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Customs Issues Guidance on How to Preserve Your Rights to Refunds for China Section 301 Product Exclusions

Because of the length of time since China Section 301 duties were first imposed on July 6, 2018, many 2018 entries first covered by the duties are approaching their liquidation date (if they have not liquidated already).

Arent Fox can help you develop a program to monitor your Section 301 entries to be able to preserve your rights to apply product exclusions to entries from 2018.

The information below was compiled from guidance issued by CBP to importers related to how to preserve their rights to have product exclusions applied to merchandise that is close to liquidation or is still within the period before liquidation becomes final (i.e., 180 days after an entry has liquidated).

CBP has provided guidance regarding the steps an importer can take to preserve their rights to have product exclusions applied to merchandise that is close to liquidation or is still within the period before liquidation becomes final (i.e., 180 days after an entry has liquidated).

 

Broadly speaking, importers can request an extension of the liquidation period to file a Post Summary Correction (PSC) or file a protest (for recently liquidated entries). CBP has provided more detailed guidance for how to process these requests, which we discuss below.

What does “liquidation” mean?

Liquidation is the point at which CBP’s ascertainment of the rate and amount of duty becomes final for most purposes. Liquidation typically occurs 314 days from the date of entry of the merchandise into the United States (but may occur faster); liquidation must occur within one year of the date of entry unless extended. This is an important date for importers to track and monitor for Section 301 (among other reasons).

Once liquidation becomes final, entries cannot be amended or changed to take advantage of any Section 301 product exclusions. Liquidation becomes “final” 180 days after the liquidation date unless within that 180 day period an administrative protest is filed related to issues with an entry, or to otherwise contest a Customs action at liquidation.

Entries must be liquidated within one year of the date of entry unless the liquidation needs to be extended for another one-year period not to exceed a total of four years from the date of entry. CBP may extend liquidation on its own authority – or importers may request that CBP extend liquidation beyond the normal one year liquidation period. Notifications of extensions are given to importers, surety companies, and customs brokers who are parties to the transaction.

How do I find out if an entry has liquidated or what the liquidation date is?

Importers with ACE access can track these dates. If not, importers should request an ACE report (ES-701 Courtesy Notice of Liquidation) from all of their brokers. Liquidation information can be tracked on an entry-by-entry basis on the CBP website, but this is a laborious process. We recommend using ACE to gather a list of liquidation dates for products.

Background

On July 6, 2018, the U.S. Trade Representative (USTR) imposed additional duties on certain goods of China (known as the List 1 Products) as a part of the action in the Section 301 investigation of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation. As a part of the determination, USTR established a product exclusion process for goods subject to the 25 percent duty assessed under the Section 301 investigation. All of the product exclusions issued so far apply to the List 1 Products, are retroactive as of the July 6, 2018 effective date of the imposition of additional duties under Section 301, and extend for one year after the publication of the exclusion notice in the Federal Register.

Key Reminders

  • Per the USTR Federal Register (FR) notices, the product exclusions are available for any product that meets the description in the Federal Register notice, regardless of whether the importer filed an exclusion request. 
  • Further, the scope of each exclusion is governed by the scope of the 10-digit headings and product descriptions in the annex, and not by the product descriptions set out in any particular request for exclusion.

The functionality for the acceptance of products excluded from Section 301 duties is available in the Automated Commercial Environment (ACE).

Instructions for Filing Entries Subject to Product Exclusion

To date, there have been four rounds of exclusion requests granted, all of which have covered only List 1 Products. CBP has issued instructions, via CSMS messages, on how to submit entries covering excluded products for each round of product exclusions granted so far by USTR. The relevant Federal Register notices and corresponding CSMS messages are below:

Section 301  HTSUS  FR Notice (Date Published) CSMS Message
1st Round 9903.88.05   83 FR 67463 (12/28/2018)    CSMS 19-000052
2nd Round 9903.88.06     84 FR 11152 (03/25/2019)  CSMS 19-000155
3rd Round 9903.88.07 84 FR 16310 (04/18/2019)       CSMS 19-000212
4th Round 9903.88.08  84 FR 21389 (05/04/2019)   CSMS 19-000244

Entries Coved by Granted Product Exclusions

  • Product exclusions granted by USTR have been limited so far to List 1 Products and thus are retroactive to July 6, 2018, for unliquidated entries or entries that are liquidated, but not final (i.e., entries that are within the 180-day protest period after the date of liquidation). 
  • Once a product exclusion is granted by USTR, an Importer of Record (IOR) may request an administrative refund by filing a Post Summary Correction (PSC) for unliquidated entries that are covered by the exclusion. 
  • If an entry is liquidated prior to the filling of a PSC, a party may file a protest within the normal 180-day period after liquidation.

Entries Covered by Pending Product Exclusions Requests

As the IOR, if you have a pending product exclusion request with USTR, or are importing a product that is covered by such a pending exclusion request, and you are concerned that a corresponding entry may liquidate before USTR renders a decision on the exclusion request, you can:

(1) Request an extension of the liquidation deadline, and file a PSC no later than 15 days before the extended date of liquidation; and/or

(2) for liquidated entries, file a protest within the 180 day period following liquidation.

  • When filing a protest, the protestant should identify the pending product exclusion decision from USTR as a basis for the protest. 
  • Upon receiving USTR’s decision on the product exclusion, the protestant should submit the exclusion information to CBP, as additional information pursuant to 19 C.F.R. 174.28 (allowing additional written information or claims to be added to administrative protests any time prior to a protest decision).
  • If a protest is filed, CBP will postpone making a determination on protests that include a claim identifying a pending product exclusion. 
  • Once USTR completes the exclusion processing, CBP will process these protests pursuant to USTR’s exclusion determination. That is, CBP will refrain from denying or granting a party’s protest before the importer receives a final determination from USTR regarding its product exclusion request.

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