Emily has a broad range of experience working in international trade matters, including Customs compliance, antidumping, countervailing duties (AD/CVD) and matters related to economic sanctions and U.S. export controls compliance. Her practice focuses on helping clients achieve import and trade compliance, defending their interests before government trade agencies and courts.

International Trade LawyersPresident Trump has targeted about $250 billion of products imported from China. These China tariffs have been rolled out in three waves:

  • (List 1) – has a 25% tariff that covers about $34 billion of Chinese products listed in 818 tariff subheadings. The 25% tariff for List 1 went into effect on July 6, 2018.
  • (List 2) – has a proposed 25% tariff that would cover about $16 billion listed in 284 tariff subheadings. The 25% tariff for List 2 has not yet gone into effect.
  • (List 3) – has a proposed 10% tariff that would cover $200 billion listed in 6,031 tariff subheadings.

The products targeted in List 1 and List 2 were primarily intermediate inputs and capital equipment (semiconductors, machinery, equipment parts, industrial chemicals). These products were selected by the U.S. Trade Representative (USTR) because they were more patent-intensive and thus related to China’s unfair practices on intellectual property and technology transfer. The products in List 3 were selected to respond to China’s immediate retaliation to impose $50 billion tariffs on U.S. goods imported into China.  List 3 covers a much broader range of products, including many consumer goods that were specifically not chosen for List 1 and 2.

If your supply chain includes imported articles from China subject to the extra 25% or 10% tariffs, there is still hope for a product-specific exclusion. The process of how the List 1 China tariffs were rolled out shows that U.S companies have at least two chances to submit comments to try to get certain products off the list.

On April 6, 2018, USTR originally proposed a List 1 of products covered by 1,333 tariff subheadings and invited comments on the proposed tariff subheadings and whether they contained products that should or should not be hit with 25% tariffs. After receiving approximately 3,200 comments and holding three days of hearings in May 2018, USTR on June 20, 2018 issued a revised List 1 of products covered by 818 tariff subheadings. The total value of the products on the original and revised List 1 was still around $34 billion, but USTR noted that it had removed some tariff subheadings, and added others based on the comments and testimony provided on the List 1 products.

Although the 25% tariff went into effect for the List 1 products on July 6, 2018, USTR on July 11, 2018, published a notice explaining the procedures and criteria for requests for product-specific exclusions for the List 1 products. USTR’s first round of comments were focused more on the tariff subheadings proposed to be subject to the tariffs, while this second round of comments gives parties a second chance to explain why their specific products should be excluded from the tariffs. The List 1 product exclusion requests are due by October 9, 2018.

List 1 Exclusion Process

USTR will now consider excluding a particular product within one of the included 818 subheadings – but not the tariff subheading as a whole – from the additional 25% tariff. The details for exclusion requests are here List 1 Exclusion Request Procedures

Exclusion Request Conditions

USTR will accept requests from all interested persons, including trade associations. Exclusion requests must identify a specific product with supporting data and rationale for an exclusion. And interested persons seeking an exclusion for multiple products must submit a separate request for each product.

Factors for USTR Consideration in Granting Exclusion Requests

In granting an exclusion request on a product-by-product basis, USTR will consider whether the product is available from a source outside of China, whether the additional tariffs would cause severe economic harm to the requestor or other U.S. interests, and whether the particular product is strategically important or related to Chinese industrial programs including “Made in China 2025.”  USTR unlikely to grant any exclusion requests that undermine the objective of the Section 301 investigation.

USTR will consider each request on a product-by-product basis.  Exclusions will be granted on a product basis, meaning any individual exclusion will apply to all imports of that particular product (not just to products imported by the requestor).

Exclusion Request Schedule

The USTR notice provides:

  • Product exclusion requests are to be filed by no later than October 9, 2018.
  • Following public posting of the filed request (in docket number USTR–2018–0025-0001 on www.regulations.gov) the public will have 14 days to file responses to the product exclusion.
  • At the close of the 14-day response period, any replies responses are due within 7-days.
  • Any exclusions granted will be effective for one year upon the publication of the exclusion determination in the Federal Register, and will apply retroactively to July 6, 2018.

Making Exclusion Requests – Requirements

The USTR notice provides that each request must include material set out in the bullet-point summaries listed below.  And USTR has issued Exclusion Request Guidelines for facilitating submissions.

  • Identification of the particular product in terms of the physical characteristics (e.g., dimensions, material composition, or other characteristics) that distinguish it from other products within the covered 8-digit subheading.  USTR will not consider requests that identify the product at issue in terms of the identity of the producer, importer, ultimate consumer, actual use or chief use, or trademarks or trade names.  USTR will not consider requests that identify the product using criteria that cannot be made available to the public.
  • The 10 digit subheading of the HTSUS applicable to the particular product requested for exclusion.
  • Requesters also may submit information on the ability of U.S. Customs and Border Protection to administer the exclusion.
  • Requesters must provide the annual quantity and value of the Chinese-origin product that the requester purchased in each of the last three years.  (Trade associations should provide such information based on members’ data.)  If precise annual quantity and value information are not available, USTR will accept an estimate with justification.

