How are companies are softening the Trump tariff blows?

Facing the onslaught of President Trump’s China Tariffs, importers are having to get creative in order to minimize the impact these higher duty rates will have on their goods. 

Foreign Trade Zone / Bonded Warehouse / Tariff Engineering

Foreign Trade Zones (FTZ), approved by the U.S. government, can be a temporary haven for companies reducing duties on a case-by-case basis.  Trade zones are not a loophole for goods destined for the U.S. market, but they can be a way for companies to avoid duties on goods shipped to the United States and subsequently re-exported to another country.

There are different types of zone designations depending on the end use of the goods; further manufacturing, packaging, comingling, etc.  In any case, the duties are not paid out until the goods are exported out of the Trade Zone, either in-bond for re-export or destined for the U.S. market.  Companies can utilize the zones to spread out those duty payments based upon the timing of the export from the zones.  This can help manage huge import duty payments being paid at time of import to the U.S. 

Bonded warehouses are another option. Firms can store and make products in “Customs-bonded” warehouses for up to five years. Duties are only applied once products leave the facility for consumption. Companies can apply to U.S. Customs for a license to operate a bonded warehouse.

According to a paper by law firm Barnes, Richards & Colburn, Tariff engineering also is making a comeback.  Companies can tweak their design processes in order to be able the re-classify their goods under a lower duty rate.  However, importers need to be very conscious of taking this too far, since Customs tends to reject revisions to existing HTS codes when companies appear to be making a “fictional or temporary product”. 

To view the full article in Transport Topics (TTNews) “In Times of Trade War, Companies Get Creative to Avoid Tariffs”.

Processes for US Goods Returned

Goods that were manufactured in the United States (US) and returned to the US are eligible for free entry back into the country only if:

  • They have not undergone any advancement in value due to upgrades, repairs, improvements in condition or any other processing which would elevate the value of the item.  
  • If the goods were subjected to changes which improved the condition then you would be responsible for paying duty on the fair market value of the labor or the item as it has been changed.  Chapter 9802 would cover the repairs, changes value. 
  • **NOTE**, duty is only assessed on the actual repair or improvement not on the entire value of the goods. 

If the goods have not been subjected to any of the outlined processes above then you would file a CBP Form 3311, Declaration for Free Entry of American Goods Returned here.   This would entitle you to free entry under HTS 9801.00.10 as duty free.

GOODS FOR WHICH DUTY HAS ALREADY BEEN PAID RETURNING TO THE US

A common question which arises is “what if I have goods on which duty has already been paid returning to the US”, for example a product sold that is defective, damaged, doesn’t conform to a certain specification outlines by the buyer etc..  

Subheading 9801.00.26, HTS provides for articles, previously imported, with respect to which the duty was paid, if

  • They were exported within 3 years after the date of such previous importation.
  • Sold for exportation and exported to individuals for their personal use, re-imported for the reason hat such articles do not conform to sample or specifications
  • Re-imported without having been advance in value or improved in condition by any process of manufacture or other means while abroad.
  • Re-imported as personal returns from those individuals; and re-imported by and for the account of the person who exported the goods from the United States within one year of the exportation.

If all of these conditions are satisfied, the goods are eligible to be re-imported duty free.  Also, if the goods are imported under HTS 9801.00.26 they are not subject to visa or quota requirements as well.

However, if the goods were originally exported with the benefit of drawback, the goods will not be eligible for duty-free treatment upon re-import.  The reason being, U.S. Note 1(a), Subchapter I, Chapter98, HTS, states that subheading 9801.00.26 would not apply to an article exported with the benefit of drawback.

***NOTE*** CBP has the right to request proof from the exporting party that duty was paid upon the previous import of the items.   

“The New NAFTA” – informative article from SupplyChainBrain

nafta-main

Need a good introduction to “New NAFTA”?  An article written today by Robert J. Bowman, SupplyChainBrain, called “The New NAFTA: What Does It Mean For Supply Chains?”is a great place to start.

This Q&A covers topics associated with the new agreement and the potential impact to U.S. supply chains.

Specifics about the new deal, called the United States-Mexico-Canada Agreement, or USMCA, have been published on the Office of The United States Trade Representative website, found here.

CSMS# 18-000689 RECONCILIATION FILING-FREE TRADE AGREEMENTS (FTA)

ace-logoACE FILING NOTICE – RECON

According to to CBP CSMS# 18-000689, issued today, November 21, when filing a reconciliation for a Free Trade Agreement issue, ACE is displaying incorrect original paid amounts. Until headquarters issues further guidance, filers should submit the reconciliation header information in the Document Imaging System (DIS) when filing the reconciliation with a FTA issue.

If you have any questions or require additional information, please send an email to
OT-RECONFOLDER@CBP.DHS.GOV, Commercial Operations, Revenue and Entry Division, Office of Trade.

