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This Week's Trade & Tariff Perspective

December 1, 2021 | Anahi Czeszewski  Product Development Manager

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Newest Developments in Customs and Trade

We have seen numerous customs and trade developments emerge in the past few weeks. From the agreements made to go to conference on the U.S. Innovation and Competition Act to the takeaways following United States Trade Representative (USTR) Katherine Tai’s travels to Asia to meet with key allies—read on as we examine the effects these changes could have on your supply chain and the steps you should to take to maximize potential cost-savings opportunities.

Watch this week's Trade & Tariff Perspective:

 

Considerable strides for the U.S. Innovation and Competition Act (USICA)

The U.S. Innovation and Competition Act was passed through the Senate on June 8, 2021, and currently resides with the House of Representatives. The USICA addresses Section 301 China duty exclusions and includes the Trade Act of 2021, which would renew the previously expired Generalized System of Preferences (GSP) and allow for a new Miscellaneous Tariff Bill (MTB). (Explore a more in-depth look into the current legislation on GSP and MTB.)

Following Senate Majority Leader Chuck Schumer’s motion to invoke cloture and attach the USICA to the National Defense Authorization Act (NDAA), it was later announced in a joint statement that Schumer and House Speaker Nancy Pelosi have agreed for the House and Senate to go to conference on the USICA.

As stated in the joint statement, "The House and Senate will immediately begin a bipartisan process of reconciling the two chambers’ legislative proposals so that we can deliver a final piece of legislation to the President’s desk as soon as possible."

If the USICA is passed by the House, and subsequently signed by the President, it could largely impact the import trade community. In relevant part, all previous duty exclusions would be reinstated from the date of passage of the legislation through December 2022. According to the bill, the specific duty exclusions that expired on December 31, 2020, would be retroactively reinstated between January 1, 2021, and the date of passage.

Takeaways following Katherine Tai’s travels to Asia

In an endeavor to meet with government officials and key stakeholders to discuss the U.S. commitment to the Indo-Pacific region and further cultivate strong trade relationships with key allies, Katherine Tai recently traveled to Japan, South Korea, and India. Highlights from the meetings with leaders from each country are outlined below.

Announcement launches the U.S.-Japan partnership on trade

To facilitate the trade-related commitment both countries share, the United States announced the formation of the U.S.-Japan Partnership on Trade, according to the USTR. This announcement was made following USTR Tai and Commerce Secretary Gina Raimondo’s Tokyo meeting with country leaders.

The immediate areas of focus include the following issues:

  • Third country concerns
  • Cooperation in regional and multilateral trade-related forums
  • Addressing labor and environment-related priorities
  • A supportive digital ecosystem for all
  • Trade facilitation

The regularly cadenced meetings are set to begin in early 2022, and will be chaired by USTR Tai.

Future of trade relations, digital services taxes, and GSP for India

Following USTR Tai’s meeting with Indian Minister of Commerce and Industry, Shri Piyush Goyal, the United States and India agreed to continue working through several trade issues.

In relevant part, a USTR announcement states the United States is open to considering restoring India’s beneficiary status under the GSP, which has been terminated since June 2019. Both countries also demonstrated a commitment to develop plans for future trade-related priorities, including the relaunch of workshops focused on accelerating the implementation of the World Trade Organization’s Trade Facilitation Agreement.

Most importantly, the USTR recently stated an agreement was reached between the United States and India on the treatment of Digital Services Taxes (DST), allowing India to continue to collect digital services taxes without the threat of retaliatory tariffs. This agreement is consistent with the same terms of earlier agreements with Austria, France, Italy, Spain, the United Kingdom, and Turkey.

U.S.-Korea Free Trade Agreement: A "longstanding and solid economic trade partnership"

The United States and South Korea stated both countries will continue to reaffirm the importance and commitment to the almost 10-year Korea-U.S. Free Trade Agreement (KORUS). They also look forward to developing this relationship and working together to address many emerging trade-related issues. Some of these issues include supply chain challenges, the digital ecosystem, and trade facilitation "with the intention of deepening cooperation to enable common approaches and responses to challenges facing global trade."

It was further communicated that both countries regard labor and environmental issues in relation to people’s welfare with the utmost importance. Because of this, both countries will hold meetings of the KORUS Labor Affairs Council and KORUS Environmental Affairs Council "in the near future to advance cooperation in these areas."

Specific to the United States and Korea trade relations, as reported by the Korea Herald in mid-November, South Korea’s Ministry of Trade, Industry, and Energy communicated his concerns regarding the Section 232 steel and aluminum tariff quotas. However, nothing concrete has been communicated regarding any negotiations currently being held.

Next steps

Remaining proactively informed in a rapidly-changing customs and trade environment can be overwhelming. Fortunately, your supply chain does not need to navigate these changes alone. Connect with one of our trade policy experts to learn more.