Exclusion requests should address the following factors:

  • Whether the particular product is available only from China.  In addressing this factor, requesters should address specifically whether the particular product and/or a comparable product is available from sources in the United States and/or in third countries.
  • Whether imposition of additional duties on the particular product would cause severe economic harm to the requester or other U.S. interests.
  • Whether the particular product is strategically important or related to “Made in China 2025” or other Chinese industrial programs.
  • Requesters may also provide any other information or data they consider relevant to an evaluation of the request.

All exclusion requests must be accompanied by a certification that the information submitted is complete and correct.  USTR strongly encourages interested persons to submit exclusion requests on its prepared form (request form) to simplify exclusion request filings.

As the China tariffs are still in the process of being rolled out, parties still have a chance to request that certain products be excluded from the proposed tariff list. For List 1 products, product specific exclusion requests can be filed up to October 9, 2018.  For List 2 and 3 products, initial comments on the proposed tariff subheadings can be filed by July 23, 2018 (List 2) and August 17, 2018 (List 3), and likely will get another chance to make product-specific exclusion requests if and when the tariffs for these two lists go effective.

Products that are not produced or cannot be adequately supplied by domestic producers would have a better chance at exclusion.  Domestic producers have a chance to oppose any exclusion requests and likely would challenge any exclusion request for Chinese products that are competing with their products. 

China import duties
When it comes to China trade, there’s a new sheriff in town

Less than a week before Chinese President Xi Jinping’s scheduled visit to the United States, President Trump on Friday, March 31, 2017, issued an Executive Order “Establishing Enhanced Collection and Enforcement of Antidumping and Countervailing Duties and Violations of Trade and Customs Laws.” This order is aimed at collecting unpaid antidumping and countervailing (“AD/CVD”) duties on U.S. imports of foreign goods, including (particularly?) goods coming into the United States from China. If you are importing products from China or thinking of doing so, this post is relevant for you because a significant percentage of existing U.S. antidumping orders cover goods from China and many of these are covered by countervailing duties as well.

Though U.S. importers are ultimately liable for the AD/CVD, many of these importers are non-residents without sufficient assets in the United States to pay AD/CVD when due. U.S. Customs and Border Protection imposes bond requirements for imports, but where goods are subject to AD/CVD, normal bond amounts securing payment are often substantially less than the AD/CVD ultimately owed. To address these nonpayment issues, the Executive Order requires the Secretary of Homeland Security, through Customs, to develop a plan within the next 90 days to require new and existing importers that pose a risk of revenue loss to the United States provide security through a bond or legal measures. This Executive Order requires Customs establish an importer risk assessment program to review the risk of revenue loss from unpaid AD/CVD and consider increasing bonding requirements.

This means many new importers of goods from China (and elsewhere) subject to AD/CVD and those with a history of late payments likely will see their customs bond amounts increase. This is costly to import businesses since the bond surety requires cash collateral. With the new directives in the Executive Order, now is a good time for companies to assess the merchandise they import and if any of that merchandise is subject to AD/CVD, to ensure it has procedures and controls in place to monitor AD/CVD declarations at entry.

In addition to enhanced customs bonding, the Executive Order also calls on the Secretary of Homeland Security to develop a plan within the next 90 days “for combatting violations of United States trade and customs laws for goods and for enabling interdiction and disposal, including through methods other than seizure, of inadmissible merchandise . . . .” The Executive Order also addresses intellectual property enforcement at the border.  by mandating that the government share with rights holders information about intellectual property rights infringement and abandoned merchandise.

Lastly, the Executive Order instructs the Attorney General develop recommended prosecution plans and allocate resources to Federal prosecutors for prosecution of trade law violations. Though AD/CVD and intellectual property have been priority trade issues for many years and the federal government has been free to pursue criminal actions, most enforcement has been via civil penalties and/or product seizures. The call for a criminal prosecution plan and increased prosecution resources to pursue such a plan no doubt will lead to an increased focus on criminal penalty actions for customs and trade violations. To put it bluntly, many trade violations that formerly led to penalties and fines could mean jail time under our new administration. Immediately after the issuance of this Executive Order, Customs announced that it is ready to follow through on the Trump directives. See CBP To Implement Executive Order.

Bottom Line. If you are importing product from China (or any other country), now is the time to double check what you are doing with your trade and customs programs and to make darn sure that you are not bringing in product that will cost you a lot of money or maybe even jail time. There is a new sheriff in town and he does not like imports.

Importing from China
Importing from China. Get it right.

