Customs Lawyer Warns Importers to Be Conservative in Trying to Avoid Section 301 Tariffs

NEW YORK -- Companies hoping to avoid Section 301 tariffs by a shift in origin should research CBP rulings first, United States Fashion Industry Association customs counsel John Pellegrini said. And if the product they are importing is even a little different from what's in a ruling, ask for a new ruling. "It's a time to play conservative," said Pellegrini, who was speaking at the Nov. 7 USFIA Trade and Transportation conference.

He scolded attendees, who had said in an online poll about Section 301 tariffs that they're more worried about the cost impact of moving production or paying tariffs than they are about enforcement. He said: "Are you serious? Have you forgotten transshipment?" He told attendees that they should be asking vendors in Vietnam: "If Customs came to me [saying] 'Prove this garment was made in Vietnam,' what am I going to show them?"

Pellegrini told them to be cautious about allowing vendors to sell to them on DDP (Delivered Duty Paid) terms. He said they should ask themselves, "Is the price too good to be true? What structure does that company have in the U.S.? Can they actually act as an importer of record?"

Pellegrini advised importers not to agree to DDP if the vendor does not have a physical presence in the U.S. And if they do enter a DDP arrangement, he said they need to make sure their companies are not listed on Form 7501 as the ultimate consignee, or on the Importer Security Filing, as the ship-to party.

Large companies generally cannot benefit from the de minimis loophole, Pellegrini said, but if they open a warehouse in Mexico or Canada, they potentially could. They could ship e-commerce purchases from across the border, or even send small shipments to independent retailers -- business-to-business sales can still count as de minimis, as long as the shipments are less than $800/day. If an importer is waiting for a decision on a Section 301 exclusion request, Pellegrini said, they may need to get an extension on liquidation. If an entry has been liquidated, there will not be the possibility of the refund of tariffs paid, he said.