China Trade War Cease Fire: Important Information on Tariffs Including How to Maximize Your List 4A Tariff Reduction Benefit

This preliminary agreement calls for China to purchase approximately $200 billion in American agricultural, energy, and manufactured goods and services over the next two years, and to provide better protection to US intellectual property and trade secrets. In exchange, President Trump agreed to reduce the List 4A tariffs on $120 billion worth of goods from 15% to 7.5% within 30 days, and indefinitely suspend the imposition of a 15% tariff on List 4B products. This momentary truce did not reference the remaining tariffs on $360 billion of products, but President Trump left open the possibility of tariff reductions and/or removal if future negotiations are successful. As of now, the existing tariffs remain.

The reduction in tariffs to 7.5% on List 4A products will go into effect on February 14, 2020. According to the Federal Register notice, the reduced duty rate will be “[e]ffective with respect to goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 am Eastern Standard Time on February 14, 2020.” Unfortunately for importers of products subject to List 4A, the rate reduction is not retroactive from the effective date of September 1, 2019.

Determining the Application of the “Effective Date”

US Customs and Border Protection will apply the duty reduction according to what it determines to be the date/time of entry, i.e., when goods are “entered.” Importers have some ability to request the date of entry, as we explain below.

The customs regulations (specifically 19 C.F.R. § 141.68) provide that when an entry summary is filed (Customs Form 7501) and serves as both the entry documentation and entry summary, the time of entry is controlled by the filing of the entry summary. For example, if an entry/entry summary is filed on February 13, 2020, the date of entry for purposes of the tariffs is February 13.

However, when the entry data elements (i.e., the CF 3461 documentation in the previous “paper world”) are filed without the entry summary information, (as is usually the case), the importer has the ability to elect the time of entry pursuant to § 141.68(a). In ABI, there is a field called “Entry Date Election Code.” If the filer places an “A” in that field, the time of entry is the “Estimated Date of Arrival.” If the filer places a “P” in the election field, the time of entry is the presentation date. If the election field is left blank, the time of entry is when CBP authorizes the release of the merchandise or any part of the merchandise covered by the entry documentation pursuant to § 141.68(a)(1). By leaving the field blank, CBP assumes that the filer is not requesting a time of entry other than the release date. Cargo release of merchandise by CBP varies by the mode of transportation (truck, air, or vessel) and can take from hours to days for ocean cargo at busy ports of entry.

Accordingly, importers should make sure that their brokers are using the correct procedures to request a date/time of entry that will be no earlier than February 14, 2020, where possible, for products covered by List 4A.

Alternatively, importers could move imported merchandise into a bonded warehouse until February 14, 2020. Goods withdrawn for consumption from the bonded warehouse on or after February 14 would be subject to the reduced 7.5% duty rate.

Other types of entries may have different dates of entry. Arent Fox can help importers navigate the entry procedures for time of entry and other China Section 301 issues.