape shared approaches to addressing areas of concern with respect to China;

-stronger views on human rights violations by China; and

-more direct engagement with China on areas of concern with a view toward seeking sensible solutions.

It is within this overall policy framework that the Biden administration will evaluate and approach the new and existing China restrictions imposed by the Trump administration. Certainly, the Biden administration has the legal authority to undo or roll back nearly all of the Trump Administration’s actions.

At the same time, the new administration undoubtedly will recognize that any major actions to roll back China sanctions will be controversial and raise questions among policy hard-liners who believe stringent dual-use export control sanctions are strongly justified in light of China’s “military-civil fusion” strategy (i.e., whereby any dual-use exports to commercial firms could wind up in China’s military sector).  Indeed, even small actions to curtail or limit China sanctions (e.g., removing companies from lists, creating new licenses or issuing new interpretations) will send political signals both at home and abroad. Meanwhile, the business community will monitor and interpret such measures in Talmudic fashion to divine if there is a new wind blowing in this area.

For these and other reasons, we do not foresee an imminent reversal of most of the Trump administration’s actions. Rather, we expect a more balanced and incremental approach than we have seen in the last four years, with more careful sculpting of existing sanctions to ameliorate the effects (with FAQs, licenses and the like) while taking a strong line against China in other areas in coordination with close allies.

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Jeffrey P.  Bialos, partner at Eversheds Sutherland, assists clients in making multi-faceted business decisions, structuring transactions and complying with complex regulatory requirements. A former Deputy Under Secretary of Defense for Industrial Affairs, he brings deep experience in defense, homeland security and national security matters, including antitrust, export controls, foreign investment, industrial security, the Foreign Corrupt Practices Act, and mergers and acquisitions, and procurement.

Ginger T. Faulk, partner at Eversheds Sutherland, represents multinational companies in matters involving US government regulation of foreign trade and investment. She has extensive experience advising and representing global companies, counseling clients in matters arising under US sanctions, export controls, import and other national security and foreign policy trade-related regulations.