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How can import tariffs affect high tech manufacturers?

Man assembles tech gadget.

In the U.S. and worldwide, high tech products are a big business. According to I.H.S. Global Insights, consumption of high tech goods grew 7.1 percent globally over the past five years, compared to only 4.2 percent growth for all other goods.

However, recent developments in trade, including a series of import tariffs imposed by the U.S. on China, are causing disruptions through the global high tech supply chain. To help tech companies address these challenges, UPS invited interested parties to attend a webinar titled, “How tariffs and trade changes may affect high tech supply chains: Strategies for survival and success.”

Webinar hosts Ron Shepherd, vice president of UPS Trade Management Services, Inc., and Vignesh Anandan, UPS senior marketing manager for the high tech segment, fielded questions from attendees about their specific trade concerns. Here are the 10 most popular Q&As with insights to help you navigate the new realities of global trade.

Top 10 Q&As on tariffs and global trade from the UPS® high tech webinar

1. As a broker, can UPS help with Harmonized Tariff Code classifications?

Our UPS Brokerage business unit, Sandler Travis Trade Advisory Services (STTAS), has highly trained classification specialists across the globe who can assist with your needs.

 2. What is the 301 duty?

This is a 10% or 25% duty enacted by the United States Trade Representative (USTR) for certain goods manufactured or produced in China. It is called “301” because the authority to impose such duties falls under Section 301 of the Trade Act of 1974 (19 U.S.C. §§ 2411-2420).

3. What are Lists 1, 2 and 3 in relation to the 301 duty?

After USTR identified commodities it would make subject to the 301 duties, it published them in three separate lists. List 1 was implemented on July 6, 2018 and included $34 billion worth of goods subject to 25% duties. List 2, consisting of an additional $16 billion worth of goods subject to 25% duties, was implemented on August 23, 2018. On September 24, 2018, List 3 was implemented with another $200 billion worth of goods starting at a 10% duty, which will increase to 25% on January 1, 2019.

4. Is there an exclusion process for products on Lists 1, 2 and 3? Have any UPS clients had success receiving exclusions?

USTR has established exclusion processes for Lists 1 and 2, although it has not yet granted any requests. USTR has not announced its intention to create an exclusion process for products on List 3 at this time, although it may do so in the near future. We do have clients who have received exclusions in relation to Section 232 of the Trade Expansion Act of 1962, which involves the aluminum and steel tariffs enacted in 2017. Our experience is that those who file exclusion requests early generally receive a quicker response from the government.

5. Would you recommend using Section 321 on imports from China that qualify?

Section 321 is part of the Tariff Act of 1930, as amended (19 U.S.C. § 1321 (a)(2)(C)). If the true value of the shipment qualifies for the de minimis thresholds under Section 321 (subject to some exceptions), then Section 301 duties do not apply. However, Section 321 applies to shipments imported by one person on one day and merchandise covered by a single order or contract cannot be split into multiple shipments to secure de minimis treatment. So, as an importer, you need to be aware of all of your inbound shipments to ensure that you are compliant with the terms of Section 321 and ensure that they are correctly valued. Failing to comply with the terms of Section 321 can lead to civil penalties and even treble damages under the False Claims Act.

6. In a Foreign Trade Zone (FTZ), if all the product received is not used for the order, will a duty need to be paid or can I dispose of the product?

The product can remain in the FTZ for a certain amount of time, be disposed of or exported. It can also be entered for consumption (subject to duty).

7. Are there any possible disadvantages to changing my HTS Code?

If you determine the classification needs to be changed, and it was not correct in the past, you as the importer may want to file a Prior Disclosure (PD) to CBP. If you decide to file a PD, you’ll need to report all of the entries where the incorrect HTS was used and pay any additional duties or fees that should have been paid at the time of entry, as well as provide additional information which the regulations on Prior Disclosures to CBP identify. You may also seek a classification ruling from CBP. If you change the HTS Code and CBP determines that the classification is incorrect, you could be subject to penalties.

 8. If a customer gives UPS the wrong HTS Code, how easily can this be fixed through STTAS?

The change of HTS on an entry would generally be handled by a Customs Broker using a Post Summary Correction (PSC), which is a simple process. CBP usually requires support for the new classification to be submitted with the PSC. You can consult STTAS to discuss any potential negative impacts of making the change.

 9. If I discovered that I was importing under an incorrect HTS, how far back can I go to request a refund?

Generally an importer may request a refund by filing a protest for an entry liquidated within 180 days of liquidation or a Post Summary Correction for those entries not liquidated. Exceptions apply in certain circumstances.

10. How and where can we set up an FTZ?

Please send an email to our UPS Zone Solutions at letstalktrade@ups.com for help with your FTZ questions, including setting up an FTZ.

For more information on how high tech companies can survive and succeed in the new trade environment, watch the full replay of the UPS high tech webinar.

This communication is for informational purposes only. It does not constitute legal advice. 


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