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USICA resources

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.

U.S. Tariff Search Tool

Section 301 - Unfair trade practices

What is it?

Section 301 of the Trade Act of 1974 — Allows the United States Trade Representative (USTR) to suspend trade agreement concessions or impose import restrictions if it determines a U.S. trading partner is violating trade agreement commitments or engaging in discriminatory or unreasonable practices that burden or restrict U.S. commerce.

Background ReportCongressional Research Service – Section 301 of the Trade Act of 1974 – August 2020

Update: October 4, 2021

Reinstatement of Targeted Potential Exclusions — Following United States Trade Representative’s (USTR) announcement on October 4, 2021, the USTR has started a targeted tariff exclusion process. The agency invited public comments on whether to reinstate previously extended exclusions. Of the more than 2,200 exclusions granted, 549 were extended. Most previously expired on December 31, 2020. The USTR will evaluate, on a case-by-case basis, the possible reinstatement of each exclusion. If granted, the USTR will reinstate exclusions retroactively to October 12, 2021, and publish them in the Federal Register.

 

Section 232 - National security concerns

What is it?

Section 232 of the Trade Expansion Act of 1962—Allows the president to adjust imports if the Department of Commerce finds certain products are imported in such quantities or under such circumstances as to threaten to impair U.S. national security.

Background ReportCongressional Research Service – Section 232 Investigations: Overview and Issues for Congress – August 2020

 

Section 201 – Cause/threat to domestic industry

What is it?

Section 201 of the Trade Act of 1974—Allows the president to impose temporary duties and other trade measures if the U.S. International Trade Commission (ITC) determines a surge in imports is a substantial cause or threat of serious injury to a U.S. industry.

Background ReportCongressional Research Service – Section 201 of the Trade Act of 1974 – August 2018

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Trade & Tariff FAQs

Q: What is a tariff?

Tariffs or duties are taxes assessed on imports of foreign goods, paid by the importer to the U.S. government, and collected by U.S. Customs and Border Protection (CBP). Current U.S. tariff rates may be found in the Harmonized Tariff Schedule (HTS) maintained by the U.S. International Trade Commission (ITC). The U.S. Constitution grants Congress the sole authority to regulate foreign commerce and therefore impose tariffs, but, through various trade laws, Congress has delegated authority to the president to modify tariffs and other trade restrictions under certain circumstances.1

Q: What are various types of import restrictions that can be imposed by the government?

Tariffs – A tax on imports of foreign goods paid by the importer. Ad valorem tariffs are assessed as a percentage of the value of the import (e.g., a tax of 25% on the value of an imported truck). Specific tariffs are assessed at a fixed rate based on the quantity of the import (e.g. 7.7% per kilogram of imported almonds), and are most common on agricultural imports.

Quotas – A restriction on the total allowable amount of imports based either on the quantity or value of goods imported. Quotas are in place on a limited number of U.S. imports, mostly agricultural commodities, in part due to past trade agreements to remove and prohibit them.

Tariff-Rate Quota (TRQ) –TRQs involve a two-tiered tariff scheme in which the tariff rate changes depending on the level of imports. Below a specific value or quantity of imports, a lower tariff rate applies. Once this threshold is reached, all additional imports face a higher, sometimes prohibitive, tariff rate.

Q: Have U.S. trading partners taken or proposed retaliatory trade actions?

Yes. Some U.S. trading partners subject to the additional U.S. import restrictions have taken or announced proposed retaliations against each of the three U.S. actions. Since April 2018, a number of retaliatory tariffs have been imposed on U.S. goods accounting for $126 billion of U.S. annual exports, using 2017 export values.

Q: How much has the U.S. government collected from the various trade remedy measures?

U.S. Customs and Border Protection (CBP) assesses and collects duties on U.S. imports, including the additional duties imposed as a result of the president’s tariff actions. As of September 9, 2020, U.S. CBP has reported the following duty assessments.

Q: Are products of Hong Kong subject to the additional Section 301 duties against China?

No. Additional duties imposed by the Section 301 remedy only apply to articles that are products of the People’s Republic of China (ISO Country Code CN). Imported goods that are legitimately the product of Hong Kong (HK) or Macau (MO) are not subject to the additional Section 301 duties. Please note that Section 301 duties are based on country of origin, not country of export.2

Q: Are Section 301 duties eligible for drawback?

As noted in CSMS Message 18-000419, Section 301 duties are eligible for duty drawback. Drawback is the refund of certain duties, internal revenue taxes, and certain fees collected upon the importation of goods. Such refunds are only allowed upon the exportation or destruction of goods under U.S. Customs and Border Protection supervision.

Q: What is the timing of duty calculations on immediate transportation in bond entries subject to Section 301?

