U.S. Customs Rulings Clarify Country of Origin for Section 301 Tariff Purposes

Faced with Section 301 duties (tariffs) on certain imports from China along with Section 232 duties on many steel and aluminum products, U.S. importers are considering possible options to compliantly reduce the payment of these duties – especially with ‘List 3’ Section 301 duties scheduled to increase to 25% on January 1st, 2019.

In the case of Section 301 duties, many importers are considering sourcing components or products from a country other than China. Importers considering this option should take special note of recent U.S. Customs rulings that clarify conditions under which a product’s country of origin is determined for the purposes of Section 301 applicability.

In ruling H300226, U.S. Customs modified a previous ruling. In doing so, it deemed a motor being assembled in Mexico, from Chinese components, subject to Section 301 duties. U.S. Customs advised NAFTA duty-free privileges would not apply in this case. However, the ruling further stated NAFTA origin rules would apply and the motor should be marked as country of origin Mexico.

In ruling H299857, U.S. Customs reconsidered a tool set. Under this ruling, citing the tool set as falling under Harmonized Tariff System (HTS) General Rule of Interpretation (GRI) 1, Customs determined that the entire tool set should be dutiable at the rate of the highest dutiable component within the set. As one component in the tool set is dutiable at 28.9% (3.9% + 25% Sec 301) on a stand-alone basis; this resulted in the entire set being dutiable at that same rate.

For importers considering future changes to their supply chains so as to optimize their import costs, these are important rulings to understand. While both rulings are specific to the circumstances addressed, they highlight the need for importers to carefully plan and verify such changes as part of any sourcing strategy.

Delmar’s North American Advisory Services team is assisting many U.S. importers as they consider supply chain decisions around compliantly optimizing Section 301 and 232 duties. Our Advisory Services team can provide knowledge and expertise, including advance country of origin rulings, to support importers in making improved sourcing and procurement decisions.

Please contact your local Delmar International representative or our North American Customs Advisory Services Group at advisoryservices@delmarusa.com for additional information and assistance.

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