The U.S. government published in the Federal Register today the details regarding the the timing of the increase of the China Section 301 List#3 tariff from 10% to 25%. The official language is as follows:
Effective with respect to goods (i) entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on May 10, 2019, and (ii) exported to the United States on or after May 10, 2019, subchapter III of chapter 99 of the Harmonized Tariff Schedule of the United States is modified:
Apparently, the language in the text was misleading and confusing even to U.S. Customs. CBP assumed that the increase was effective for all entries with an entry date of May 10, 2019 or afterwards. CBP has already programmed into their ACE software system the 25% tariff increase to be effective for all entries subject to China Section 301 List#3 tariffs. CBP issued a message this afternoon clarifying and correcting the interpretation of the effective date of the tariff increase.
1.) Export Date BEFORE May 10, 2019
Goods subject to List#3 and exported to the United States BEFORE May 10, 2019 should still be charged the 10% tariff. This applies EVEN if the entry date is on or after May 10, 2019. Here is the official language from the Customs message this morning clarifying this important correction:
For subject goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern standard time on May 10, 2019, and exported to the United States before May 10, 2019, the 10 percent duty rate will still apply.
CBP is working with the USTR to confirm how to demonstrate and prove export date on the entry filing. What we do know is that 19 CFR 152.1(c) defines date of exportation as follows:
“Date of Exportation,” or the “time of exportation” … means the actual date the merchandise finally leaves the country of exportation for the United States. If no positive evidence is at hand as to the actual date of exportation, the center director shall ascertain or estimate the date of exportation by all reasonable ways and means in his power, an in so doing may consider dates on bills of lading, invoices, and other information available to him.
For shipments that departed in the past few weeks on the water to the United States, I don’t foresee any major challenges to the definition of export date. However for shipments that are just departing from China today or perhaps are trans-shipping at various ports in China, we may see some challenges with Customs regarding how to accurately define and prove the date of export.
Please note that Customs has NOT yet corrected their internal software. Therefore entries subject to List#3 will still show a 25% tariff at this time. If a software correction is not before the entry summary duty payment is due, Importers will have to pay this 25% tariff initially and then request a Post Summary Correction to get a refund of the duties. We are going to be monitoring each importer’s entries over the next few weeks closely to make sure which entries may require a tariff rate adjustment.
2.) Export Date AFTER May 10, 2019
If the shipment has an export date AFTER May 10, 2019, the import will be subject to increased tariff rate of 25% barring a last minute adjustment from the U.S. government. A Chinese Trade Delegation is meeting in Washington DC these two days to discuss a trade agreement. There remains some hope that the United States and China can come to an agreement and end these tariffs.