Utilize Customs and Border Patrol Liquidation Guidance to Ensure Maximum Refund from the Granting of Section 301 Exclusion Requests

Many importers mistakenly believe that once their entry documents are submitted to Customs and “estimated duties” are paid, the importer’s obligations and liability for Customs duties have been satisfied. This is not the case.

When Customs “accepts” entry documents and releases the goods to the importer, this means nothing more than the documents appear to be in order (the totals add up and necessary documents are attached) and that the proper amount of duties apparently has been deposited. It is important to note that the money paid to Customs at time of entry is referred to as a “deposit of estimated duties.” The final accounting for import duties occurs at “liquidation” of an entry. At liquidation, Customs finally assesses duties based upon its then current knowledge of the value of the imported merchandise and the rate of duty provided for in the HTSUS (Harmonized Tariff Schedules of the United States). Decisions made at liquidation commonly are influenced by changes that have occurred since the time of entry. These changes can be the result of Customs rulings pertaining to similar merchandise or a similar transaction, court decisions, or a change of practice on Customs’ part.

Understanding the liquidation process is important because importers seeking exclusions from Section 301, should take specific steps now to maximize their refunds of those tariffs paid if they are excluded. These include keeping a close eye on liquidation dates and the ever-changing list of excluded goods. Also, remember the exclusion applies or will apply to your product, even if your company did not request the exclusion. So it is important for importers to stay up-to-date on not only those exclusions that have already been granted but also those that have been requested and are still awaiting a final decision. MBS is closely following these matters for our clients.

To date, Section 301 tariffs have been imposed against three separate lists of goods imported from China: a 25 percent tariff on List 1 goods (valued at about $34 billion) effective July 6, 2018; a 25 percent tariff on List 2 goods (valued at about $16 billion) effective Aug. 23, 2018; and tariffs of 10 percent and then 25 percent on List 3 goods (valued at $200 billion) effective Sept. 24, 2018, and May 10, 2019, respectively.

The Office of the U.S. Trade Representative is currently working its way through thousands of requests for tariff exclusions for List 1 and List 2 goods, with some approved. Requests for exclusions for List 3 goods are still being accepted and are due by Sept. 30.

Product exclusions granted by USTR so far are under List 1 and are retroactive to July 6, 2018, for unliquidated entries or entries that are liquidated but not final.  Once a product exclusion is granted by USTR, an Importer of Record (IOR) may request an administrative refund by filing a Post Summary Correction (PSC) for unliquidated entries that are covered by the exclusion.  If an entry is liquidated prior to the filling of a PSC, a party may file a protest.

If you have entries covered by pending product exclusions requests, as the IOR, if you have a pending product exclusion request with USTR, or are importing a product that is covered by such a pending exclusion request, and you are concerned that a corresponding entry may liquidate before USTR renders a decision on the exclusion request, you can:

(1) request an extension of the liquidation from U.S. Customs and Border Protection (CBP)by filing a PSC no later than 15 days prior to the expiration of the 314-day liquidation cycle. Liquidation can be extended for up to four years in one-year increments. For example, entries of List 3 goods made on Sept. 24, 2018 (the date on which the 10 percent tariff on such goods became effective) are scheduled to liquidate as of approximately Aug. 4 unless an extension is requested; and/or

(2) file a protest within the 180-day period following liquidation (which currently may include List 1 and List 2 goods).  When filing a protest, the protestant should identify the pending product exclusion decision from USTR as a basis for the protest.  If entries of excluded goods have already liquidated, importers may file a protest within 180 days of the date of liquidation.  Upon receiving USTR’s decision on the product exclusion, the protestant should submit the exclusion information to CBP, as additional information pursuant to 19 C.F.R. 174.28.

If a protest is filed, CBP will postpone making a determination on protests that include a claim identifying a pending product exclusion.  Once USTR completes the exclusion processing, CBP will process these protests pursuant to USTR’s exclusion determination.  That is, CBP will refrain from denying or granting a party’s protest before the importer receives a final determination from USTR regarding its product exclusion request.

Link to Liquidation Guidance from CBP

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Bio Link Denise co-leads the federal practice at Michael Best Strategies with expertise in association and coalition management as well as development of public policy strategies, at both the state and federal level. She was active, on behalf of firm clients, during the recent federal tax reform debate, much as she was during the last major tax reform in 1986. Expertise: Regulatory Law, Tax & Trade, Energy, Environmental, Food, Agriculture, and Telecommunications
Bio Link Patrick has been very active in politics since his time with the Talbot County Democratic Forum, where he volunteered for President Obama’s re-election as a high school student. While in college, he volunteered for Monty Mason for Delegate of District 93 in Williamsburg, VA; served as a campaign strategist for Virginia’s 1st District congressional candidate, Norm Mosher; and interned on the Hill for Senate Majority Leader Harry Reid in 2014. Expertise: Tax, Financial Services, Environment, Agriculture, Blockchain, Cryptocurrency, and Energy