Duties are due on goods that are entered for consumption, or withdrawn from warehouse for consumption, on or after the effective date of the provisional tariffs. For entries covered by an entry for immediate transportation, and with a country of origin of China, and a Harmonized Tariff Schedule (HTS) classification covered by Annex A to the FRN, such entries shall be subject to the duty rates in effect when the immediate transportation entry was accepted at the port of original importation, pursuant to 19 CFR 141.69 (b), which states:
Merchandise which is not subject to a quantitative or tariff-rate quota and which is covered by an entry for immediate transportation made at the port of original importation, if entered for consumption at the port designated by the consignee or his agent in such transportation entry without having been taken into custody by the port director for general order under section 490, Tariff Act of 1930, as amended (19 U.S.C. 1490), shall be subject to the rates in effect when the immediate transportation entry was accepted at the port of original importation.

Q: Are products entered under the Section 321 de minimis exemption (under $800) subject to Section 301 duties?

No, not right now. Goods properly entered under Section 321 are not subject to Section 301 duties. Please note that a formal entry is required if a shipment contains merchandise subject to AD/CVD. Goods subject to AD/CVD do not qualify for Section 321. Something to keep an eye on: U.S. Customs and Border Protection (CBP) submitted a proposal in early September 2020 to the Office of Management and Budget that would eliminate the $800 de minimis exemption for goods subject to Section 301 tariffs. Remember, Section 321, 19 USC 1321 is the statute that describes de minimis. De minimis provides admission of articles free of duty and of any tax imposed on or by reason of importation, but the aggregate fair retail value in the country of shipment of articles imported by one person on one day and exempted from the payment of duty shall not exceed $800. The de minimis threshold was previously $200, but increased with the passage of the Trade Facilitation and Trade Enforcement Act (TFTEA).

Q: Can I still apply for exclusions to the Section 301 (China) tariffs?

The time window to submit new exclusion requests is now closed, but the USTR is considering extensions of exclusions granted from Lists 1, 2, 3, and 4. While the USTR approved, on average, 35% of requests under the first two actions, the approval rates under the third and fourth actions were 5% and 7%, respectively.3 Be sure to check in with your trusted trade advisors to see if new comment periods open.

Q: Are products used to support the fight against COVID-19 subject to the additional Section 301 (China) tariffs?

The USTR announced on March 20, 2020, that, prior to theCOVID-19 outbreak, the agency had been working with the U.S. Department of Health and Human Services “to ensure that critical medicines and other essential medical products were not subject to additional Section 301 tariffs.” Consequently, the United States had not imposed tariffs on certain critical products, such as ventilators, oxygen masks, and nebulizers. Moreover, the USTR indicated that, in recent months, it has prioritized the review of requests for exclusions on medical care products, resulting in exclusions granted on basic medical supplies, including gloves, soaps, face masks, surgical drapes, and hospital gowns. Since March 2020, the USTR has exempted certain medical products from Section 301 tariffs in several rounds of exclusions.3

Q: How do I find out if my product is subject to Section 301 tariff duties?

Enter the product’s harmonized tariff schedule (HTS) classification on the USTR website. In addition, you can refer to our exclusive guide to quickly search both the Section 301 tariff lists but also identify if there are any exclusion opportunities. Talk to your Trusted Advisor® expert at C.H. Robinson to learn more.

Q: Do Section 301 (China) duties still apply if I ship goods to another country, such as Canada or Mexico, and have them packaged there before entering the commerce of the United States?

Yes. Basic changes/processes such as packaging, cleaning, and sorting would not change the country of origin to be declared in most cases. The origin would still be China and therefore the Section 301 duties would still apply.

Q: If I previously paid Section 301 (China) duties, but an exclusion was later issued by the United States Trade Representative (USTR), can I get my money back?

Yes. You have the opportunity to potentially recover duties paid on previous entry activity. Your customs broker, trade attorney, or trade consultant can submit a refund request via Post Summary Correction (PSC) or Protest as long as the entry has not exceeded the liquidation date plus 180-day time period (roughly 480 days from the original entry date). Remember, your company doesn’t have to be the one that requested the exclusion in the first place. You qualify as long as your product meets the specific description of the exclusion granted by the USTR.

Q: Does U.S. Customs and Border Protection (CBP) pay interest when refunding duties previously paid?

Yes! CBP does pay interest from the date the original money was deposited. The current interest rates are published in the Federal Register on a quarterly basis. Review the most recent Federal Register Notice for the latest rates.

References

1. Congressional Research Service – Trump Administration Tariff Actions (Sections 201, 232, and 301): FAQs

2. Section 301 Trade Remedies Frequently Asked Questions

3. Congressional Research Service - Section 301: Tariff Exclusions on U.S. Imports from China

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