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Companies Turn to Mitigation Strategies Due to Section 301 Tariffs

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Mitigation is the reduction of something harmful or the reduction of its harmful effects. It may refer to measures taken to reduce the harmful effects of hazards that remain in potential, or to manage harmful incidents that have already occurred.

After a year in office the Biden administration has given no indication that it intends to lower or eliminate the Section 301 additional tariffs the United States continues to impose on hundreds of billions of dollars’ worth of imported goods from China.

However, there are a number of proven and legitimate ways for importers, exporters, and manufacturers to effectively escape or limit the impact of these tariffs. A bit of flexibility and ingenuity can have a profound impact on a company’s bottom line when facing substantial duty exposure.

Exclusions. The Office of the United States Trade Representative has closed the comment period on extending hundreds of previously expired Section 301 tariff exclusions and a decision could come in the next few weeks. In the meantime, ST&R is pressing USTR for a full reopening of the exclusion process and a renewal of previously expired exclusions. For more information, or to become part of this effort, please contact us at strdc@strtrade.com.

In addition, importers can still join a court case challenging the Section 301 tariffs on List 3 and 4A goods from China and preserve their right to potential refunds of those tariffs. Contact attorneys Larry Ordet, Lenny Feldman, Rob DeCamp, or David Cohen at 301Litigation@strtrade.com to learn more.
Tariff Engineering. As much as United States Customs and Border Protection has resisted the idea in the past, the courts have continually affirmed that CBP can only levy tariffs on goods in their condition as imported.

This has led importers in a variety of industries where high duties prevail to import products in unfinished or embellished forms to legally take advantage of classification provisions carrying a lower or free rate of duty. For instance, components imported separately may fall into an entirely different tariff provision than the finished product and may thus be excluded from a higher tariff.

Further, classification concepts are particularly useful for certain United States or other products that fall within the special HTSUS Chapter 98 provisions, many of which may enable importers to partially or fully avoid Section 301 tariffs. These provisions cover numerous types of products used for specific purposes as well as specific production or sourcing scenarios involving United States or previously imported components.

Operational Engineering. If you cannot modify the tariff classification of an imported product, explore changing its country of origin. For instance, CBP has found that the complex assembly of numerous parts, modules, or subassemblies into dedicated machines results in a substantial transformation of the components so that their country of origin is where the finished product was produced. Shifting operations away from China to another country may thus enable you to escape the higher duties.

Valuation. First sale valuation has long proven useful to industries that have been subject to high duties. Here duty is paid on the price a trading company pays the manufacturer instead of the higher price the importer pays the trading company. While additional tariffs still apply in this scenario, the dutiable value is significantly lower, resulting in a lower duty bill.

Various criteria must be met to ensure the first sale price reflects a sale that is clearly destined to the United States and conducted at arm’s length, but, once validated, a viable first sale value can provide substantial duty savings. It can also serve as a type of long-term annuity; i.e., even once the Section 301 tariffs expire, use of first sale valuation would continue to provide a lower declared value and thus reduce the regular duties assessed on a company’s products.

Importers should also examine whether certain amounts typically included in the price, such as buying commissions, shipping-related charges, inspection fees, and post-importation assembly charges, can be excluded from dutiable value.

Finally, importers should consider how the use of transfer pricing rules can lower dutiable value. Click here to learn more.

Bonded Facilities and Movements. For those companies involved in manufacturing as well as import for export trade, bonded facilities provide a safe haven from the Section 301 tariffs. Goods admitted to a foreign-trade zone in privileged foreign status retain their character and tariff classification as admitted even if they are manufactured into a product affected by the tariffs that may be withdrawn from the zone and exported out of the United States to avoid the tariffs.

In addition, goods otherwise subject to the tariffs could be entered and stored in a bonded warehouse for up to five years to avoid those duties if they are (1) exported directly from the warehouse or (2) entered for United States consumption once the tariffs have lapsed or a product-specific exclusion has been granted. Temporary importation bonds and bonded movements also enable companies to avoid tariffs for products transiting or undergoing processing prior to exportation out of the United States.

Section 321 De Minimis. CBP laws and regulations provide for a duty exemption for goods manifested at less than $800 fair retail value in the country of shipment if imported by one person on one day. CBP has confirmed that this exemption applies to Section 301 tariffs.

In assessing this opportunity, however, companies should carefully consider the accuracy of the information provided for such de minimis shipments to avoid cargo holds and possible seizures due to other government agency or intellectual property compliance issues. There is also a possibility that Congress may take action this year to limit the applicability of Section 321 to any goods subject to Section 301 tariffs or other trade remedy actions.

For more information, please contact Charles L. Crowley at (914) 433-6178 or ccrowley@strtrade.com or Robert D. DeCamp at rdecamp@strtrade.com or (212) 549-0141.

