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<\/a><\/p>\nYour options:<\/em><\/strong><\/p>\n FOREIGN TRADE ZONES (FTZ)\/ CUSTOMS BONDED WAREHOUSES:<\/strong><\/em><\/p>\n Foreign Trade Zones (FTZ)<\/a>\u00a0are secured areas outside of US Customs and Border Protection\u2019s (CBP) jurisdiction. Although located in the United States, FTZs function similarly to Free Trade Zones and are located in or around CBP ports of entry. As prescribed by the Foreign-Trade Zones Act of 1934 (19 U.S.C. 81a-81u), the FTZ Board vests the authority to establish these facilities and cooperates with CBP to set regulations.<\/p>\n These facilities bode are beneficial for both exporters and importers due to their allowance to move merchandise into zones of operations, such as storage, exhibition, assembly, manufacturing, and processing.\u00a0Since FTZs are in the US, they are subjected to Federal Laws, State and or local laws, as well as the restrictions and requirements prescribed by the FTZ board.<\/p>\n What may be placed in zones?<\/strong><\/p>\n Unless prohibited by law or other exceptions listed by\u00a0CBP<\/a>, all foreign or domestic merchandise, whether dutiable or not, can enter an FTZ. While prohibited merchandise is, in fact, prohibited by FTZs, due to the disconnect with CBP, merchandise subjected to a quota may be placed in an FTZ until the quota is opened up or is removed.<\/p>\n Why FTZs?<\/strong><\/p>\n When using an FTZ, the typical CBP entry process, such as payment of duties, does not apply to the foreign merchandise until it leaves the FTZ, entering CBP territory for domestic consumption. While the FTZ is, in fact, inside the US, it is not under U.S. Custom and Border Protection\u2019s jurisdiction<\/p>\n To enter an FTZ or to ESTABLISH YOUR OWN FACILITY AS AN FTZ, Contact\u00a0DTL\u00a0<\/a>for aide and guidance to ensure a legal and desirable option.<\/p>\n How Can I avoid Section 301 Tariffs Using an FTZ?<\/strong><\/p>\n According to\u00a0CBP<\/a>, per the Federal Register Notice published by the USTR, any product which is subject to the additional duty imposed by this determination, and that is admitted into a U.S. foreign trade zone on or after 12:01 am eastern daylight time on July 6, 2018, only may be admitted as \u2018privileged foreign status\u2019 as defined in\u00a019 CFR 146.41<\/a>. Such products will be subject upon entry for consumption to any ad valorem rates of duty or quantitative limitations related to the classification under the applicable HTSUS subheading.<\/p>\n CUSTOMS BONDED WAREHOUSES<\/em><\/strong><\/p>\n Bonded warehouses<\/a>\u00a0function similarly to FTZs, in that they are subjected to different rules and regulations upon the entry of merchandise into the US. These facilities, which have been around for over 150 years and allow for goods subjected to duties to be \u201cstored, manipulated, or manufactured without having to pay the given duties. Essentially the warehouses, which are secured and supervised by the US government, enable companies to avoid a duty until the items leave the warehouse for consumption.<\/p>\n Bonded Warehouses serve almost like a \u201cpause button\u201d. Importers may hold their goods in the warehouse until they want to distribute the goods to consumers. Until the moment the item(s) leave the facilities, they are exempt from duties. This allows for importers to transfer their goods from warehouse to warehouse and allows for items to be held, manufactured, and or manipulated prior to paying any obliged duty.<\/p>\n If you wish to explore more deeply the intricacies, similarities, and differences between Foreign Trade Zones and Bonded Warehouses, check out our previous\u00a0blogs<\/a>\u00a0for the more valuable insight!<\/p>\n How Can I avoid 301 Tariffs Using a Bonded Warehouse?<\/strong><\/p>\n According to CBP, an importer could store section 232 or 301 applicable merchandise in a bonded warehouse and then export it to another country without having to pay the tariffs on it.\u00a0 There is no special status for section 232 or 301 goods entered into a bonded warehouse and it serves as a great mechanism to mitigate the impact of Section 232 and 301 tariffs.<\/p>\n DUTY DRAWBACK<\/strong><\/em><\/p>\n If you import products into the US only to export them to another country, you may be entitled to compensation for the duties paid upon importation to the US.\u00a0Duty Drawback<\/a>\u00a0provides for the refund of up to 99% for certain duties, internal revenue taxes, and fees collected by CBP upon importation. The drawback may be granted only after the subjected item(s) have been either exported or destroyed (under CBP supervision). In order to receive a Duty Drawback, a Customs broker must file a submission to CBP on behalf of your company. While potentially beneficial, it is important to recognize that the duty drawback process is detailed and may span the course of months before any monetary compensation is retrieved. Some of the required information includes proof of the export or destruction, as well as proof that duty was originally paid. According to CBP, a bill of sale or airway bill is valid proof of export and a CBP Officer must witness the destruction of the goods. Without proof of export or the destruction, the claim is not substantiated.