Today, we're going to be talking about the most frequently asked questions in regards to the 301 tariffs. If you joined us last month, we tackled all the frequently asked questions about duty drawback. And today we're going to shift our focus to the 301 duties. And joining me today, I'm lucky enough to have Jay Charkow, who is the president at ITM.
Well, nobody knows the 301 information more than you do Jay.
Well, it comes out of a lot of research and and working with a lot of clients that pay a lot of 301 duties.
So let's let's start really basic and let's why don't you tell us what is a 301 tariff.
Well, a 301 tariff is...could be good and it could be bad. It depends on your perspective of paying the 301 tariff. The U.S. Trade Representative back in 1974 established a trade act that gave the president and his administration the opportunity to penalize countries that were treating the U.S. businesses unfairly. And what happened was it gives them the authority to put tariffs on items coming in from those countries.
And the 301 is a section of the regulations. And what happened was that the Trump administration had decided that the Chinese businesses in many, many areas were not fairly treating the U.S. companies. And they imposed a series of tariffs on duties on things coming in from China. And basically, it's Section 301. And those are the tariffs that were imposed by the Trump administration on goods coming in from China.
And maybe you can clear something up for us here. I remember vividly when they imposed the 301 tariffs and there was talk about how China would pay them. But I don't think that was in fact, I know that's not what happened. So who who pays the 301 tariffs?
Well, what happens is like any tariff of goods coming into the United States, the importer is the one that pays the tariff. And I think there was some news information promoted by certain individuals that said these were paid by the Chinese. That's absolutely incorrect. The U.S. company that imports the goods are the ones that pay these tariffs. And unfortunately, in many cases, they have to be passed on to the consumer.
So in reality, the U.S. people in the United States are the ones that are paying the duties that were imposed. And these are not small duties. I know when they rolled out, they there was a scale. But what are what are these duty rates that are affected by the three oh ones?
They started initially they started at most of them at seven and a half percent. And they escalated in different sequences to in some cases 15 and in some cases 25%. Now, to put that into perspective, if an item costs a dollar and there's a 25% duty on it, that brings the cost up to a dollar 25, which is quite significant.
And again, the idea was to discourage people from buying goods in China and sourcing their materials elsewhere.
And then that that 301 is in addition to the base duty rate, if applicable. So you could be importing something from China and paying 5% and then you pay another 25%. So in essence, you're paying 30% duty on that product.
Exactly. And that example is a low number. There are some items that come in from various countries. Textile goods are an example where the duties could be 15 to 20%. So you could be paying 40 to 45% of the cost in duty before you even get the material into the United States, let alone the transportation costs. So the and so paying all that duty is a huge hit on importers into the United States.
We hope you will gain some valuable insight into the world of customs tariffs. With all the supply chain challenges the world is facing, our aim is to maximize your duty drawback dollars and boost your bottom line. We hope you'll subscribe to our podcast to stay current with each new episode in which will unveil numerous ways to improve your international trade profitability. Thanks for listening.
Welcome to The Duty Drawback podcast from International Tariff Management. Here at ITM, we help our clients secure refunds and reductions of duty burdens on imported and exported goods. With more than 40 years of classification, free trade and compliance experience, in each episode, we explore real life examples of how companies are taking full advantage of numerous programs in place for both importers and exporters, and how these little known programs can yield substantial returns to their bottom lines. If you're engaged in international trade, you can expect to learn actionable tips and strategies that you can implement in your business to become a more profitable importer and or exporter. Thanks for tuning in. Now let's dive into this month's episode. Today, we're going to be talking about the most frequently asked questions in regards to a301 tariff. If you joined us last month, we tackled all the frequently asked questions about duty drawback. And today we're going to shift our focus to the 301 duties. And joining me today, I'm lucky enough to have Jay Charkow, who is the president at ITM. Thanks for joining me today, Jay. It's a pleasure to be with you Jill. Thank you for asking me to participate. Well, nobody knows the 301 information more than you do. It comes out of a lot of research and working with a lot of clients that pay a lot of 301 duties. So let's let's start really basic and let's why don't you tell us what is a 301 tariff. Well, a 301 tariff is, it could be good and it could be bad. It depends on your perspective of paying the 301 tariff. The U.S. Trade Representative back in 1974 established a trade act that gave the president and his administration the opportunity to penalize countries that were treating the U.S. businesses unfairly. And what happened was it gives them the authority to put tariffs on items coming in from those countries. And the 301 is a section of the regulations. And what happened was that the Trump administration had decided that the Chinese businesses in many, many areas were not fairly treating the U.S. companies. And they imposed a series of tariffs on duties on things coming in from China. And basically, it's Section 301. And those are the tariffs that were imposed by the Trump administration on goods coming in from China. And maybe you can clear something up for us here. I remember I remember vividly when they imposed the 301 tariffs and there was talk about how China would pay them. But I don't think that was in fact, I know that's not what happened. So who pays the 301 tariffs? Well, what happens? It's like any tariff of goods coming into the United States. The importer is the one that pays the tariff. And I think there was some news information promoted by certain individuals that said these were paid by the Chinese. That's absolutely incorrect. The U.S. company that imports the goods are the ones that pay these tariffs. And unfortunately, in many cases, they have to be passed on to the consumer. So in reality, the U.S. people in the United States are the ones that are paying the duties that were imposed. And these are not small duties. I know when they rolled out, they there was a scale. But what are what are these duty rates that are affected by the three oh ones? They started initially they started at most of them at seven and a half percent. And they escalated in different sequences to in some cases 15 and in some cases 25%. Now, to put that into perspective, if an item costs a dollar and there's a 25% duty on it, that brings the cost up to a dollar 25, which is quite significant. And again, the idea was to discourage people