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Section 301 Tariffs on Products From China

Over the past year, there has been a significant amount of activity and conversation around additional tariffs being required on a range of products from various countries. These are sometimes referred to as “trade remedy” measures or tariffs. The additional tariffs are also being used as way to address the “import injury” against the U.S. domestic markets, depending on the circumstances.

As an importer, it is critical that your company understands the ever evolving landscape, in relation to these additional tariffs, to ensure the health and compliance of your supply chain. Below, you will find useful information related to the Section 301 tariffs on products out of China.

What are Section 301 tariffs?

Section 301 of the Trade Act of 1974 provides the United States with the authority to enforce trade agreements, resolve trade disputes, and open foreign markets to U.S. goods and services. It is the principal statutory authority under which the United States may impose trade sanctions on foreign countries that either violate trade agreements or engage in other unfair trade practices. When negotiations to remove the offending trade practices fail, the United States may take action to raise import duties on the foreign country’s products as a means to rebalance lost concessions.

On March 22, 2018, pursuant to Section 301 of the Trade Act of 1974, the President issued a Presidential memorandum, directing the United States Trade Representative to consider increasing tariffs on imported goods from China.

The results of the a Section 301 investigation determined that China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation are unreasonable and discriminatory.

Products Affected

The Section 301 tariffs were rolled out in three separate lists.

  • List 1: $34 billion in import Harmonized Tariff headings and numbers were identified and subject to an additional 25% duty, which became effective on July 6, 2018.
    • 88.01: 25% ad valorem additional duty for articles the product of China.
  • List 2: $16 billion in additional imports were identified and went into effect on August 23, 2018.
    • 88.02: 25% ad valorem additional duty for articles the product of China.
  • List 3: $200 billion worth of imported goods were identified and went into effect on September 24, 2018, at the duty rate of 10%. Initially the increase to a 25% rate was to go into effect on January 1, 2019; however, this has been delayed until March 2, 2019, and the final outcome is still to be determined.
    • 88.03: 10% ad valorem additional duty for articles the product of China, as enumerated in U.S. note 20(f) to Subchapter III to Chapter 99.
    • 88.04: 10% ad valorem additional duty for articles the product of China, as enumerated in U.S. note 20(g) to Subchapter III to Chapter 99.

IMPORTANT: Exclusions issued on the items on List 1 are now published and are NOT entity-specific. They are HTS and product-specific. You can find the full list of the current exclusions being granted here: https://ustr.gov/issue-areas/enforcement/section-301-investigations/request-exclusion

As an importer, what can I do to be compliant?

  • Verify your products are classified correctly with the proper HTS codes.
  • Confirm that your suppliers have accurate commercial invoice descriptions of the products.
  • Verify the country of origins of your products.
  • Ensure your Customs broker is submitting accurate entries to U.S. Customs.
  • Use your ACE Portal Account to run reports and verify your overall Customs entry accuracy.

What are my options to mitigate the impact of the additional tariffs?

  • Review the accuracy of the HTS codes being used to classify your products.
  • Consider sourcing.
  • Change production steps and locations to affect the products’ HTS codes and countries of origin.
  • Submit an exclusion request to the Department of Commerce.
  • Duty drawback is available for goods subject to the Section 301 tariffs that will be subsequently exported.