Additional China Duties Are Increasing to 25% on Many Items; More Increases are Expected

Many have read the news about the “trade war” between the U.S. and China and recently there have been a number of changes that will increase the number of imports and importers impacted by these additional duties.

On July 6, 2018 the U.S. Administration implemented the first in a series of additional duty assessments on products imported from China. This first list impacted about $34 billion in imported products and a 25% additional duty was added to those products.

On Aug. 23, 2018 the second list of items to have the additional duty assessed against them was announced and another $16 billion in imports was charged the additional 25%. On Sept. 24, 2018 another $200 billion in products was impacted with the additional duty rate of 10%. On May 10, 2019 items on the Sept. 24^th list saw their additional duty rate increase from 10% to 25%.

Currently the U.S. Trade Representatives’ office is reviewing public comments and will hold hearings beginning June 17^th to discussion the assessment of additional duties, likely at 25%, against the remaining products from China that were not covered on Lists 1, 2 or 3. It is anticipated that those products will become subject to those additional duties within weeks or even days of the completion of the hearings. At that point practically every product made in China will face additional duties.

Based on current import levels of about $500 billion per year in products from China the additional duty totals will be well in excess of $100 billion per year and these added costs are causing problems for U.S. importers and their customers. The news is not promising as to any end to the trade war so these additional duties may be with us for some time.

I’ve been asked by a number of clients “how can we mitigate or eliminate the payment of these additional duties?” While I’ve heard of some schemes being offered by some rather unscrupulous sourcing companies and Customs Brokers that would violate U.S. Customs law, there are some LEGAL steps you may be able to take to limit the impact of these additional duties on your imported products.

1. Consider sourcing in a country other than China. This is often easier said than done, but I have a number of clients already moving in this direction. A few words of caution:
   • Be SURE of the correct country of origin for your products. This can be tricky with today’s global supply chains but as an importer you are legally required to exercise due diligence in determining the origin of your products.
   • Beware of suppliers who offer to “trans ship” your products or falsify origin on shipping documents. This is illegal and can lead to civil and criminal prosecution.
   • If your products are partially manufactured in China and then have their manufacturing finished in another country you must follow the rather complicated Customs country of origin rules in determining the actual country of origin for those products.
2. Negotiate with your suppliers to reduce prices to help offset the cost of the additional tariffs. This too can be tricky and there are some dangers in doing this that you should be made aware of before you do this.
   • The importer must accurately report the price “paid or payable” and pay duty on that value. Valuation rules can be quite complex but importers are required to exercise due diligence to ensure their value as reported to U.S. Customs is correct.
   • Customs can ask for documentation to prove that the value reported on imported goods matches the exact amount the importer paid to the supplier. Be sure to have good documentary evidence in case you are asked to provide it by Customs.
   • Beware of suppliers who offer to “doctor” documents to reflect lower prices. This is illegal and can lead to prosecution of the importer by U.S. Customs.
3. Review the HTS classification of your products to ensure it is correct. While it appears most items from China may be impacted by the additional duties it is critical you report the correct HTS number as any changes in the “trade war” may impact some items before they impact others. There are also a limited number of exclusions for specific products that should be reviewed to see if your products may qualify for exclusion from the additional tariffs.
4. Do your imported products involve multiple parties other than just a seller (supplier) and buyer (importer)? Certain times of sales involving more than two parties MAY be allowed to report a lower value and thus pay lower duties. This is a complex matter with very specific rules. If you think your products may qualify please contact us for guidance.

We live in a very complicated time in international trade and it is critical that importers carefully review their import transactions to avoid costly errors. We are here to help. Please contact us at info@tradelogicintl.com to arrange a phone consultation.