U.S. Customs and Border Protection Provides Guidance on Applicability of Section 301 Tariffs to Imported Retail Sets

In response to questions on Section 301 posed by the National Customs Broker and Forwarder Association of America (“NCBFAA”), U.S. Customs and Border Protection (“CBP”) recently stated that—

• The Section 301 tariffs on Chinese-origin goods will not apply to articles that are imported into the United States as part of a set provided that the set itself is classified in a subheading under the Harmonized Tariff Schedule of the United States (“HTSUS”) that is not included in the Section 301 list.

• However, if the article that imparts the essential character to the set happens to be classified in a HTSUS subheading that is subject to the Section 301 tariffs, then the entire set will be subject to the Section 301’s 25% ad valorem duty rate.

By way of background, the U.S. Trade Representative (“USTR”) investigated China’s practice of requiring U.S. companies to transfer their intellectual property rights (“IPR”) and technologies to Chinese companies in order to obtain business licenses and approval to invest in China. The USTR determined that these practices were unreasonable, discriminatory and restrict U.S. commerce. On June 20, 2018, the USTR announced the imposition of an additional ad valorem duty rate of 25% on certain products from China. Covered products classified in 818 HTSUS subheadings and are identified in Annex A to the USTR’s June 20th Federal Register notice. The duties went into effect on July 6, 2018.

General Rule of Interpretation (“GRI”) 3(b) provides the rules for classifying imported sets put up for retail sale. In order to be a legitimate set for retail sale, the set must: (a) consist of at least two items that are on their face classifiable in different HTSUS headings or subheadings; (b) consist of items that are put together to meet a particular need or carry out a specific activity; and, (c) be offered for sale directly to the end customer in boxes or cases without the need for any repacking after importation into the United States.  Per GRI 3(b), the tariff classification for the overall retail set should be the article that provides the essential character to the entire set. The essential character will vary from one type of good to another, but the factors that CBP will consider in making essential character determinations include: the nature of the item; bulk; quantity; weigh; value; and the role the article plays with respect to the use of the set.

If you have any questions or need further information as to the applicability of the Section 301 tariffs to your products, classification of imported goods under the HTSUS or other international trade-related issues, please contact Miller Proctor Law PLLC (Melissa Proctor – melissa@millerproctorlaw.com).