CBP's treatment of goods from foreign-trade zones that are subject to the recently decreased Section 301 tariffs should go through a notice a comment process because it amounts to a change in policy, the National Association of Foreign-Trade Zones said in a Feb. 18 letter to the agency. “The 'level playing field' (i.e., providing U.S. FTZs and bonded warehouses equal Customs duty treatment), is a fundamental [principle] of U.S. law governing FTZs, has always been protected in the current Trade Remedy environment,” it said. A lawyer for the NAFTZ recently explained the arguments and said the letter was coming (see 2002120011).
Section 301 Tariffs
Section 301 Tariffs are levied under the Trade Act of 1974 which grants the Office of the United States Trade Representative (USTR) authority to investigate and take action to protect U.S. rights from trade agreements and respond to foreign trade practices. Section 301 of the Trade Act of 1974 provides statutory means allowing the United States to impose sanctions on foreign countries violating U.S. trade agreements or engaging in acts that are “unjustifiable” or “unreasonable” and burdensome to U.S. commerce. Prior to 1995, the U.S. frequently used Section 301 to eliminate trade barriers and pressure other countries to open markets to U.S. goods.
The founding of the World Trade Organization in 1995 created an enforceable dispute settlement mechanism, reducing U.S. use of Section 301. The Trump Administration began using Section 301 in 2018 to unilaterally enforce tariffs on countries and industries it deemed unfair to U.S. industries. The Trump Administration adopted the policy shift to close what it deemed a persistent "trade gap" between the U.S. and foreign governments that it said disadvantaged U.S. firms. Additionally, it pointed to alleged weaknesses in the WTO trade dispute settlement process to justify many of its tariff actions—particularly against China. The administration also cited failures in previous trade agreements to enhance foreign market access for U.S. firms and workers.
The Trump Administration launched a Section 301 investigation into Chinese trade policies in August 2017. Following the investigation, President Trump ordered the USTR to take five tariff actions between 2018 and 2019. Almost three quarters of U.S. imports from China were subject to Section 301 tariffs, which ranged from 15% to 25%. The U.S. and China engaged in negotiations resulting in the “U.S.-China Phase One Trade Agreement”, signed in January 2020.
The Biden Administration took steps in 2021 to eliminate foreign policies subject to Section 301 investigations. The administration has extended and reinstated many of the tariffs enacted during the Trump administration but is conducting a review of all Section 301 actions against China.
Dishwasher pumps made of parts from China that are assembled in Serbia are considered to be of Serbian origin, CBP said in a Jan. 23 ruling. Due to the Serbian origin of the pumps, Section 301 tariffs on goods from China do not apply, CBP said. The ruling came in response to a request from Thomas Keating, of Rock Trade Law, on behalf of Johnson Electric North America.
House Ways and Means Committee ranking member Kevin Brady, R-Texas, said he hopes India's eligibility for the Generalized System of Preferences benefits program is restored, but cautioned that India is hard to pin down on opening market access -- which is the administration's requirement for even partial restoration. Brady touched on tariffs, negotiations and implementation of the U.S.-Mexico-Canada Agreement as he took questions from reporters late Feb. 12 at the Capitol.
The National Association of Foreign-Trade Zones appealed to CBP officials during the group's annual legislative summit on Feb. 11 on the issue of CBP's treatment of goods that are in foreign-trade zones and are subject to the Section 301 tariffs on goods from China that will be reduced on Feb. 14. CBP said in a recent CSMS message about the tariff decrease that the applicable tariff rate for goods in FTZs is based on “the rate of duty and tax in force on the date of filing the application for privileged foreign status.” That policy has prompted some industry claims of inconsistency by the agency (see 2002050038).
The Office of the U.S. Trade Representative issued four new exclusions from the first tranche of Section 301 tariffs on goods from China, it said in a notice. The exclusions apply retroactively to July 6, 2018 and will expire on Oct. 2, it said. The agency also adjusted tariff subheadings and made other "technical amendments" to previously issued exclusions.
The Office of the U.S Trade Representative is set to publish a notice Feb. 11 of some new product exclusions from Section 301 tariffs on the first list of products from China (see 2002100008). The product exclusions apply retroactively to July 6, 2018, the date the tariffs on the first list took effect, and will remain in effect until Oct. 2, 2020.
U.S. importers in December sourced 539,000 TVs from China, 46.2 percent fewer than in November and the lowest monthly volume since the 507,000 Chinese sets shipped here in February 2015, according to Census Bureau data posted Feb. 9 and accessed through the International Trade Commission’s DataWeb tool. Import statistics culled from DataWeb for the fourth full month that the 15 percent List 4A Section 301 tariffs were in force on Chinese goods showed the December exodus from Chinese TV sourcing accelerating at an even faster pace than in November. With it came signs of TV supply-chain diversification through third countries other than Mexico, especially for the cheapest entry-level sets.
IRobot’s 2019 operating-profit margin would have been 3.1 points higher at 10.4 percent if not for the $37.9 million in List 3 Section 301 tariff costs imposed on the robotic vacuum cleaners (RVCs) it sourced from China, CEO Colin Angle said on a Q4 earnings call Feb. 6. IRobot expects to incur $47 million to $50 million more in 2020 tariff costs, Chief Financial Officer Alison Dean said.
CBP's notice on the coming Section 301 tariff decrease (see 2002040045) and the agency's treatment of List 4A goods in foreign-trade zones are drawing some industry concerns. The CBP notice said the duty rate for goods subject to the tariffs in FTZs is based on “the rate of duty and tax in force on the date of filing the application for privileged foreign status.” CBP's interpretation “is inconsistent with existing CBP precedent and [we] will be challenging it on behalf of our a number of clients,” said Sidley lawyer Ted Murphy in a blog post.
The Office of the U.S Trade Representative is set to publish a notice Feb. 5 some new product exclusions from Section 301 tariffs on the third list of products from China (see 2001020013). The product exclusions apply retroactively to Sept. 24, 2018, the date the tariffs on the third list took effect, and will remain in effect until Aug. 7, 2020.