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Considerations for Managing Section 301 Tariffs: Triage Your Supply Chain

Beginning on July 6, 2018, and pursuant to Section 301 of the Trade Act of 1974, the United States imposed 15-25% additional tariffs in four tranches on $550 billion worth of Chinese products imported into the U.S. The tariffs have placed a financial burden on many companies importing into the U.S. and created much uncertainty. Which products will be excluded? Who should shoulder the duty burden? How long will this trade war last?

Proactive importers may potentially reduce their increased duty liability using several duty-saving strategies. Below is a list of possibilities companies may wish to consider for supply chain triage:

  • Request exclusions for products on Section 301 “List 4A.” Consider exclusion requests for specific products that cannot be sourced in the U.S. The deadline for submissions is January 31, 2020.

  • Request extensions on exclusions for products on Section 301 “List 1.” Many of the exclusions granted in December 2018 are set to expire on December 28, 2019. USTR is considering extending these exclusions by up to twelve months and will accept comments in support of exclusions until November 30, 2019.

  • Move production outside of China. Consider whether it is possible to move part or all of the production process outside of China so that the country of origin is a third country. This is a product specific analysis and will depend on sourcing of the components and complexity of production steps outside of China.

  • Implement duty savings with “First Sale.” Customs duties are normally assessed on the sale between the importer and the middleman vendor. With first sale, duties are assessed on the transaction between the manufacturer and the middleman vendor. The importer would pay duties on the value of the components and labor, but not on the middleman vendor’s markup, thereby shrinking the transaction value of the goods and reducing duty payments.

  • Determine if components of invoice price can be broken out. With proper structuring, many of the fees that are elements of the price can be deducted from the transaction value upon which duty payments are determined. Deductions can include foreign inland freight and foreign port charges.

  • Review purchase order terms. Are the incoterms DDP or FOB? If so, consider adding language to agreements regarding duty to shift the burden wherever possible. Further, consider inserting language to account for potential uncertainties regarding future tariffs.

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About this Author

Laura Siegel Rabinowitz Corporate Trade Attorney Greenberg Traurig Law Firm
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Laura Siegel Rabinowitz counsels domestic and multinational businesses on complex supply chain issues and other complicated challenges associated with trade, advising on mitigation of duty exposure and compliance. Laura has deep experience handling international trade projects for clients, including multinational importers, exporters, manufacturers, retailers, customs brokers, and freight forwarders.

Laura advises clients on mitigating tariffs on Chinese-made products and steel and aluminum and helps clients navigate the maze of regulations,...

212-801-9201
Donald Stein, Greenberg Traurig Law Firm, International Trade and Healthcare Litigation Attorney
Shareholder

Donald S. Stein focuses his practice on federal regulatory issues, and in particular U.S. Customs law, trade remedies and trade policy issues. From dealing with imports and the myriad of laws enforced by the U.S. Bureau of Customs and Border Protection ("CBP"), he has also developed experience in practicing before other federal regulatory agencies, including the U.S. Food and Drug Administration, the U.S. Federal Trade Commission, and the U.S. Fish and Wildlife Service. He is also experienced in working with the U.S. International Trade Commission, the U.S. Department of Commerce and the Office of the U.S. Trade Representative in connection with trade law and trade policy issues.

In the Customs area, Don has wide-ranging experience representing clients in the apparel and agriculture sectors, as well as in many other industries, in tariff classification, valuation, country of origin and country of origin marking matters, as well as defending clients against Customs detentions and seizures, and claims for penalties, liquidated damages, and/or the redelivery of goods. He has also worked closely with U.S. intellectual property owners to help protect their intellectual property against unauthorized and infringing imports. Under the CBP’s regime of "informed compliance," Don has worked with his clients to advise and ensure that they structure their import operations in a manner that is fully compliant with all CBP rules and regulations. He has also worked with clients to design and implement Customs compliance programs. Additionally, Don assists clients who are subject to CBP audits.

In the trade policy area, Don has represented the interests of clients in trade preference matters (free trade agreements and special trade programs), as well as in matters pending before Congress which may affect their interests. He also provides advice to clients on World Trade Organization related issues.

202-530-8502
Axel Urie international Trade and Customs Attorney Greenberg Traurig Law Firm
Associate

Axel Urie is a member of the International Trade and Customs Practice in Greenberg Traurig's Washington, D.C. office. He is experienced in trade remedy and customs matters, including litigation for domestic importers, producers, and foreign exporters.

202-530-8539