U.S. imposes 25% tariffs on approximately $50B of Chinese goods

china us trade

On Friday June 15th, 2018, the United States Trade Representative (USTR) announced that the U.S. will follow through with 25 percent tariffs on approximately $50 billion worth of goods from China in 2018 import value (read announcement here).

The list of goods covered by the order includes mainly industrially significant technology products spread across 1,102 U.S. tariff lines.  The list of specific tariff numbers can be found here and, as announced, CBP will begin collecting these additional duties beginning July 6th.

Additionally, there is a second set of HTS numbers which have been identified by the interagency Section 301 Committee as benefiting from Chinese industrial policies.  These include the “Made in China 2025” industrial policy, and the set covers about $16 billion worth of imports from China. The second set of products will undergo a public notice and comment process, including a public hearing, after which USTR will issue a final determination on the products from the list that would be subject to the duties, the agency said.  Crowell Morning Trade Law wrote a good overview on this, here.

The USTR will “soon provide an opportunity” for the public to request exclusion of “particular products” from the duties to be imposed under Section 301 of the Trade Act of 1974, and will issue a notice in the Federal Register with details on this process within the next few weeks, USTR said.

Changes to China’s manifest system – what you need to know!

chinaChina’s 24 hours Advanced Manifest Regulation Update

Have you been asked by your Chinese partners for additional company information for new shipment into and out of China?  It is our initial understanding that for US entities the information requested is the consignee or notify party’s company Employee Identification Number (EIN).   The carrier OOCL provides a good overview to their customers on  their website, here.

Our friends at NCBFAA are also working diligently on providing guidance on the new requirements for shipments to and from China. The regulations are confusing and in some cases contradictory. We will follow up with addition information as it becomes available.

The GACC published the original requirements in 2008 in Decree No. 172. These specific requirements were not implemented in 2008. Customs announced in Notice No. 56 that implement would begin June 1, 2018. (See links to the notices below).

Below are some additional links to the GACC notices:

USTR publishes proposed action and China reacts with it’s own list

Achina us trades announced, the U.S. Trade Representative (Trade Representative; USTR) has determined that the acts, policies, and practices of the Government of China related to technology transfer, intellectual property, and innovation covered in the investigation are unreasonable or discriminatory and burden or restrict U.S. commerce. The Office of the U.S. Trade Representative (USTR) is seeking public comment and will hold a public hearing regarding a proposed determination on appropriate action in response to these acts, policies, and practices. The Trade Representative proposes an additional duty of 25 percent on a list of products from China. The list of products, defined by 8-digit subheadings of the Harmonized Tariff Schedule of the United States (HTSUS), is set out in the Annex to this Notice.

The official 301FRN notice is:  OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE Docket No. USTR-2018-0005 Notice of Determination and Request for Public Comment Concerning Proposed Determination of Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation.  Read the notice here.

Attorneys Susan Kohn Ross and Kevin Rosenbaum from MSK, published a blog article today which gives a complete overview of the situation.  Read here.  As they also say, “Stay tuned for more developments”.

CBP publishes entry summary process for new steel and aluminum requirements

steel htsALERT!  Per CSMS Message 18-000240, issued on March 22nd, the additional duty on imports of steel and aluminum articles under Section 232 are effective with respect to goods entered, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on March 23, 2018.

This CSMS message provides specific details on the additional requirements and entry filing process, known as a Section 232.  Below is an overview of the process, or click here to read the full CBP message. 

Which countries are included?  All countries are covered by the initial order except Canada, Mexico, Australia, Argentina, South Korea, Brazil and member countries of the European Union (Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom).

How to file?  CBP has developed new tariff numbers in chapter 99 which allows for the correct additional duties to be calculated and transmitted on the entry.

  • For steel articles subject to the order, classified in the HTS as: 7206.10 through 7216.50, 7216.99 through 7301.10, 7302.10, 7302.40 through 7302.90, and 7304.10 through 7306.90 importers must also claim HTS number 9903.80.01 (25% ad valorem additional duty for steel mill products).
  •  Aluminum articles subject to the order, are defined in the Harmonized Tariff Schedule (HTS) as unwrought aluminum (HTS 7601), aluminum bars, rods, and profiles (HTS 7604); aluminum wire (HTS 7605); aluminum plate, sheet, strip, and foil (flat rolled products) (HTS 7606 and 7607); aluminum tubes and pipes and tube and pipe fitting (HTS 7608 and 7609); and aluminum castings and forgings (HTS 7616.99.51.60 and 7616.99.51.70), including any subsequent revisions to these HTS classifications. For products covered by the order importers must also claim HTS number 9903.85.01 (10% ad valorem additional duty for aluminum products).

*The aluminum order does not apply to products made with aluminum or parts of downstream products.

