tariff refund

Section 301 Tariff Duties have greatly impacted U.S. Companies since their inception by the Trump Administration in mid 2018, affecting an estimated $500 billion in imported goods from China into the United States.

This exponential increase in duties has left many companies scrambling for solutions to mitigate these China tariff duties. Reevaluating classifications and product designs or finding alternate sourcing could be a possible solution, but are often very complex and come at the extensive cost of supply chain and operational resources. However, there is an immediate solution to mitigate these tariff duties. Section 301 duties are drawback eligible.

What does that mean?

When a company claims drawback on duty-paid imports that are subsequently exported it allows them to collect 99% of the regular duty paid – in addition to Section 301 duties. Since duty drawback is retroactive, you can reach back and use duty-paid imports from 5 years ago in drawback claims – perfect for recouping previously paid Section 301 tariff duty. What makes duty drawback even more interesting is the use of substitution matching, which we cover extensively in recent duty drawback matching article.

Brief example…

• Your company imports 100,000 KG of product from China and paid $500,000 in total duty
• The 100,000 KG of product from China is sold domestically
• You company also imports 300,000 KG of product with the same HTS from Australia and it was duty-free
• The 300,000 KG of product from Australia is exported out of the United States
• Since both products share the same HTS and let’s assume they qualify for substitution at the 8-digit HTS, you can use the Australia origin exports to claim drawback on the China origin duty-paid imports

Looking towards the future.

There have been numerous rounds of List exclusions implemented which has helped remove some HTS codes, but as of right now we do not see China Section 301 tariffs going anywhere anytime soon. Aside from strategizing long term supply chain solutions, you should have your Company’s duty drawback program viability thoroughly assessed. There are many unique recovery scenarios in duty drawback, so it is best to consult a duty drawback expert.

Section 301 tariff timeline, Section 301 HTS codes, Section 301 published Lists and Section 301 List exclusions

Date	Event	Tariff Rate	HTS Codes and Subheadings
March 8, 2018	Steel Articles	Additional 25% Ad Valorem	7206.10 through 7216.50 7216.99 through 7301.10 7302.10 7302.40 through 7302.90 7304.10 through 7306.90
March 8, 2018	Aluminum Articles	Additional 10% Ad Valorem	7601 7604 through 7609 7616.99.5160 7616.99.5170
March 22, 2018	Administration pushes for Section 301 tariffs on China imports
April 4, 2018	U.S. Trade Representative announces proposed list of 1,333 HTS subheadings
May 29, 2018	U.S. confirms Section 301 lists on China import products
June 15, 2018	U.S. Trade Representative publishes Section 301 List 1, effective July 6th, and proposed List 2, affecting $50 billion in Chinese imports in total	Additional 25% Ad Valorem	List 1 – 818 HTS codes List 2 – 284 HTS codes
June 18, 2018	U.S. announces the possibility of implementing List 3	Additional 10% Ad Valorem	List 3 – 6,031 HTS subheadings
June 20, 2018	U.S. Trade Representative publishes official List 1 notice (USTR-2018-0018)
July 6, 2018	List 1 tariffs go into effect	Additional 25% Ad Valorem	See List 1 here
August 3, 2018	U.S. considers increasing List 3 tariff rates from 10% to 25%
August 7, 2018	U.S. Trade Representative publishes finalized Section 301 List 2, effective August 23rd	Additional 25% Ad Valorem	List 2 – 279 HTS codes
August 23, 2018	List 2 tariffs go into effect	Additional 25% Ad Valorem	See List 2 here
September 21, 2018	U.S. Trade Representative publishes finalized List 3, effective September 24th, affecting $200 billion in Chinese imports and proposes List 4 tariffs, affecting $325 billion in Chinese imports	Additional 10% Ad Valorem	List 3 – 5,745 HTS codes
September 24, 2018	List 3 tariffs go into effect	Additional 10% Ad Valorem	See List 3 here
September 28, 2018	U.S. Trade Representative publishes amended List 3, effective October 1st	Additional 10% Ad Valorem	38 HTS codes added, 14 HTS codes removed
December 3, 2018	U.S. announces List 3 tariffs set to increase from 10% to 25% Ad Valorem, effective January 1st
February 24, 2019	U.S. postpones delayed List 3 tariff increase
May 5, 2019	U.S. announces List 3 tariffs to increase from 10% to 25%, effective May 10th
May 10, 2019	List 3 tariff increase go into effect	Additional 25% Ad Valorem
May 17, 2019	U.S. Trade Representative publishes List 4 notice	Additional 25% Ad Valorem	3,805 HTS subheadings
August 1, 2019	U.S. announces List 4 adjusted from 25% to 10% Ad Valorem and will go into effect September 1st
September 1, 2019	List 4 tariffs go into effect	Additional 10% Ad Valorem	See List 4 here