Section 301 Tariffs Are Drawback Eligible

Section 301 Tariff duties have greatly impacted U.S. Companies since their inception by the Trump Administration in mid 2018, affecting an estimated $500 billion in imported goods from China into the United States.

This exponential increase in duties has left many companies scrambling for solutions to mitigate these China Tariff duties. Reevaluating classifications and product designs or finding alternate sourcing could be a possible solution, but are often very complex and come at the extensive cost of supply chain and operational resources. However, there is an immediate solution to mitigate these tariff duties. Section 301?duties are drawback?eligible.

What does that mean?

When a company claims drawback on duty paid imports that are subsequently exported it allows them to collect 99% of the regular duty paid – in addition to Section 301 duties. Since duty drawback is retroactive, you can reach back and use duty-paid imports from 5 years ago in drawback claims – perfect for recouping previously paid Section 301 tariff duty, resulting in a windfall of recovery for new drawback programs. What makes duty drawback even more interesting is the use of substitution matching, which we cover extensively in our duty drawback matching?article.

Substitution matching example.

• Your company imports 100,000 KG of product from China and paid $500,000 in total duty
• The 100,000 KG of product from China is sold domestically
• You company also imports 300,000 KG of product with the same HTS from Australia and it was duty free
• The 300,000 KG of product from Australia is exported out of the United States
• Since both products share the same HTS and let’s assume they qualify for Unused Substitution at the 8-digit HTS, you can use the Australia origin exports to claim drawback on the China origin duty-paid imports

Looking towards the future.

There have been numerous rounds of List Exclusions implemented which has helped remove some HTS codes, but as of right now we do not see China Section 301 Tariffs going anywhere anytime soon. Aside from strategizing long term supply chain solutions, you should have your company’s duty drawback program viability thoroughly assessed. There are many unique recovery scenarios in duty drawback, so it is best to?consult a duty drawback expert.

Section 301 tariff timeline and published Lists.

• July 6, 2018: List 1 Tariffs go into effect. Additional 25% Ad Valorem.
• August 23, 2018: List 2 Tariffs go into effect. Additional 25% Ad Valorem.
• September 24, 2018: List 3 Tariffs go into effect. Additional 10% Ad Valorem.
• May 10, 2019: List 3 Tariffs increase go into effect. Additional 25% Ad Valorem.
• September 1, 2019: List 4 Tariffs go into effect. Additional 10% Ad Valorem.

Maximize your drawback recovery with the experts.

Our comprehensive drawback solutions maneuver our clients through the drawback process compliantly while transferring the administrative requirement from our client’s staff to our team of drawback professionals. We take full responsibility for all program elements, from regulatory compliance to claim preparation, and we operate strictly on a percentage of the recovery.

We offer a complimentary duty drawback assessment for your new or existing duty drawback program that maximizes recovery and evaluates regulatory compliance exposure. Visit the duty drawback experts at www.alliancechb.com.