Posts

United States to Ban Goods Made in Xinjiang China

Under a new law the United States will ban imports of all goods made in whole or in part from any good from the Xinjiang Uyghur Autonomous Region in China, effective June 21, 2022. Companies need to use the next 180 days to ensure their supply chains do not include such goods.

President Biden signed into law Dec. 23 the Uyghur Forced Labour Prevention Act, which effectively deems all goods mined, produced, or manufactured in the XUAR to be produced by forced labour in China. Even those not importing directly from China may have goods detained if the materials used to produce the imported goods in a second country are tied at any level to XUAR or specific entities or commodities associated with forced labour in China.

Under this law, imports of goods from the XUAR will be banned unless United States Customs and Border Protection determines that:

  1. the importer of record has fully complied with relevant guidance to be provided by CBP, as well as any regulations issued to implement that guidance;
  2. the importer has completely and substantively responded to all inquiries for information submitted by CBP to ascertain whether the goods were made wholly or in part with forced labour; and
  3. by clear and convincing evidence, the goods were not made wholly or in part by forced labour.

Any good from the XUAR that thus overcomes the rebuttable presumption of being made with forced labour will be included in a public list to be issued by CBP 30 days after making such determination.

Further, an interagency Forced Labour Enforcement Task Force will have to develop a strategy to prevent the importation of forced labour goods from China along with the following lists:

  1. entities in the XUAR that produce goods with forced labour
  2. entities working with the government of the XUAR to recruit, transport, transfer, harbour, or receive forced labour or Uyghurs, Kazakhs, Kyrgyz, or members of other persecuted groups out of the XUAR
  3. products made wholly or in part by such entities
  4. entities that exported products made with forced labour from China to the United States
  5. facilities and entities, including the Xinjiang Production and Construction Corps, that source material from the XUAR or persons working with the government of the XUAR or the XPCC for purposes of poverty alleviation program or pairing-assistance program or any other government labour scheme that uses forced labour

The Task Force must seek public input no later than Jan. 24, 2022, and the public will be given no less than 45 days to submit comments. A public hearing must be held within 45 days after the close of the public comment period.

The State Department must then submit a report to Congress by March 23, 2022, that provides a strategy to address forced labour in the XUAR along with lists of (1) entities in China or affiliates that use or benefit from forced labour in the XUAR and (2) foreign persons that acted as agents of such entities or affiliates to import goods into the United States The final strategy to be developed by the Task Force must be in place by June 21, 2022.

Importantly, the UFLPA calls for the Task Force to provide guidance to importers with respect to the following:

  1. due diligence, effective supply chain tracing, and supply chain management measures to ensure they do not import any goods made with forced labour from mainland China and especially from the XUAR
  2. the type, nature, and extent of evidence that demonstrates that goods originating in mainland China were not made wholly or in part in the XUAR
  3. the type, nature, and extent of evidence that demonstrates that goods originating mainland China, including goods detained or seized pursuant to Section 307, were not made wholly or in part with forced labour

Sandler, Travis & Rosenberg, P.A., has developed a program to help companies review their supply chain visibility. The STR program first provides a stocktaking of procedures, policies, and programs in place to evaluate the level of due diligence and reasonable care. Next is testing and tracking to review a shipment to determine if the procedures in place can timely provide the necessary documents to CBP to rebut a claim of forced labour. Finally, CBP will assist in responding to any CBP-issued detentions.

For more information on ST&R’s import compliance reviews and how they can benefit your company, please contact Charles L. Crowley at (914) 433-6178 [email protected].

Customs Attorney Charles Crowley

Customs Attorney Charles Crowley

Importers of Automotive Parts Save Major Duties and Taxes

There are a number of ways that vehicle and automotive parts companies can lower the duty that they pay for items imported into the United States.

While these strategies have been in existence for many years, the use of these strategies has grown tremendously in recent years given the increase in taxes imposed on various goods imported into the United States.

Tariff Classification and Engineering

Vehicle and automotive parts companies importing goods into the United States may be able to lower the duty that they pay for articles imported into the United States by changing the tariff classification that is used to enter these items.

This can be done lawfully when the tariff classification being used is found to be incorrect or when slight changes are made to the design and manufacture of the articles at issue.

For example, in a ruling issued by U.S. Customs and Border Protection in December of 2020, an importer successfully argued that its two-post vehicle lifts were classifiable as “Other lifting, handling, loading or unloading machinery” in heading 8528 of the tariff schedule as opposed to “Jacks hoists of a kind used for raising vehicles” in heading 8525.

CBP had previously ruled that the company’s lifts were classifiable as “jacks hoists” but overturned its decision after finding that the articles did not “pull a vehicle up using a hook and chain or a rope” and that they “raise vehicles more than a short distance”.

Additionally, in a ruling issued by CBP in May of 2017, an importer successfully argued that an oil cooler core was classifiable as a “part of heat exchange unit” in heading 8419 rather than as a “part of a motor vehicle” in heading 8708.

CBP looked to the section notes of the tariff schedule before finding that the importer was correct in its assessment that the oil cooler cores were classifiable as parts of heat exchange units. This change in tariff classification resulted in a 2.5% duty savings for the importer.

To help importers who may not have the bandwidth or know-how to fully engage in the classification process, Sandler Travis & Rosenberg, P.A. has professionals with extensive knowledge of the classification opportunities that exist for automotive parts and vehicles.

ST&R works with importers by reviewing their current classifications to ensure their correctness and by suggesting design changes to current products that may result in substantial duty savings.

Companies requiring expert assistance in identifying potential alternative classifications for the products that they import should contact ST&R. Charles “Chuck” Crowley can be reached at (914) 433-6178 and Mika M. McLafferty can be reached at (212) 549-0165.

Strategic Manufacturing

The assessment of duties on goods imported into the United States is dependent on a product’s country of origin as much as its classification.

The more recent implementation of additional duties of between 7.5% and 25% on certain goods that are Made in China has meant that the country of origin of products imported into the United States has become increasingly relevant.

Where vehicle and automotive parts companies are manufacturing a specific product in more than one country, ST&R can review manufacturing processes to determine the proper country of origin of that product. ST&R can advise companies as to what steps in the manufacturing process may confer origin to a product so that companies can strategically perform origin-conferring operations for a product in the country that provides the most favourable duty rate.

In the case of goods being produced in part in China, it is imperative that companies understand whether the operations being performed in China are origin-conferring such that the finished product may be subject to additional duties of between 7.5% and 25% upon importation into the United States.

As an example, CBP has recently analysed the proper country of origin of motors that were manufactured in multiple countries including China. Importers of those items were interested in understanding whether CBP would consider the country of origin of those motors to be China in which case additional duties of 25% would apply to the products at the time of importation.

As recently as May of 2021, CBP has issued rulings in which it has found that rotors and stators are the dominant components of finished electric motors and has found that the origin of a motor was determined by the origin of the rotor and stator cores.

Those interested in understanding how to strategically manufacture their product to avoid the potential assessment of Section 301 duties of between 7.5% and 25% should contact ST&R. Charles “Chuck” Crowley can be reached at (914) 433-6178 and Mika M. McLafferty can be reached at (212) 549-0165.