What Your Business Needs to Know and Do About Tariff Exclusions
As COVID-19 continues to wreak havoc on the world economy, it’s prudent to find ways to keep your shipping business afloat by finding economic relief if and whenever possible. First off, being aware of the changing complexities of the China-U.S. trade war is essential. According to the Census Bureau’s Foreign Trade Statistics, China is one of our country’s largest trading partners, which means companies large and small are likely affected by the trade situation. Last year, the U.S. imported $452 billion from China, which made up about 14% of overall U.S. imports by value.
Section 301 of the Trade Act of 1974 allows the U.S. to impose trade sanctions as recourse for unfair foreign trade practices. In 2017, China was under investigation for issues regarding innovation practices, intellectual property rights, and technology transfer. Since then, retaliation measures have been put in place for the past couple of years and remain in effect for an indefinite amount of time. While the USTR recently announced reductions on some tariff measures and a suspension of others, about two-thirds of U.S. imports from China are still taxed an additional 7.5% to 25%, covering about $350 billion worth of product. Keep in mind, the average duty rate for U.S. imports is only 2%; thus, China’s products are incurring additional costs on top of that.
The current tariffs are extremely broad and cover many industries including food/beverage, industrial supplies, transport equipment, consumption goods, and fuels and lubricants. As of this month, the U.S. Customs and Border Protection (CBP) reports collecting $52 billion in Section 301 duties since the trade remedies took effect.
This is a hot issue for importers and we’re currently seeing more industry associations and companies pushing for relief from these measures. While the period to request exclusions from the Section 301 tariffs is now closed, it is a great time to confirm that you are doing all you can to potentially recover duties previously paid, and potentially apply on a go-forward basis the exclusions that the USTR has been granting against certain products.
How to seek relief now and in the future
Cost savings and refunds are top of mind for all, so to help provide some relief, the USTR has released many tariff exclusions shippers can apply for. The important thing to keep in mind here is that ample work is involved. It’s not just a one-time process, because you’ll likely need to continuously apply for new exemptions where applicable. Some of the exclusions being granted are product-specific whereas some are granted at the HTS classification. You’ll also want to be ready in case CBP asks for proof of eligibility. Staying organized is paramount to identify the opportunities and defend against CBP scrutiny.
Each exclusion round also has a validity period, and many of those expiration dates are coming up fast! We’re seeing the USTR opening several new short-window comment periods to consider extending previously granted tariff exclusions. This could be your chance to drop commentary to protect and extend your granted exclusions or to oppose competitors, if applicable and necessary so that your company is not left at a disadvantage.
What are the eligibility requirements?
Eligibility is simple – companies affected by the China 301 tariffs.
Exclusions can be granted based on sourcing, impact on U.S. jobs and product type and need. Producers of goods used to combat COVID-19 can also be eligible for exclusions.
Also, tariff exclusions are retroactive to the date the tariffs were first applied, and exclusions generally expire after one year from the date of publication of the granted exclusion.
Important Reminder for Process
The customs entry and liquidation process is complicated, spanning a lengthy period. It can take up to 480 days and is broken down into these windows of time:
1. Day 1: Customs entry is filed
2. Day 1 – 300: Post Summary Correction (PSC) – can be filed to request refund prior to the entry liquidating
3. Day 300: PSC no longer eligible as entry is deemed liquidated (importer may request suspension or extension of liquidation prior to this point).
4. Day 301 – 480: Entry is liquidated, and protest must be filed to request a refund
5. Day 480+: Entry may be past protest period and is no longer eligible for a refund request via PSC or protest.
Since the process is lengthy, make sure you consider these tips when conducting your duty recovery analysis:
-Know your product (10-digit HTS codes and know the barcodes toward the products)
-Apply their qualifications
-Narrow down lists of products impacted by tariffs
-Identify which ones have exclusions granted – work with that list
-Run a report and gather import activity
-Start looking at validity dates
-Make sure brokers are applying it to the new shipments of the products
-File petitions if you want to continue to take advantage of it
Insights for the future
The trade war is not ending soon and it’s hard to unravel, but we know it’s an important issue that we can expect to see in the spotlight for the foreseeable future. Customers are advised to stay close to this and to pay attention to the advisories from C.H. Robinson and USTR.
To check for exclusion status against your products click the resources here:
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