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Strategies to Minimize the Impact of Section 232 & 301 Tariffs

Minimize Section 232 & Section 301 Tariffs
Minimize Section 232 & Section 301 Tariffs

Although the additional tariffs of Section 232 and 301 continue to negatively affect U.S. importers, exporters, and manufacturers, there are a number of legitimate and proven strategies for avoiding or reducing these duties, which are summarized below.

Exclusion Requests: If you feel that your import goods are critical to the U.S. economy and cannot be sourced anywhere else (i.e., specifically, within the U.S.), both the Department of Commerce (for Section 232 Aluminum & Steel Tariffs) and the Office of U.S. Trade Representative (for Section 301 tariffs on Chinese goods) have processes to request that specific products be excluded from the tariffs.

Tariff Engineering: Sometimes, you can legally take advantage of classification provisions carrying a lower or free rate of duty by importing goods in unfinished or embellished forms. Additionally, sometimes importing component parts separately can result in the individual components falling into a different tariff classification that is currently excluded from the tariff increase, whereas importing them together would be included.

Operational Engineering: If tariff engineering is not an effective strategy for your import goods, you can consider changing its country of origin. Country of origin is determined by various factors including processing of products, so shifting operations from one country (for example, China) to another country may enable you to avoid Section 301 increases.

Valuation: This strategy involves only paying duties on the initial sale price that a trading company pays the manufacture as opposed to the higher price that the importer pays the trading company. If you can validate that the first sale price reflects a sale that is destined for the U.S., you can benefit from a substantial duty savings. This strategy has proven to be particularly useful in the apparel and footwear industries.

Bonded Facilities: Bonded facilities can provide a safe haven from the additional tariffs. One way importers can avoid the additional tariffs is if goods which are classified as exempt from the tariffs enter into a foreign-trade zone and are manufactured into a product affected by the additional tariffs there. Even if they are withdrawn from the zone and entered for U.S. consumption, the goods will retain their original tariff classification (as admitted), and thus, will be able to avoid the additional tariffs. Additionally, goods that may be subject to the additional tariffs can enter and be stored in a bonded warehouse for up to five years to avoid those duties if they are exported directly from the warehouse or entered for U.S. consumption once the additional tariffs have lapsed or a product-specific exclusion has been granted.

Duty Drawback: Duty drawbacks allow for a refund of 99% of the duties and fees paid on goods imported into the U.S. if they are subsequently exported. Duty drawbacks are available for Section 301 duties, but whether they will be available or not for Section 232 is still to be determined.

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