North American Trade & Tariff Insights

January 26, 2022  |  Ben Bidwell  Director, North American Customs and Trade Compliance

The Complexities of Trade Policy and Customs Enforcement—What’s Keeping You Up at Night This Quarter?

It’s no secret that today’s trade environment is much more complex than ever before. We’ve seen a surge of vessels waiting to berth over the last several months. There have been significant bottlenecks at ports, terminals, and railyards across the country. And from a tariff perspective, many companies continue to pay additional duties on numerous goods from China.

Multiple punitive tariffs have also been put in place over the past three years. Most notably, the Section 301 tariffs, also known as the “China tariffs,” affect nearly 70% of our imports from China with an additional duty of either 7.5% or 25% required on top of normal trade relations rates.

Are there any opportunities to avoid paying these extra duties?

There were Section 301 (China) tariff exclusions in place for hundreds of products being imported from China, but nearly all those exemptions expired, except for a small number of PPE and medical product exclusions.

There is pending legislation in Congress today, called the U.S. Innovation and Competition Act (USICA), that would address many of these duty exclusions. As it is currently written, the USICA would reinstate tariff exclusions on a go-forward basis and retroactively reinstate a considerable number of exclusions back to January of last year.

Importers and the trade community are watching this legislation very closely, as passage of this bill would result in millions of dollars in duty refunds and substantial savings on certain imports from China going forward.

The Import Security and Fairness Act

The other significant piece of pending legislation I wanted to touch on is the Import Security and Fairness Act, which was just introduced last week. This act would address de minimis shipment activity in the United States—where more than two million small packages arrive daily.

The current de minimis value in the United States is $800, which means one can import shipments valued at $800 or less without paying duties and taxes. This includes the aforementioned punitive tariffs, along with less stringent reporting requirements to Customs and Border Protection (CBP).

According to U.S. Representative Earl Blumenauer (D-OR), chairman of the House Ways and Means Trade Subcommittee, “The number of packages we receive in the United States has skyrocketed…and will only climb in the coming years. As long as foreign companies that sell their goods in America are splitting up their shipments to evade tariffs and oversight, American businesses will continue to be put at a competitive disadvantage cost-wise.

This loophole also makes it easier for people to import illegal goods and harmful products, because there is virtually no way to tell whether these packages contain products made through forced labor, intellectual property theft, or are otherwise dangerous.”

This legislation proposes that the United States:

• Prohibits goods from countries that are both non-market economies and on the United States Trade Representative’s (USTR) Watch List from using de minimis benefits;
• Prohibits goods subject to enforcement actions (e.g., Section 301 tariff measures) from using the program;
• Closes de minimis loopholes for offshore distribution or processing facilities; and
• Requires CBP to collect more information on all de minimis shipments to prohibit the use by bad actors

Forced labor

The recently signed Uyghur Forced Labor Prevention Act (UFLPA) prohibits goods from being imported into the United States that are either produced in China’s Xinjiang province or by certain entities identified in the forthcoming UFLPA enforcement strategy—unless the importer can prove by clear and convincing evidence that the goods were not produced with forced labor.

A request for public comment was recently published in the Federal Register January 24, 2022. Comments will be accepted for 45 days. Individuals may submit comments by following the instructions in the Federal Register notice. The ban is set to become effective June 21, 2022.

After receiving comments, the Forced Labor Enforcement Task Force will conduct a public hearing and develop a strategy for supporting enforcement of section 307 of the Tariff Act of 1930, as amended. The Department of Homeland Security and CBP will issue guidance for importers. 

The effects of COVID-19 on the trade community

Looking back to March 2020, COVID-19 forced the trade community and government agencies into a virtual environment. Shipments that traditionally required original physical documentation were quickly changed to email or online acceptance.

Agencies had to rely on customs brokers to help address government requests because agencies were not able to send requests via traditional U.S. mail, and CBP didn’t have email contacts for many importers. It was a big challenge and a big change for everyone. However, it was also a very welcome change.

In many ways, COVID-19 forced everyone to embrace faster and lower-cost methods to conduct business. CBP and many of the other agencies that helped facilitate imports into the United States must be commended. They acted very quickly and kept trade flowing every step of the way.

New to many importers was the need to import PPE. I remember talking to a bike importer at the onset of the pandemic who wanted to import masks and hand sanitizer for their staff. These are not easy commodities to import, and in many cases, involved other agencies, like the Food and Drug Administration (FDA). The FDA did a great job not only helping to facilitate the shipments, but also in educating the trade community on how to quickly navigate their requirements.

Also new to most people within the industry was the concept of Emergency Use Authorizations (EUA), issued from the FDA. There was, and still is, a need for masks, gloves, testing kits, etc., and the issuance of these EUAs, along with clear guidance on how to use them, allowed the trade community to effectively get these goods into the country.

However, it hasn’t been uncommon to hear a news story about a shipment of counterfeit masks or packages of hand sanitizer that were seized. While counterfeit goods and international property rights (IPR) issues have always been a problem, we’re much more aware now of how we depend on the safety and quality of these imported goods. According to CBP, on any given day, the agency will seize an estimated nine million dollars’ worth of product with IPR violations.

How can C.H. Robinson help?

The takeaway here is that the current trade climate is extremely complex and there are no signs of this slowing down or getting easier. Whether it is understanding what pending legislation means to your business or how recently implemented tariffs will affect your landed costs, we explain what’s happening each week to keep the trade community informed.

We recently published a tariff search tool that breaks down by tariff number what effect the USICA may have on your imported products. We all know labor is very challenging to come by these days, and tools like this can save hours of research time, providing clarity in a very complex environment.

Connect with one of our trade policy experts to learn even more.

The United States Innovation and Competition Act (USICA) was passed by the U.S. Senate in June 2021 to counter China’s growing influence in science, technology, and advanced manufacturing.

What’s included in the bill

Major components of the bill include investments in domestic manufacturing of “strategic sectors” like computer chips and PPE.

Also included is the Trade Act of 2021, which would reinstate certain exclusions to Section 301. Additionally, under USICA, importers of Generalized System of Preferences (GSP) products could be retroactively refunded for certain duties paid and no longer have to pay duties and tariffs on GSP imports until January 1, 2027, when GSP will expire again.

Determine the potential impact to your business

Uncover potential duty refunds if the USICA passes into law* with our U.S. Tariff Search Tool. Instantly search by Harmonized Tariff Schedule (HTS) and estimate your retroactive duty refund amount today.

*The USICA is currently a bill and has not yet become law. Aspects of the bill can change and amendments can be made. The information provided herein does not guarantee any refund and undue reliance should not be placed on it. Proper review and thorough analysis are required to determine outcome.

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