Section 301 Imports from China
The National Customs Brokers and Forwarders Association of America (NCBFAA) reported on January 15, 2019 that the United States Trade Representative will not give exemptions on the third round of Section 301 tariffs at their current rate of ten percent. The third round of tariffs, or “List 3,” includes about $200 billion of Chinese imports (from 2017). The duty rate on this list will jump to 25% on March 2, 2019 if there is no trade deal agreed upon with China by that time. Robert Lighthizer did comment that an exemption process will be implemented if the tariffs on List 3 increase from 10% to 25%.
According to the NCBFAA International Trade Today release, “Lighthizer also addressed how foreign-trade zones are affected by Section 301 tariffs, an issue that the FTZ trade association has been fighting for nearly a year. Lighthizer said that long-standing practices continue to apply, and that importers who use FTZs want a special exemption.”
“Erik Autor, president of the National Association of Foreign-Trade Zones, said his group has repeatedly explained that FTZs are not trying to avoid paying tariffs on content subject to Section 301 tariffs, but that because of the way the zones report the import ed content to Commerce, far more than the 301-targeted tariff lines is being hit. Usually, goods made in an FTZ pay a duty equal to the tariff on the finished good for the proportion of the product that was imported. In the case of trade remedies, the imported items that are subject to higher-than-typical tariffs do get taxed at the input duty level, at t he time the good enters into commerce.
But USTR has not followed that long-standing practice, Autor said. Instead, companies are paying duties on inputs that aren’t Chinese when the single highest-value imported component is Chinese. They’re also paying duties on Chinese inputs that are not subject to Section 301 duties, just because the finished product is classified in a tariff provision on the Section 301 list. The finished product is an American product, not a Chinese product, and so should not be taxed at all, Autor noted.”
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