<\/p>\n Duty Drawback<\/a>\u00a0is available for Section 301 duties, but not for Section 232 duties; it is unclear that the president had the authority to eliminate drawback for Section 232 duties under his import authority.<\/p>\n TARIFF ENGINEERING<\/strong><\/em><\/p>\n Essentially, tariff engineering is a method of altering the HTS classification of an intended imported good to benefit from a lower duty rate. Since CBP can only levy tariffs on the condition of goods as imported, tariff engineering gives importers the opportunity to\u00a0redefine their imported products and pay lower duties. An importer cannot simply re-classify the exact same good under a different HTS (this would be evasion), rather the imported product must actually embody the qualities of another HTS, which happens to be duty-free.<\/p>\n In order to properly re-classify the imported good, importers should review the HTS chapter of the good and determine whether there is a more appropriate classification that has a lower duty (or even duty-free).\u00a0 Additionally, slight deviations in packaging or how the product is purchased may change the classification of the product. For instance, product components may be imported separately and assembled in the United States; these components would be individually classified under HTSs that may have\u00a0fallen into an entirely different tariff provision that has\u00a0a lower duty (or even duty-free).<\/p>\n For the purposes of mitigating\u00a0Section 232 and 301 tariffs, ensure your new classification\u00a0is currently excluded from the China Tariff Lists and not subject to an additional 25 percent tariff.<\/p>\n While Tariff engineering\u00a0exists in\u00a0a legal gray-zone, Courts have frequently upheld the legality of the process since the 1880s. However, companies attempting to alter their products\u2019 classification have run into problems.<\/p>\n The most notable recent dispute appeared in\u00a0Ford Motor Company v. United States (2018<\/a>). The case regarded Ford\u2019s classification of imported vans. While Ford and the courts preceding rulings favor the legality of the company\u2019s decision to modify the interior of the vehicle enough to earn the classification of a passenger van (subjected to a 2.5% ad valorem), and effectively avoiding the tariffs subjected to cargo-vans (subjected to a 25% ad valorem), the court ruled otherwise. This case, as well as other similarly controversial ones,\u00a0 highlight the need for a cautious, concerted effort to both modify the imported good, while fully adhering to US law. DTL has successfully assisted multiple clients in their tariff-engineering efforts, resulting in a legal avoidance of potentially crippling duties.<\/p>\n COUNTRY OF ORIGIN CHANGE\u00a0<\/strong><\/em><\/p>\n An additional option is to consider relocating operations or your sourcing country, i.e., the product\u2019s\u00a0country of origin<\/a>. If a given country has exceptionally higher duties for imports than a comparable third country, move your supply chain to the duty-free nation.\u00a0 While potentially costly to initially relocate, changing the country of origin will allow you to import the exact same item(s) without paying the additional duties. If considering this option, one must be cognizant of the\u00a0list<\/a>\u00a0of nations that have a free-trade agreement with the United States. Even though another nation may not be subjected to substantial duties, shifting your supply chain to a nation that has a formal, free and fair-trade agreement with the US ensures accountability and reliability.<\/p>\n FIRST SALE\u00a0<\/em><\/strong><\/p>\n First Sale is a system that decreases the dutiable value of imported goods by authorizing importers to use the price paid in the first sale. It allows an earlier sale to be used in declaring customs value as long as that sale can be documented as a sale for exportation to the United States and the importer meets all other Customs requirements.<\/p>\n Consequently, that equivalent value is assigned according to the transaction between the manufacturer and the middleman not between the middleman and the new buyer. The First Sale benefit is available to all importers that meet the above criteria. We are currently seeing importers subject to\u00a0China tariffs<\/a>\u00a0avail themselves to this duty savings opportunity. Importers subject to high duty rates or high middleman markup and have a cooperative relationship with the middleman would greatly benefit from the First Sale valuation option.<\/p>\n\n