For companies with products subject to the Section 301 tariffs imposed on imports from China, there may be a way to reduce or eliminate those duties.
Many of the products now subject to the additional tariffs previously were duty-free or subject to relatively low duties. Given those circumstances, few importers paid attention to tariff classification and valuation principles. The assessment of additional duties should change that.
Still, there may be a way to deflect some of the impact. Consider the following:
- Look at the tariff classification assigned to each imported product. Could a different classification, not subject to the additional duties, be more appropriate?
- Are the entered values higher than they need to be? For example, if a company buys from a middleman, who in turn purchases from the manufacturer, it may be possible to use the manufacturer’s selling price as the entered value. Similarly, does the price include elements that, if stated separately, would not be subject to the duty?
- Can final production steps be moved from China to a second country, to change the country of origin? The effectiveness of this strategy will depend on whether Customs and Border Protection will recognize the processing in the second country as a "substantial transformation." Evaluate the production process and try to alter the mix of what is imported into the United States and what is produced domestically to reduce the impact of the additional tariffs.
- Do the terms of sale allow the company to recover the cost of the additional tariff? Is it possible to renegotiate the terms of sale or terminate disadvantageous long-term agreements?
- Explore the use of foreign trade zones and comparable tariff-deferment programs to mitigate or soften the immediate impact of the increased tariffs.
- Evaluate the potential for exempting a product from the additional tariffs. The deadlines for seeking exclusions require prompt action by importers.
The impact of additional tariffs for U.S. importers is significant. The supply chains will need to be evaluated to determine if any opportunities exist to reduce the impact. McGuireWoods welcomes the opportunity to explore options and to review the legal landscape with any entity impacted by the additional tariffs.