Difficult to Read 'Tea Leaves' on USTR Changes From Initial Section 301 List, Customs Lawyer Says

It’s “difficult to read the tea leaves,” or “glean” any lessons, from why the Office of the U.S. Trade Representative removed certain tariff lines from the initial list of Section 301 tariffs, said David Cohen, a lawyer with Sandler Travis, during Sports & Fitness Industry Association (SFIA) webinar July 18. The USTR on June 15 announced it deleted 40 percent of the product lines from its first list of proposed Section 301 tariffs on Chinese imports (see 1806150003). The rationale behind those changes isn't apparent, he said.

SFIA member companies largely escaped the first two rounds of tariffs, said Bill Sells, the association’s senior vice president-government and public affairs. "We finally got hit in the latest round," he said. Sporting goods and accessories, including golf bags, caps of various types and baseball and hockey gloves, all figure prominently in the tariffs notice released July 10 (see 1807110050), he said. So SFIA pulled together the "urgent" webinar to mobilize member opposition to the proposed duties, because the July 27 deadline is so near for filing requests to testify at three days of USTR public hearings beginning Aug. 20, he said.

Sandler Travis was “incredibly active” working with clients in various industries to get their products excluded from the first tariffs list, said Cohen. Even where successful, “I haven’t been able to glean much from a review of some of the particular tariff lines,” he said. “We get that question a lot.” All Cohen’s team knows “just from a statistical purpose at a macro level,” is that “the exclusion process had an impact,” he said. “They reduced the number of tariff lines that were subject from the first list to the second by a magnitude of, like, 40 percent, or more even.”

Some observers “have opined" that some of the products could have "disproportionately impacted lower-income segments of the population” and "that “might be some reason for some of the products to be removed,” said Cohen. "We haven’t yet really defined kind of a strong correlation between the products that were removed and the precise reasons.” USTR representatives didn’t comment.

With the USTR’s July 6 announcement on procedures for companies to seek product-specific exclusions from the tariffs (see 1807060039), “the government’s giving us another bite at the apple” to get tariffs now in effect removed, said Cohen. “Reclassification” of products is another strategy a company could use to eliminate or reduce exposure to tariffs, he said. It behooves companies that operate “under the status quo” and have done so for years to re-examine the Harmonized Tariff Schedule codes under which they are importing products if hit with the higher duties, Cohen said.

There might be “a compelling argument” for a company to “reclassify the product,” even if it has been using the same HTS code by habit for many years, Cohen said. “We’re providing a lot of advice and counsel to clients who are contemplating changing the classifications that they use for particular products with an eye toward minimization or avoidance of the Section 301 duties. Nothing tawdry about it, it’s really part of an importer’s role, exercising reasonable care to periodically review their import classification. It’s an important task that companies can undertake, especially in this environment.”

“Deferral” strategies like storing goods in a “bonded warehouse” may offer savings for companies with tariff exposure because the goods wouldn’t be subject to the higher duties until imported into the U.S., Cohen said. “There are some people who are optimistic, and I tend to be one of them as well, that the 301 duties may not last forever,” Cohen said. “There’s hope that someone in this conflict between the Chinese and the United States leadership, that one or both of them will back down, and the need for these duties will dissipate or be removed altogether.” That’s where a deferral strategy would work best, he said.