SanMar Corp., which imports T-shirts, sweatshirts and polo shirts that are used for fun runs, corporate logos and the like, hasn't been hit with Section 301 tariffs yet, but its executives are anxiously watching trade policy. Melissa Nelson, general counsel for SanMar, said she used to be able to stay away from Washington, D.C., but with the surge of tariffs in the last year, that's no longer true. Even Section 232 tariffs, which you would not think would affect an apparel importer, are increasing costs for them. Nelson explained that SanMar is buying clothes racks for a Jacksonville, Florida, warehouse; she said they're worried about the cost.
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Apparel importers may still want to classify their hangers separately from apparel, but should take extra care in light of the potential application of Section 301 tariffs on the hangers, Sandler Travis said in a client alert. CBP has long held that some more substantial, reusable hangers are classifiable in subheading 3923.90.0080 as plastic articles for the conveyance or packing of goods, even when imported together with apparel. That subheading carries a 3% duty rate, though 10% Section 301 tariffs raise that to 13% if imported from China, and that could rise to 28% of no deal is reached on the tariffs by March 2 (see 1812140034). Nonetheless, importers should still perform an analysis on whether that rate would still be lower than the rate applicable to the garment itself if the hangers are less substantial and considered “packing material” not classified separately from the apparel, the alert said.
Dispute panels are forming at the World Trade Organization on the Section 301 tariffs the U.S. levied on China and on the retaliatory tariffs Turkey levied on the U.S. in response to U.S. tariffs on Turkish steel and aluminum. China said the tariffs, on about $250 billion worth of its exports, are damaging China's economic interests and the rules-based trading system. The panel on Turkish retaliation is the sixth panel formed on retaliation for the metals tariffs, which are applied around the world.
CBP is now accepting claims for drawback on Section 301 duties on products from China, said John Leonard, executive director-trade policy and programs, on a conference call held Jan. 23 to discuss issues related to the ongoing federal government shutdown. The agency has fixed a bug in ACE that was preventing Section 301 drawback claims and is now able to begin processing, though the agency’s ability to resolve particular issues will be limited due to staffing issues caused by the ongoing shutdown, he said.
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The Council of the European Union passed its negotiating directives for free trade talks with the U.S. on Jan. 18, and as expected, agriculture is not part of the scope. The EU also said it would require the lifting of the Section 232 tariffs on aluminum and steel before any deal is finalized. "These two proposed negotiating directives will enable the Commission to work on removing tariffs and non-tariff barriers to transatlantic trade in industrial goods, key goals of the July Joint Statement," EU Trade Commissioner Cecilia Malmstrom said.
More CBP scrutiny of first sale transactions has followed an increase in the use of first sale valuations in recent months, law firm Sandler Travis said in a blog post. The growth in first sale valuations, which allows importers to value goods at the price sold from a manufacturer to a middle man, is one result of the Section 301 tariffs on goods from China, the firm said. "At a time when volatility in trade policy has left some traditional methods of lowering costs unavailable and is threatening to eliminate others, importers are continuing to use the first sale rule to save millions of dollars in import duties each year," said the firm, which advertises its first sale services in the post.
Regulations.gov, the government website where businesses can see if other companies have objected to their tariff exclusion requests, went down Jan. 16. It's not clear how long it will take workers -- who have been affected by the partial federal government shutdown -- to get the issues resolved and get the site back online. A spokeswoman for the Office of the U.S. Trade Representative said the agency continues to work on exclusion requests on items on the first two tranches of the Section 301 tariffs list, and that "the time period to comment will be extended as applicable" because of the outage.
A legislative effort from Rep. Sean Duffy, R-Wis., to expand the president's ability to impose new tariffs (see 1901160012) is a troubling prospect for retailers, according to the National Retail Federation. NRF Senior Vice President for Government Relations David French said Congress “should be working to protect local communities from an escalated trade war” brought on by the Trump administration’s Section 301 tariffs on Chinese imports and China’s retaliatory tariffs on U.S. goods. Duffy’s “misguided” legislation “would do the exact opposite, giving the executive branch limitless power to raise taxes in the form of tariffs,” French said. “Congress has already ceded far too much of its clear constitutional authority over tariffs, and we are witnessing the consequences unfold across the country. The idea that Congress would make matters even worse by further abdicating its role on trade policy is simply unconscionable.” Duffy's bill would give the president the ability to raise U.S. tariffs to match other countries' levels without having to justify the move through a safeguard or national security investigation.