Recent Trade & Tariff Perspectives

June 16, 2021 | Ben Bidwell Director of North American Customs & Compliance

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How the U.S. Innovation and Competition Act (USICA) May Affect Section 301 China Tariff Exclusions

Could Section 301 China tariff exclusions become a reality once again?

The U.S. Innovation and Competition Act (USICA) is making its way through Congress with heavy bipartisan support. The legislation passed through the Senate on June 8, 2021, and will now be taken up by the House of Representatives. While the bill contains a surplus of various trade concepts, the USICA also addresses Section 301 China duty exclusions.

If passed by the House and signed by the President, USICA could have a very large impact on the import trade community, especially since approximately two-thirds of Chinese product will still be subject to additional duties ranging from 7.5% to 25%. Refer to our trade war timeline for details on the current situation.

Is a new duty exclusion request process coming?

Throughout the last couple of years, the United States Trade Representative (USTR) has granted roughly 2,357 duty exclusions from the Section 301 “China trade war” tariffs. Many of them (we estimate about 83%) have since expired, leaving just medical products and other articles used in the fight against COVID-19 eligible to avoid additional duty rates for a few more months.

However, the bill that the Senate recently passed (Section 73001 – Title III) states: “…the USTR shall establish and maintain a process for exclusion requests from duties under Section 301 unless the Trade Representative determines and certifies to the appropriate congressional committees that maintaining an exclusion process (a) would impair the ability of the United States to maintain effective pressure to remove unreasonable or discriminatory practices burdening commerce in the United States; or (b) is impractical due to the low value of duties imposed (S3567-S3568).” Therefore, it remains to be seen if a new duty exclusion request process will come with a new law.

Reauthorization of previous duty exclusions that have since expired

Section 73001 of the USICA also seems to indicate that all previously covered duty exclusions would be reinstated from the date of passage of the legislation through the end of calendar year 2022. This covers over 2,200 unique exclusions that importers could once again take advantage of to avoid the additional duty rates from the Section 301 China tariffs.

Certain expired duty exclusions may be eligible for a retroactive duty refund

According to the Senate-passed bill, duty exclusions that expired on December 31, 2020 (and only on that date), would be made retroactive between January 1, 2021, and the date of passage.

The language of the bill is as follows: “…notwithstanding Section 514 of the Tariff Act of 1930 or any other provision of law and subject to subparagraph (B), any entry of a covered article on which duties were paid under Section 301(b) of the Trade Act of 1974 and to which a covered duty exclusion would have applied on December 31, 2020, that was made – (i) after December 31, 2020, and (ii)  before the date of the enactment of this Act, shall be liquidated or reliquidated as though such entry occurred on such date of enactment…A liquidation or reliquidation may be made…if a request therefor is filed with U.S. Customs & Border Protection not later than 180 days after the date of the enactment of this Act.”

How much is in scope for retroactive application?

To understand the retroactive impact of this legislation, we need to look at the numbers. There were approximately 472 exclusions that expired on December 31, 2020.

Of those expired exclusions, 21 were harmonized tariff schedule (HTS) code-specific exclusions, meaning that any import using one of those 21 HTS classification numbers would be eligible for tariff relief. The remaining 451 expired exclusions were at the specially prepared product description level provided by the USTR, meaning that the imported product must not only fit the HTS code but also the specific exclusion language.

Duty refund without interest and next steps

While this could be a big win for the importing community previously taking advantage of Section 301 exclusions, it also means that there is work ahead to address shipments that could become eligible for a refund from the retroactive exclusions. Please note that duties would be refunded without interest.

Take steps to ensure that you are taking advantage of all reinstated exclusions if/when this legislation becomes law. Don’t tackle this task alone. Lean on your customs broker, trade consultant, or attorney to identify any refund opportunities that may exist.

C.H. Robinson is monitoring this legislation closely and is looking forward to assisting our shippers in ensuring all refund opportunities are identified and maximized. While this legislation moves through the remaining branches of government, we will continue to post updates as changes are made or new milestones are reached.

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