These additional HTS numbers are now effective and available in CNI.  Per CBP, Importers and filers failing to submit the required Chapter 99 HTS classifications with the entry summary information for imports under the specified Chapter 72, 73, and 76 HTS classifications for the covered countries of origin will receive the following reject messages:

E1 IQ10    LINE SUBJECT TO QUOTA

E1 FQ09   QUOTA NOT ALLOWED FOR ENTRY TYPE

E1 FQ05   BANNED IMPORT

E1 RF998 TRANSACTION DATA REJECTED

For more information, please refer to the Presidential Proclamations on Adjusting Imports of Steel and Aluminum into the United States, Federal Register, 83 FR 11619 and 83 FR 11625, March 15, 2018; and the March 22, 2018 Presidential Proclamations on Adjusting Imports of Steel and Aluminum into the United States.

New ACE reporting to support reconciliation in ACE

hdr_abi-recon-moduleAs you know, CBP delivered ACE Deployment G, Release 4, on Saturday, February 24th, as promised.  One of the critical pieces of this deployment was moving reconciliation entries into ACE, along with drawback, liquidation and other functionality.  Read our prior blog  on this deployment.

Now, CBP has made long-awaited ACE REPORT ENHANCEMENTS relating to recon.   On March 17th, 2018, CBP has deployed two new universes and nine new standard reports in ACE, to further support the transition of reconciliation into ACE.  These enhancements are meant to provide the trade with all necessary information for reconciliation filing.  Read CSMS #18-000229 – ACE Deployment G Reports Deployment – March 17, 2018 here.

For example, ACE ES-501 is a report showing all open entries flagged for recon.  ES-502 provides bond information.

In fact, on April 14, 2018, the Authorized Data Extracts will be retired, and effective this date, all reports capabilities will reside in ACE Reports.

For more information, please review the ACE Deployment G Reports Information Notice for Trade.

CustomsNow is an ACE-certified software vendor and compliance consulting company, whose clients are brokers, importers, exporters, forwarders, and more.  We have an excellent reconciliation solution, which allows filers to upload underlying entry data from any/all various original filers to a single recon.  Contact us to learn more.

U.S. Department of Commerce Announces Steel and Aluminum Tariff Exclusion Process

steelMarch 18, 2018 U.S. Department of Commerce Announcement

Today, the U.S. Department of Commerce announced its procedures for excluding products from the recently announced tariffs on steel and aluminum product imports. As directed by President Trump, the Department will publish the procedures in the Federal Register and will start accepting exclusion requests from U.S. industry on Monday, March 19, 2018, at 8:45 AM.

Click HERE to see the Federal Register notice.

“These procedures will allow the Administration to further hone these tariffs to ensure they protect our national security while also minimizing undue impact on downstream American industries,” said Secretary Ross. “Starting tomorrow, domestic industry will be able to apply for exclusions through a fair and transparent process run through Commerce’s Bureau of Industry and Security.”

Secretary Ross, in consultation with other Administration officials, will evaluate exclusion requests, taking into account national security considerations. In that evaluation, the Secretary will consider whether a product is produced in the United States of a satisfactory quality or in a sufficient and reasonably available amount. A single response to each exclusion request will be posted on regulations.gov.

Only individuals or organizations using steel or aluminum articles identified in Presidential Proclamations 9704 and 9705 and engaged in business activities in the United States may submit exclusion requests. Exclusion requests will be posted for a 30-day comment period on regulations.gov.

Separate exclusion requests must be submitted for each unique steel or aluminum product import. For an exclusion request to be considered, the requester must provide a full factual description of the specific product, its properties, and its quantity.

Any individual or organization in the United States may file objections to steel or aluminum exclusion requests, but the Commerce Department will only consider information directly related to the submitted exclusion request that is the subject of the objection. Organizations submitting an objection filing on an exclusion request should provide specific information on the product that their company can provide that is comparable to the steel or aluminum product that is the subject of the exclusion request.

Organizations filing an objection should also provide factual information on the production capabilities at steel or aluminum manufacturing facilities that they operate in the United States; the availability and delivery time of the products that they manufacture relative to the specific steel or aluminum product that is subject to an exclusion request; and discussion on the suitability of its product for the application or applications identified by the exclusion requestor.

Both the exclusion requests and objection filings will be available for public viewing on regulations.gov. Processing of exclusion requests normally will not exceed 90 days, including adjudication of objections submitted on exclusion requests.

The forms for submitting steel and aluminum exclusion requests, and objections to specific exclusion requests, will be available on regulations.gov on March 19, 2018, at 8:45 AM. The steel docket number is BIS-2018-0006 and the aluminum docket number is BIS-2018-0002.

Copies of the forms and additional information on the exclusion process will be available at https://www.bis.doc.gov/index.php/232-steel and https://www.bis.doc.gov/index.php/232-aluminum on March 19, 2018, at 8:45 AM.

For questions concerning the exclusion process, contact steel232@bis.doc.gov or 202-482-5642 for steel-related queries and aluminum232@bis.doc.gov or 202-482-4757 for aluminum-related queries.

*NOTE:  Click HERE to read CBP’s CSMS #18-000219 – Harmonized System Update 1803 created on March 13, 2018, which included the modifications made as a result of the two Presidential Proclamations enacting Section 232 tariffs on steel and aluminum imports.