USTR Ends Section 301 Exemption for U.S. Goods Returned After Repair, Alteration, Processing and Assembly

Special tariff provisions for U.S. goods returned after assembly, repair, alterations and processing will soon become subject to Section 301 tariffs on China, the Office of the U.S. Trade Representative said in a notice published Aug. 16. Products on the tariff list properly claimed under Chapter 98 provisions have up to now been fully exempt from the 25 percent duty, but beginning 12:01 a.m. on Aug. 23, subheadings 9802.00.40, 9802.00.50, 9802.00.60 and 9802.00.80 will no longer be eligible for the carve-out if classified under a Chapter 1-97 tariff provision otherwise covered by the tariffs.

The change affects both goods on the initial list of $34 billion in goods for which tariffs began July 6 (see 1807050033), and the more recently announced second group of $16 billion in goods that will be subject beginning Aug. 23 (see 1808080020). Annex A to USTR’s notice adds new U.S. Note 20(c) to Chapter 99, with language applying the tariffs to U.S. goods returned under subheadings 9802.00.40, 9802.00.50, 9802.00.60 and 9802.00.80 for the upcoming second set of tariffs. Annex C amends existing language in U.S. Note 20(a) to apply the tariffs to those subheadings for the tariffs already in effect.

Both notes will now say: “The additional duties … do not apply to goods for which entry is properly claimed under a provision of Chapter 98 of the [Harmonized Tariff Schedule of the U.S.], except for goods entered under subheadings 9802.00.40, 9802.00.50, 9802.00.60, and heading 9802.00.80.” Both notes will also be amended to clarify the 25 percent Section 301 tariff also applies to goods receiving temporary tariff exemptions or reductions under Subchapter II to Chapter 99 (such as under miscellaneous tariff bills).

In the same way that normal tariffs are applied to goods classified under these subheadings, the 25 percent Section 301 duty will only be applied to the operation performed in China, not the full value of the good. “For subheadings 9802.00.40, 9802.00.50, and 9802.00.60, the additional duties apply to the value of repairs, alterations, or processing performed abroad, as described in the applicable subheading,” the tariff schedule now says. “For heading 9802.00.80, the additional duties apply to the value of the article less the cost or value of such products of the United States, as described in heading 9802.00.80.”

(Federal Register 08/16/18)