Sep 2019

Tariff Exclusion Deadline

If you are purchasing Chinese-origin products to sell to end customers, sourcing component parts for your own US manufactured products, supplying warranty claims for the US market, or importing, selling, or distributing any of the above, you have likely been a casualty of the US – China trade war.

Pursuant to President Trump’s direction, the U.S. Trade Representative (“USTR”) has imposed unprecedented tariffs on approximately $550 billion of Chinese-origin products under section 301 of the Trade Act of 1974 through various separate regulatory actions.  The tariffs have ranged from 10% to 30% at various times, depending on the discussions and negotiations between the countries, as well as on perceived retaliatory actions adopted by China against US-origin goods.

At present, a process exists for US stakeholders to apply for an exclusion from tariffs on approximately $200 billion of Chinese-origin goods, depending on the subheading of the Harmonized Tariff Schedule of the United States (“HTSUS”), under which such products are imported.  The due date to submit an application for exclusion is Monday, September 30, 2019.

If an application for an exclusion is granted, the submitter will no longer have to pay these tariffs on any excluded product through August 7, 2020.  Additionally, the importer will have the right to receive a full reimbursement of all applicable tariffs paid to-date, applying retroactively.  There is no indication that another opportunity will arise to seek exclusion at a later date, and it is impossible to predict whether President Trump and the USTR will continue to increase the tariffs above the crushing 30%.

We are actively working with clients in the following areas:

  1. Advising on proper HTSUS codes to avoid tariffs or to ensure reimbursement of tariffs in the event an exclusion submitted by a third party is granted and becomes applicable to our clients;
  2. Advising on process to amend HTSUS codes after customs clearance, liquidation timeframes, and related protests;
  3. Advising on ongoing USTR tariff actions and modifications;
  4. Advising on the exclusion process and strategy;
  5. Reaching out to local politicians for supports and drafting letters of support for our clients;
  6. Advising on potential litigation between importers and US purchasers relating to the potential reimbursement of tariffs paid and how to avoid such litigation (i.e. does the importer have to reimburse the US purchasers; does US purchaser have to reimburse distributors, etc… );
  7. Advising on whether previously granted exclusion requests apply to other products;
  8. Monitoring USTR actions granting exclusion requests;
  9. Preparing and submitting exclusion requests for distributors, US purchasers, and importers;
  10. Preparing assignment of rights agreements and cost/risk sharing within the supply chain to avoid litigation later in the event an exclusion is granted;
  11. Monitoring exclusion requests submitted by competitors of our clients to comment and respond;
  12. Monitoring the regulations daily to advise on any changes that may affect sales contracts;
  13. Revising and editing purchase order and acknowledgment terms to insert language to shift risk relating to the ongoing uncertainty of tariffs;
  14. Negotiating with foreign suppliers.

Please contact your Earp Cohn lawyer for more information or to be connected with our International Law Team.