On Monday, April 20, 2020, U.S. Customs and Border Protection (CBP) issued interim instructions for implementation of the U.S.-Mexico-Canada Agreement (USMCA).*  The instructions provide guidance regarding preferential tariff claims under the USMCA.  The Agreement, once it enters into force, provides for the immediate or staged elimination of trade barriers for goods originating in one of the three countries.  The instructions provide guidance regarding rules of origin (including for automotive goods), regional value content (RCV) calculation methods, de minimis rules, transshipment, eligibility for textiles and apparel, making preference claims, and certification and recordkeeping rules and requirements.

The instructions provide a rules of origin definition to determine whether a good qualifies as an “originating good” under the USMCA, such that it is eligible for preferential tariff treatment.  Under USMCA a good is “originating” in the United States, Mexico, or Canada when:

a) The good is wholly obtained or produced entirely in the territory of one or more of the Parties, as defined in Article 4.3 of the Agreement;

b) The good is produced entirely in the territory of one or more of the Parties using non-originating materials provided the good satisfies all applicable requirements of product- specific rules of origin;

c) The good is produced entirely in the territory of one or more of the Parties exclusively from originating materials; or
Continue Reading CBP Posts Interim Instructions for USMCA Implementation

On November 7, the United States Government Accountability Office (“GAO”) released a report assessing actions the U.S. Department of Commerce (“Commerce”) and U.S. Customs and Border Protection (“CBP”) have taken to address weaknesses in the process for collecting antidumping (“AD”) and countervailing (“CV”) duties.

The report noted the following facts:

  • For bills issued in fiscal years 2001 – 2018, CBP collected over $20 billion in uncollected AD/CV duties.
  • For bills issued over the same period, $4.5 billion in AD/CV duties remained uncollected as of May 2019.
  • Only 20 importers accounted for $1.93 billion (or 43.3 percent) of the $4.5 billion in AD/CV duties with the remaining $2.52 billion (or 56.7 percent) in uncollected duties accounted for by 1,118 importers.

The report also notes that one cause for concern at Commerce is the significantly increased workload, with a lack of corresponding increase in staff.  The report explains that from fiscal years 2012 to 2018, the total number of AD/CV duty orders enforced by Commerce has increased from 280 to 457, with the number of case analysts increasing only from 118 to 127.  Commerce has sought to address the increased workloads by implementing a variety of internal procedures and establishing a training unit.

CBP has also undertaken variety of measures to address uncollected duties.  Perhaps most interesting is CBP’s use of new statistical models to identify key risk factors associated with nonpayment.  As noted above, with only 20 importers accounting for more than 43 percent of the value of billed but uncollected duties, identifying high risk importers would appear to be a prudent step.

The report also identified the United States’ retrospective system of duty assessment as one factor contributing to complexities in duty collection faced by both agencies.  The retrospective system is widely viewed as a net positive, however, which leads to more accurate duty assessment over time.  The report concludes that while the two agencies have undertaken measures to address weaknesses in the process for collecting duties, more can be done.
Continue Reading GAO Report Reveals Deficiencies in Process for Collecting Antidumping and Countervailing Duties

Thursday, October 10, 2019
12:00 PM – 1:00 PM

Many companies are looking for opportunities to reduce or eliminate duties on products they import.  In 2015, Congress passed legislation codifying a duty reduction process, known as the Miscellaneous Tariff Bill (MTB), that reduces duties assessed on more than a thousand imported raw materials and intermediate

Effective May 10, 2019 importations of merchandise covered under the Section 301 third tranche, manufactured in China and entered into the U.S., are subject to the increase in additional duties from 10 to 25%.  However, according to U.S. Customs and Border Protection updated guidance, the increased duties of 25% will not apply to goods a)

On Monday, March 4th, President Trump announced that India and Turkey will no longer benefit from the United States’ Generalized System of Preferences (“GSP”) program.  The GSP program, established by the Trade Act of 1974, is designed to promote economic development by eliminating duties on certain eligible products when imported from a beneficiary

Today Customs and Border Protection (CBP) published an updated version of its “Guidance for Reimbursement Certificates”; see https://www.cbp.gov/document/guidance/guidance-reimbursement-certificates.

In the memorandum, CBP reminds the public that regulations by the Department of Commerce (“DOC”) require that importers must file a certificate advising whether the importer has entered into an agreement, or otherwise has received reimbursement of AD duties, prior to liquidation of the entry.

Failure to file reimbursement certificates (stating that importer was not reimbursed) may double importer’s antidumping duties upon liquidation.  CBP’s memorandum offers specifics on how to file the certificates and includes an example of a blanket reimbursement form.

The memo also outlines procedures for filing in ACE and ACS.  Although CBP will accept paper reimbursement certificates, it is encouraging importers to file electronically.

CBP addresses other guidelines for filing reimbursement certificates, including the following:
Continue Reading CBP Updates “Guidance for Reimbursement Certificates”

One of the potential consequences of the U.S.-China trade dispute is that more companies may consider supply chain sourcing from third countries such as Mexico.   This may include direct sourcing in the third country or the processing of Chinese components into finished products in third countries prior to entry into the United States.  There are a number of issues to consider where the processing of Chinese products subject to section 301 duties occurs in third countries prior to importation in the United States.

For example, the imported Chinese components processed in a third country may nonetheless be subject to section 301 duties when imported into the United States unless they are “substantially transformed” into a new and different article of commerce in the third country.  This is a product-specific analysis and involves a review of components and production steps. Recently, the Court of International Trade ruled that mere assembly of foreign component parts does not constitute substantial transformation. (Energizer Battery Inc. v. United States, 190 F. Supp. 3d 1308 (Ct. Intl. Trade 2016). The decision noted that, “whether there has been a substantial transformation depends on whether there has been a change in the name or use of the components.”  The court focused not on whether “the components as imported have the form and function of the final product” but rather “whether the components have a pre-determined end-use at the time of importation.”  The court suggested that the imported parts would need to undergo “further work” beyond mere assembly to be considered substantially transformed.


Continue Reading Mexico, China and Section 301

US Customs and Border Protection has finally released the much anticipated proposed changes to the drawback regulations. (See FRN August 2)

Drawback provides an opportunity for importers to apply for refunds of duty payments upon exportation of the same or similar product. It is also a terrific opportunity for importers of components to receive

The United States Court of International Trade recently overturned a U.S. Customs and Border Protection (CBP) denial of a protest, in which Quaker Pet Group, LLC contested CBP’s classification of its pet carriers.  The five pet carriers at issue in Quaker Pet Group, LLC v. United States, Slip Op. 18-9 (Ct’ Intl. Trade 2018) are used to carry cats, dogs or other pets and are made of mesh and cloth.  CBP classified the carriers under Harmonized Tariff Schedule of the United States (HTSUS) subheading 4202.92.30, a provision which covers “travel, sport and similar bags” made of textile material that are designed for “carrying clothing and other personal effects during travel.” 
Continue Reading CIT Overturns CBP: Pets are not “Items or Personal Effects”