Hundreds of China Tariff Exclusions Now Expired; First Sale Can Help Mitigate Effects
© , Sandler, Travis & Rosenberg, P.A. Originally published in the [08/10/2020] issue of the Sandler, Travis & Rosenberg Trade Report. Reprinted by permission.
More than 700 products imported from China became subject to the Section 301 additional 25 percent tariff when their exclusions expired Aug. 7. While exclusions were extended for more than 250 other goods, those extensions are only valid through Dec. 31. Importers of affected goods should consider using the first sale rule to mitigate the impact of these tariffs.
Tariff Exclusion Decisions
The Office of the U.S. Trade Representative considered extending 14 sets of tariff exclusions covering nearly 1,000 List 3 goods from China. However, USTR has declined to extend most of these exclusions, meaning those goods are now subject to the 25 percent tariff.
USTR did approve extensions of 266 exclusions, including 21 individual HTSUS numbers and 245 specifically-described products. These exclusions, which must be claimed using new HTSUS 9903.88.55, are available for any product that meets the specified product description (see attached notice), regardless of whether the importer filed an exclusion request.
However, while USTR said it would consider extending these exclusions for up to 12 months, it ultimately only extended them through Dec. 31. USTR states that this shortened extension is due to “the cumulative effect of current and possible future exclusions or extensions of exclusions on the effectiveness of” the Section 301 tariffs. USTR explains that it has granted more than 6,700 exclusion requests to date, has extended some of these exclusions, and may consider further extensions. USTR states that it will take account of the cumulative effect of exclusions in considering the possible further extension of these and other exclusions.
First Sale Rule
Under the first sale rule, the dutiable value of a qualifying transaction may be based on the purchase price between the middleman/vendor and the manufacturer rather than the price paid by the importer to the middleman/vendor, resulting in a lower duty bill. First sale has long been useful to industries subject to high U.S. tariffs, such as apparel and footwear, which use it to save millions of dollars in import duties each year. However, its utilization has increased dramatically over the past few years as companies seek to lessen the impact of the Section 301 tariffs on imports from China; Section 201 and 232 tariffs on steel, aluminum, and other products; and tariffs on European Union goods imposed in a long-running World Trade Organization dispute on aircraft subsidies. Additional tariffs also remain a possibility on imports from EU countries (due to their proposed digital services taxes) and automobiles and auto parts from many countries (following a Section 232 national security investigation).