Strategies for Importers – Section 301 China Tariffs

At a glance

• The main takeaway: While the Section 301 China tariffs, implemented by the United States Trade Representative (USTR), have significantly altered the landscape of international trade and  undeniably created hurdles, importers have a range of strategies at their disposal to navigate and mitigate their impact.
• Impact on your business: The tariffs serve the purpose of protecting domestic industries, but they can also result in increased duties and disruptions to the supply chain.
• Next steps: Effected importers need a strategy to mitigate the impact of these tariffs. Schedule a consultation with Aprio’s Customs and Tariffs team to identify duty-saving opportunities.

The full story

The Section 301 China tariffs, implemented by the United States Trade Representative (USTR), have significantly altered the landscape of international trade, impacting importers and businesses engaged in commerce with China.

These tariffs, initially introduced in 2018, were aimed at addressing unfair trade practices and intellectual property invasion by China. While they served their purpose to protect domestic industries, they have posed profound challenges for importers in the form of increased duties and supply chain disruptions. While we anticipate upcoming regulatory changes and government actions on the tariffs at issue, we offer a few mitigation strategies below to reduce duty impact in the meantime:

1. Review your tariff codes.

The China tariffs cover a wide range of goods based on their applicable tariff codes. We have observed many companies relying on their suppliers or customs brokers to classify their products. Tariff classification is a granular exercise; suppliers and customs brokers often lack in-depth knowledge of classification rules, which leads to misclassification of products. Businesses must therefore review the correctness of tariff codes – you will be surprised how many products are misclassified. Your products may be more properly classified under codes that are not subject to the tariffs or which carry a lower tariff rate.

2. Review your customs values.

Many companies do not realize that the value that they report to U.S. Customs and Border Protection (CBP) may be legally reduced. For example, buying commissions that you pay for a seller or middleman may not be dutiable. Additionally, shipping costs associated with international freight may be taken out from the customs value. See also Aprio’s article on the “First Sale Rule.”

Businesses importing from related parties also need to review their related party pricing (transfer pricing) and value of individual items (part number level) to find whether they are properly valued under the relevant CBP rules.

3. Are your products “Chinese-origin”?

The China tariffs apply only to Chinese-origin products which are substantially transformed in China. If major production steps occur outside of China before importation, or if core components were produced outside of China, your products may not be “Chinese-origin” and therefore may not be affected by the China tariffs.

4. Are you exporting products subject to the tariffs?

If so, duty drawback is a great option. Drawback is a duty refund program for imported goods that were either exported as-is or as raw materials/components used in exported goods. Eligible importers can claim 99% of refunds on duties paid on the imported goods. Failing to claim this refund leaves money on the table. 

The bottom line

While the Section 301 China tariffs have undeniably created hurdles, importers have a range of strategies at their disposal to navigate and mitigate their impact. As the situation continues to evolve, staying informed and proactively exploring avenues to address tariff-related challenges will be key for importers looking to weather the storm of Section 301 tariffs. Aprio’s Customs and Tariffs team is happy to help your business reassess import activities and identify duty-saving opportunities.

Related Resources/Assets/Aprio.com articles/pages

So Called “301 Exclusions” Continue into 2024

Are you Overpaying on Duties for Imported Goods?

Transfer Pricing and Customs Valuations: Finding Peace in a Trade War