Returned Goods Provisions Allowed for Avoiding Possible Increase to Section 301 Tariffs, CBP Says
Importers can use the temporary import provisions with goods subject to Section 301 tariffs in order to pay the tariffs at current levels and avoid potential increases, CBP said in a Feb. 21 ruling, HQ H302203. Alex Romero of A.F. Romero & Co. Customs Brokers requested CBP's ruling on behalf Panacea Products Corp. Several of Panacea's products are subject to the third list of Section 301 tariffs, which were originally slated to increase from 10 percent to 25 percent on Jan. 1. That increase has since been delayed "until further notice" while the U.S. and China negotiate (see 1903010036).
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Goods are eligible for duty-free treatment under Harmonized Tariff Schedule of the U.S. subheading 9801.00.10 if they are U.S. merchandise "returned after having been exported, or any other products when returned within 3 years after having been exported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad," CBP said. Panacea usually imports its goods from China, sends them in-bond to the company's packaging operations in Mexico under the maquiladora program, and then enters the packaged goods for consumption in the U.S.
In preparation for possible tariff increases, the company instead "plans to ship the goods back to the United States and enter them for consumption" before the packaging step, "thus triggering liability for U.S. duties and any applicable Section 301 measures." It would then send the goods to Mexico for packaging, with liability for Section 301 tariffs already established at 10 percent.
Panacea's plans appear to meet the requirements for the subheading, CBP said. "Because Panacea proposes to enter the goods for consumption in the United States before sending them to Mexico for packaging and bringing them back to the United States for resale, the goods will qualify as 'returned' for the purposes of subheading 9801.00.10, HTSUS," it said. "Furthermore, Panacea states that the goods will remain in Mexico for a period of a few months to a year (i.e., less than the three-year limit established in subheading 9801.00.10, HTSUS) before being returned to the United States." The packaging operations also don't advance the value or improve the condition of the goods, the agency said.
As to whether the Section 301 tariffs would apply again when the merchandise is returned from Mexico, CBP said that answer is no. "Section 301 measures do not apply to goods for which entry is properly claimed under subheading 9801.00.10, HTSUS," it said. "Therefore, provided that the merchandise in this case is reimported with a proper claim under subheading 9801.00.10, HTSUS, the Section 301 measures will not apply upon reimportation." CBP notes that the agency has not yet updated its regulations to reflect the changes to subheading 9801.00.10 from the Trade Facilitation and Trade and Enforcement Act. "While portions of the regulations are no longer pertinent," some of the reporting requirements remain in place, the agency said.
More information is necessary for CBP to determine if Panacea can make use of subheading 9801.00.20 and whether the goods will be returned “after having been exported under lease or similar use agreements,” CBP said. Whether the agreement with Panacea Mexico "qualifies as a 'similar use agreement' for purposes of subheading 9801.00.20, HTSUS, requires a detailed analysis of the specific agreement at issue and a clear understanding of the rights and obligations of each of the parties," it said. "In this case, however, Panacea has only stated that the merchandise will be exported to Mexico under the Mexican maquiladora program. Without more information on this program and how it applies to the transaction under consideration, we cannot determine whether it qualifies "