Companies importing goods from China into the United States may find themselves in having to respond to a U.S. Customs and Border Protection (“CBP”), Request for Information (CBP Form 28) or what may be worse, a CBP Notice of Action (CBP Form 29). The CBP Form 28 – Request for Information is a tool routinely used by CBP to solicit additional information about a shipment to verify if the goods are properly classified, valued or otherwise meet U.S. import requirements. The CBP Form 29 – Notice of Action can be used to inform an importer of a proposed action, including assessment of additional duties on the goods, or to notify the importer that the action has already been taken by CBP. Both communications may be considered red flags for CBP to investigate prior transactions of an importer and for CBP to initiate a penalty investigation.

Though you as an importer may have an easy response to a CBP inquiry or a valid basis as to why the CBP’s proposed action should not be taken, your response often may require you to provide information from your China (or other) manufacturing supplier. In these situations, it can be critical for your supplier to work with you the importer in the United States, to ensure you have all necessary information for the goods you imported. It is also critical that your communications with the CBP not provide the CBP with information the CBP can use against you. Pulling together a sufficient response together for the CBP within a short time frame can be no small task, but you can almost always ease that task and improve your odds by anticipating and preparing for your customs problems within the framework of import procedures and controls.

It is a common misconception among importing companies that they do not have to be exact on their commercial invoice or other import documentation. But to properly import goods for entry in the United States, a complete product description, accurate country of origin, and correct value in accordance with CBP rules are all key pieces of information which must be accurately provided. These requirements fall under the importer’s legal responsibility to exercise “reasonable care.” If you as an importer fail to attend to these basic legal requirements, you will be greatly increasing (1) your risk of delays in the release of your goods, (2) further scrutiny by CBP through an audit, and (3) penalties.

The import compliance burden shifted to U.S. importers in 1994, when Congress passed the Customs Modernization Act of “Mod Act” as a part of the same legislation package as the North American Free Trade Agreement (“NAFTA”). It is under the Mod Act that CBP expects importers to exercise “reasonable care” when addressing the following, per the CBP Reasonable Care Checklist:

  • Customs documentation for entry;
  • Complete merchandise description for tariff classification and proper duty rates;
  • Valuation of merchandise consistent with specific CBP valuation rules;
  • Country of origin verification, marking, labeling;
  • Free trade agreements; and

Though the above list is not meant to be an exhaustive one, it tracks key compliance components in the reasonable care checklist.

Despite its name, the CBP Reasonable Care Checklist is not a formulaic standard, but rather a list of questions to prompt U.S. importers to create their own internal framework or methodology to meet United States import compliance standards. CBP allows U.S. importers flexibility in how to manage their reasonable care responsibilities based on the importer’s own transactions.

If you import from China, your first step in managing your reasonable care responsibilities so as to minimize your importing compliance risks is to start with the basics and become familiar with the CBP Reasonable Care Checklist. Answering the questions posed by CBP will help you formulate your necessary internal import procedures and controls.

 

 

How to get your product through U.S. CustomsIf you are importing products from China you need to do your homework to make sure your incoming shipments into the United States comply with U.S. Customs laws and regulations. Compliance with U.S. Customs laws and regulations is critical in avoiding your shipments being detained or seized, and/or penalties assessed. Common issues importers of products from China typically face include the following:

  • Not determining proper classification and duty rate for products. If you plan to import and sell on a Delivered Duty Paid basis, you should consider customs duties in your costs and that means you should know all of your applicable duty rates before you import.  Also certain products are subject to high antidumping or countervailing duties in addition to regular customs duties, which may be as high as 300%.
  • Failing to mark the product with the country of origin of manufacture. Generally goods of foreign origin for import into the U.S. or immediate containers of the goods must be marked legibly and in a conspicuous location with the country of origin in English. Failure to do so accurately can result in civil and even possibly criminal penalties.
  • Not properly marking wood packing material. All wood packing material for products imported into the U.S. must be properly treated and marked prior to shipping. Failure to meet the treatment and marking requirements may cause shipments to be delayed and penalties issued.
  • Failing to provide complete commercial invoices. Customs regulations provide that specific data must be included on the commercial invoice for U.S. Customs purposes, including a detailed description of the merchandise, and correct value information. Omission of this information may result in improper declaration to U.S. Customs at the time of import and expose you to penalties.
  • Failing to meet other U.S. Government agency requirements. Goods imported for sale in the U.S. must satisfy the same legal requirements as those goods manufactured in the United States. U.S. Customs enforces the laws of other agencies in the U.S., including, the Food and Drug Administration, the Consumer Product Safety Commission (CPSC), and the Environmental Protection Agency, in addition to others. Therefore, if toys, for example, are exported to the U.S., detailed CPSC requirements, including for testing, must be met prior to export.
  • Distribution of many trademarked and copyrighted items. Items which are trademarked and copyrighted are restricted by contractual agreements that give exclusive rights to specific companies to distribute the product in the U.S. Imports of improperly trademarked or copyrighted items can be seized at the U.S. border and can subject you as the importer to penalties.

Taking the time to identify the required U.S. Customs laws and regulations for the products to be shipped to the U.S. from China will help you maintain seamless delivery of your merchandise to U.S. customers and avoid civil and criminal penalty exposure.