Sandler, Travis & Rosenberg Named As Legislative Counsel

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The NCBFAA has retained Sandler, Travis & Rosenberg, as Legislative Counsel, led by Nicole Bivens Collinson.

Collinson leads the International Trade and Government Relations Practice of ST&R, in Washington, D.C., and serves as managing principal of the Washington, D.C., office. She is also a member of ST&R’s Operating Committee and a commentator on trade matters on MSNBC and NPR.

Collinson has over 30 years of experience in government, public affairs, and lobbying. She has drafted and guided the successful implementation of several pieces of key international trade legislation positively affecting the bottom line of many United States companies.

“Recent events have highlighted just how crucial well-operating supply chains are to our economic health. The NCBFAA’s members play an indispensable role in making that happen, and for almost 125 years the Association has worked tirelessly to make it easier for those companies to do their jobs,” Collinson said.

“ST&R looks forward to aiding this work by using our decades of experience building effective relationships with Congress and federal agencies to advance the priorities of the NCBFAA and its members.”

Collinson is a well-known international trade authority in Washington, regularly called upon by members of Congress and the Administration to help explain complex trade programs. Her decades of work with the House Ways and Means, Energy and Commerce, Foreign Affairs and Homeland Security committees and the Senate Finance; Commerce, Science and Transportation; Foreign Relations; and Homeland Security and Governmental Affairs committees has established deep and lasting relations with members of Congress and their staffs.

Prior to joining Sandler, Travis & Rosenberg, Collinson served as assistant chief negotiator for the Office of the United States Trade Representative, responsible for the negotiation of bilateral agreements with Latin America, Eastern Europe, Southeast Asia, the Sub-Continent and Africa.

She also served as a country specialist in the International Trade Administration at the Department of Commerce, where she was responsible for the preparation of negotiations on specific topics between the United States and Latin America, Eastern Europe, China, and Hong Kong, as well as the administration of complex textile agreements.

Collinson holds a master’s degree in international relations from The George Washington University and a triple bachelor’s degree in political science, European studies, and French from Georgetown College.

“I have known Nicole for a number of years and find her to be utmost professional and extremely knowledgeable of the legislative process in Washington, D.C.,” NCBFAA President Jan Fields said. “The association will certainly benefit from her talent and expertise as we navigate current and future legislative matters that impact our industry.”

“On behalf of the association, I am thrilled to see Nicole join our team,” said NCBFAA Legislative Chair Laurie Arnold. “Nicole’s reputation as an expert in our industry precedes her and we are thrilled to be able to deepen our relationship with Sandler, Travis & Rosenberg.

We look forward to working closely with her to effectively advocate for our members’ needs before Congress, the Administration, and beyond.”

About Sandler, Travis & Rosenberg, P.A.

ST&R is a leading international trade, customs, export, and trade policy firm that has set the standard for international trade lawyers and consultants since its founding in 1977.

Clients worldwide, including governments, manufacturers, importers, exporters, customs brokers, freight forwarders, and sureties, rely on ST&R’s comprehensive and effective services to succeed amid the constantly changing demands of global trade.

Sandler, Travis & Rosenberg Adds Senior DOJ Trial Attorney

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Sandler, Travis & Rosenberg is pleased to announce that Jason Kenner joined the firm on September 27, 2021, to head its litigation practice.

Over the last fourteen years Jason served in the Department of Justice as a Trial Attorney and then Senior Trial Counsel handling federal trial and appellate international trade litigation.

Jason Kenner

Jason Kenner

“Jason’s first-hand experience as a well-respected, seasoned litigator will allow the firm to build on our nearly half-century of successful international trade litigation,” said ST&R Operating Committee member Lenny Feldman.

“As federal agencies more aggressively enforce international trade laws, litigation has become an increasingly important and necessary tool in protecting our clients’ interests.”

At the Department of Justice, Jason served in the Civil Division, International Trade Field Office, and more recently on its Trade Fraud Task Force. As lead attorney in the trial and appeal of trade cases, he was responsible for formulating and executing litigation strategies, representing officials from, and decisions by, United States Customs and Border Protection, the Commerce Department, and other federal agencies.

He was responsible for all aspects of litigation in customs and trade-related matters, and for supervising the work of junior trial attorneys.

Jason holds a J.D. from St. Johns University School of Law and a B.A. in public justice from Oswego State University.

He has been admitted to the bar in New York state, the Court of International Trade, and the Court of Appeals for the Federal Circuit. He can be contacted by phone at (212) 549-0137 or via email at jkenner@strtrade.com.

Sandler, Travis & Rosenberg is a leading international trade, customs, export and trade policy firm with over sixty professionals and nine offices and fourteen additional locations.

The firm’s practice focuses on cross-border movement of goods: minimising risks, reducing and eliminating liabilities, decreasing cycle time, and anticipating and addressing problems in corporations, government agencies and courts of law.