Updates on the MTB, Section 301 Tariffs and TFTEA Drawback

October 13, 2018

Miscellaneous Tariff Bill Act of 2018

The President signed H.R. 4318 Miscellaneous Tariff Bill Act of 2018 (MTB) into law on September 13, 2018. The MTB amends the HTSUS to suspend and reduce tariffs on 1,660 products through December 31, 2020. These amendments are pursuant to the new process established in the American Manufacturing and Competitiveness Act of 2016.

Previously Congress determined which products should be eligible for duty suspension and reduction. Under the new process, the U.S. International Trade Commission collects industry petitions and public comments, analyzes the data and makes the final determinations on duty suspension and reduction with federal agency input.

MTB duty suspensions and reductions are effective for goods entered or withdrawn from a warehouse for consumption on or after October 13, 2018 and will remain in effect until December 31, 2020. All MTB provisions are in HTSUS subchapter II to chapter 99. ACE will be updated prior to the October 13 implementation date.

According to CSMS# 18-000606, products subject to Section 301 tariffs can benefit from MTB suspensions and reductions for the general (column 1) duty rate. However, these products remain subject to 25% ad valorem duty rate imposed by headings 9903.88.01 and 9903.88.02 or the 10% ad valorem duty rate imposed by headings 9903.88.03 and 9903.88.04.

Sets and Section 301 Duties

In a September 6, 2018 ruling HQ H299857, CBP determined that a toolset that is classifiable under a subheading not covered by the Section 301 tariffs is still subject to those tariffs because one of the components is subject to the tariffs. The September 6 ruling was in response to a request to reconsider CBP’s earlier ruling where it applied the Section 301 rates to the entire toolset even though only a portion of the elements of the set would be subject to 301 rates if entered separately.

The ruling involved a 129-piece mechanic’s toolset from China. CBP initially found that the set was best classified under 8206.00.00 as “tools of two or more headings 8202 to 8205, put up in sets for retail sales.” The duty rate for that subheading is based on the “rate of duty applicable to the article in the set subject to the highest duty rate” CBP wrote in the initial ruling.

The highest duty rate was for 8466.10.0175, the classification for five items in the set, at 3.9% plus the 25% section 301 tariff rate applicable to those items. Thus, CBP calculated the total duty rate to be 28.9%.

The requester for reconsideration argued that this duty rate was incorrect and too high citing the Section 301 FAQ which said that if a set is classified outside the tariffs, the 301 duties won’t be assessed on individual components. CBP responded that those FAQ instructions apply only “to sets classified in accordance with General Rule of Interpretation (‘GRI’) 3.”

This toolset was instead classified by reference to GRI 1, and CBP contended that the FAQ instructions were not applicable to this toolset. CBP further pointed out that unlike sets classified under GRI 3, this toolset was not classified under the subheading and with the duty rate for the component that imparted the essential character for the toolset. This toolset duty rate was determined based on the article with the highest duty rate and the entire set must be taken into account. CBP stated the it couldn’t “ignore the additional duty imposed by Chapter 99 in determining what is the highest duty rate, by examining what the duty rate would have been absent the additional duty imposed by Chapter 99, and then determining if that component is subject to the 301 provisions.”

Final TFTEA Drawback Regulations Must Take Effect by December 17

The Court of International Trade ruled on October 12, 2018 that CBP must file a final rule for drawback under the Trade Facilitation and Trade Enforcement ACT (TFTEA) with the Office of the Federal Register by December 17, 2018. The final rule will be effective when filed, except for provisions involving drawback for excise taxes. The excise tax provisions may take effect 60 days after publication.

This is the latest ruling in a lawsuit brought against CBP that contends that the government is improperly not processing requests for accelerated payment on TFTEEA drawback claims.

For further information or questions about this or other customs issues, contact George R. Tuttle, III at geo@tuttlelaw.com or at (415) 986-8780.

George R. Tuttle, III is an attorney with the Law Offices of George R. Tuttle in the San Francisco Bay Area.

The information in this article is general in nature and is not intended to constitute legal advice or to create an attorney-client relationship with respect to any event or occurrence and may not be considered as such.

Copyright © 2018 by Tuttle Law Offices.  
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Information has been obtained from sources believed to be reliable.  However, because of the possibility of human or mechanical error by our offices or by others, we do not guarantee the accuracy, adequacy, or completeness of any information and are not responsible for any errors, omissions, or for the results obtained from the use of such information.


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