Customs issues guidance on how to preserve refund rights for Section 301 product exclusions

Introduction

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

The information below was compiled from guidance issued by the Customs and Border Protection (CBP) to importers regarding 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 (ie, 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 a protest (for recently liquidated entries). The CBP has provided more detailed guidance for how to process these requests.

What does 'liquidation' mean?

Liquidation is the point at which the CBP's ascertainment of the rate and amount of duty becomes final for most purposes. Liquidation typically occurs 314 days from the date on which the merchandise enters the United States (but may occur faster); liquidation must occur within one year of the date of entry unless extended. As such, 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 an administrative protest is filed within that 180-day period relating to issues with an entry or to otherwise contest an action taken by Customs 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). The CBP may extend liquidation on its own authority or importers may request the CBP to do so. Notification of an extension are given to importers, surety companies and customs brokers that are parties to the transaction.

How to find liquidation dates or whether entries have liquidated?

Importers with Automated Commercial Environment (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. As such, importers should use ACE to gather a list of liquidation dates for products.

Background

On 6 July 2018 the US Office of the Trade Representative (USTR) imposed additional duties on certain Chinese goods (known as the List 1 products) as a part of the action in the Section 301 investigation of China's acts, policies and practices regarding technology transfers, intellectual property and innovation. As a part of the determination, the USTR established a product exclusion process for goods subject to the 25% 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 6 July 2018 (ie, the date on which additional duties under Section 301 were imposed); and
• extend for one year after the publication of the exclusion notice in the Federal Register.

Key reminders

Per the USTR Federal Register notices, product exclusions are available for any product that meets the description in the Federal Register notices, regardless of whether the importer has 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 exclusion request.

The functionality for the acceptance of products excluded from Section 301 duties is available in the ACE.

Instructions for filing entries subject to product exclusion

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

Entries covered by granted product exclusions

Product exclusions granted by the USTR have been limited to List 1 products and are thus retroactive to 6 July 2018 for unliquidated entries or entries that are liquidated but not final (ie, entries within the 180-day protest period after the liquidation date).

Once the USTR grants a product exclusion, an importer of record may request an administrative refund by filing a 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

Importers of record that have a pending product exclusion request with the USTR, or are importing a product that is covered by such a pending exclusion request, and are concerned that a corresponding entry may liquidate before the USTR issues a decision on the exclusion request, can:

• request an extension of the liquidation deadline and file a PSC no later than 15 days before the extended date of liquidation; or
• 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 the USTR as a basis for the protest.

On receiving the USTR's decision on the product exclusion, the protestant should submit the exclusion information to the CBP as additional information pursuant to 19 CFR 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, the CBP will postpone deciding on protests that include a claim identifying a pending product exclusion.

Once the USTR completes the exclusion processing, the CBP will process these protests pursuant to the USTR's exclusion determination – that is, the CBP will refrain from denying or granting a party's protest before the importer receives a final determination from the USTR regarding its product exclusion request.

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