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Section 301 exclusions, U.S. imports from China; opportunities and benefits

Section 301 exclusions, U.S. imports from China

The United States has imposed tariffs on Chinese imports under “Section 301” of the Trade Act of 1974. Exclusions from the Section 301 tariffs have been provided for certain imports, and the initial Section 301 exclusions were granted in December 2018. Any importer can use the granted Section 301 exclusions, as long as the product fits the description of the identified products.

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What do you need to know?

There are seven Harmonized Tariff Schedule of the United States (HTS) codes for which any products under those codes were granted exclusions; these will apply to anyone importing products that originate from China under those HTS codes. Any U.S. importer or business importing products from China needs to determine if the product-specific description exemptions could apply to their imports that originate in China.

Importers and businesses importing products that are granted exclusions are able to recoup all of the additional Section 301 tariffs they have paid thus far. That means for the products granted Section 301 exclusions under List 1, importers will be refunded all Section 301 tariffs paid since July 6, 2018—the date when List 1 was implemented. 

Furthermore, exclusions will be available for one year from the date when published (in the case of the first exclusions, they were published on December 28, 2018, and will last until December 28, 2019).

Refer to the list of 10-digit and product specific exclusions in a table [PDF 77 KB] produced by KPMG LLP.

 

A product or HTS code was granted an exclusion from the Section 301 tariffs… now what?

Confirming the product exclusion

Exclusions are not official until they are published in the Federal Register. Currently, the only granted exclusions were published on December 28, 2018. Read the Federal Register notice [PDF 388 KB] 

Read a table [PDF 77 KB] (an unofficial document produced by KPMG) intended to show details on granted exclusions.
 

There are two types of granted exclusions.

  • Seven HTS codes, no matter what product descriptions are in the requests, were granted exclusions.
  • Twenty-four (24) product-specific exclusions were granted.  

 

The status of an exclusion request can be viewed on the website of the U.S. Trade Representative (USTR). The files are updated every Friday. For example, the following lists are from the USTR website:

Your imported products were granted an exclusion… now what?

According to U.S. Customs and Border Protection (CBP), two methods are available for refunds of Section 301 duties—by submitting a post-summary correction (PSC) or by filing a protest. CBP issued a release stating that it intends to issue further guidance related to these measures by February 8, 2019. 

Once guidance has been issued, importers will use a Chapter 99 product exclusion number on entries and entry summaries. For these first round of granted exclusions, the code is 9903.88.05. Refer to the Federal Register notice for further instructions, and expect the future CBP guidance to address this item. Until further CBP guidance is released, importers must continue their importing practices, and continue paying the additional Section 301 customs duty. Any entries or entry summaries using the Chapter 99 product exclusion number will be rejected.  

KPMG observation

There are opportunities currently available under the granted Section 301 exclusions, and businesses need to consider how to take full advantage of and claim future financial benefits of these granted exclusions. Businesses further need to understand how to file effective claims for refund of customs duties under this process. 

KPMG Trade & Customs professionals have observed certain steps can help, such as: 

  • Collecting trade data and determining maximum financial benefit—for example, consider:
    • What products are being imported that may be eligible for refunds and exclusions from Section 301 duties for one year? 
    • What additional duties have been paid that may be refunded? An analysis of the business’s trade data should indicate the possible amount of customs duties that could be recovered.
  • Managing the process for claiming refunds of past customs duties paid (and avoiding certain pitfalls and unexpected issues in filing claims for refunds of the additional Section 301 tariffs paid).
  • Staying ahead of the Section 301 tariffs and granted exclusions going forward: 
    • As the USTR grants new exclusions over the coming months, businesses need to have the ability for real-time notification of imports that qualify for the benefits as excluded products. 
    • If an agreement between the United States and China is not reached and the United States in March 2019 increases the tariffs on List 3 ($200 billion) from 10% on 25%, it is expected that an exclusion process for List 3 would be announced. Businesses would then need to consider how to apply for and effectively obtain an exclusion for their imports.


For more information on this topic or to learn more about KPMG’s Trade & Customs Services, contact:

Doug Zuvich
Partner, Global Practice Leader
T: 312-665-1022
E: dzuvich@kpmg.com

Andy Siciliano
Partner, National Practice Leader
T: 631-425-6057
E: asiciliano@kpmg.com

Irina Vaysfeld
Principal
T: 212-872-2973
E: ivaysfeld@kpmg.com

Robert Waldrop
Principal
T: 212-954-8117 
E: rwaldrop@kpmg.com

Christopher Young
Principal
T: 312-665-3229
E: christopheryoung@kpmg.com

George Zaharatos
Principal
T: 404-222-3292
E: gzaharatos@kpmg.com

John L. McLoughlin
Principal, East Coast Leader
T: 267-256-2614
E: jlmcloughlin@kpmg.com

Luis (Lou) Abad
Principal, WNT
T: 212-954-3094
E: labad@kpmg.com

Amie Ahanchian
Managing Director
T: 202-533-3247
E: aahanchian@kpmg.com

Gisele Belotto
Managing Director
T: 305-913-2779
E: gbelotto@kpmg.com

Andy Doornaert
Managing Director
T: 313-230-3080
E: adoornaert@kpmg.com

Jessica Libby
Managing Director
T: 612-305-5533
E: jlibby@kpmg.com

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