from buying goods in China and sourcing their materials elsewhere. And then that that 301 is in addition to the base duty rate, if applicable. So you could be importing something from China and paying 5% and then you pay another 25%. So in essence, you're paying 30% duty on that product. Exactly. And that example is a low number. There are some items that come in from various countries. Textile goods are an example where the duties could be 15 to 20%. So you could be paying 40 to 45% of the cost in duty before you even get the material into the United States, let alone the transportation costs. So the and so paying all that duty is a huge hit on importers into the United States. So how can they claim a refund on the 3001? Are they eligible for duty? Drawback? Well, there are several ways that they can get the money back. Over the years, there were exemptions. Everything wasn't put on duty. But by definitely companies that imports the goods into the United States and are forced to pay the 301 tariffs from China can get 99% of the duty recovery if these goods are subsequently exported from the United States. So how would someone go about establishing a drawback program in order to get these three on one's back? Well, it's a it's a two step process. The first step is to establish the applications and the approvals from U.S. Customs and Border Protection. And then the second step is to gather the proper documentation that would allow one to be compliant with the regulations and in turn recover the duties that are paid upon importation. When you in turn export the materials. And then what do you see for the three ones going forward? So when they initially rolled out, there was some thought that they would be temporary and then they would be lifted. Here we are four years later and we're still paying the three oh ones. What do you think the future holds. Of the future for the 301 tariffs in probably in the foreseeable future. They will continue. The relationship between the United States and China has gotten worse. The Chinese have in turn decided that they want to have a larger battle with the United States economically and they are doing things that are not beneficial to the U.S. and therefore, the United States will probably keep these tariffs in place for a long time. The solution is that many, many companies in the United States are resourcing their goods outside of China. But as you pointed out, you know, in the interim, if people are paying the duties for Chinese goods and in turn can export them, duty drawback is a great opportunity to recover as much of the duty as is allowable under the exportation. Rights so that a lot of the companies that are that are, for lack of a better word, stuck sourcing their products from China. And they're paying these huge three ones on top of their base duties. If they're exporting their goods, they can claim drawback and they can get that back. Absolute. Absolutely. And it's a big it's a big number. We've been doing drawback for companies for many, many years. And there are two levels. There are companies that have always sourced goods from China and are now being able to get those duties back. And these companies that had never paid a duty before, there are you have to understand the tariff. But many items come into the United States because of what they are duty free. And what happened with the 301 tariffs were that although the normal duty is free, this three or one tariff is put on things. So people could had been bringing in goods duty free into the United States from China, and they're now paying 15, 25% duty on them. These people were probably not even aware because drawback was not an opportunity for them in the past to take advantage of the duty drawback regulations. And if you're if you're importing from China and you're paying a301i know that we talked a little bit about exemptions, but what are exclusions in regards to the three oh ones? Well, certain things have been excluded from the duty and very few of them, they've gone through the courts, which we may be bit into later the different levels. That's 301 tariffs have been put on four different times. And the many of the people in the United States have been fighting these tariffs. There's many companies that decide they don't want to source from another country and they want to get this exemption, this elimination of their tariffs. And they fought many times for a long time, probably two years now, about trying to remove some of these tariffs that have been put on the the exclusions that you mentioned. If your item meets one of the criteria for the exclusion and it's very precise, it's by product and it's by harmonized tariff number, you can be excluded. There are many companies that don't realize that their items are excluded and could have looked at, or maybe they should look at what their item is, learn how to classify it properly to see if it is part of the exclusion for these 301 tariffs. What types of items are eligible for an exclusion? Basically, just as I you you mentioned before, that they were rolled out and the three ones were rolled out in four waves. So to say actually five because the fourth wave was a two parter. But of those items that we that came out in those lists, which ones do qualify for an exclusion. There are there are various things that are excluded that could be a specific item that's made from plastic that fits a certain a certain requirement, the certain job that's being done by it. It could be a metal item that is used in a specific application. There aren't really I don't have off the top of my head a list of all of the items, but there are many, many lists of items and one that wants to look at it can on the U.S. Customs website determine which items have been eliminated. I can't believe you don't have that list on the top of your head. Well, the top of my head has a little hair on it, but. So what would your advice be to people who are listening And they're they're paying the 301. They're not eligible for an exclusion. They can source their items elsewhere, but they're exporting. Well, it's it's fairly obvious for a company that specializes in duty drawback that they should definitely look at how to get their money back through a duty drawback process. Another thing that should be remembered about these 301 tariffs is that there's been a legal a court battle for the last three years, two years, excuse me. And companies have tried to get exclusions and get the elimination of the third and fourth round of exemptions. And the government there's been a a case with the Court of International Trade that has just ruled with three judges. They've ruled against the claimants, and which means that these duties are going to stay in place. And many of these companies had thought they were going to get the exemption and it's not going to happen. And these companies, if any one of these listeners or ones that had paid these duties, I would strongly suggest that you start looking at duty drawback, because if you do that drawback allows you to go back five years so you can go back and recover many of these duties that were put in place for five years ago, which would definitely help your bottom line. That is true. So I think we've covered a lot today. We've given everybody a little bit of information about the three oh ones. We have a lot of information and some other webinars and podcasts about the 301 tariffs on our website. So anybody listening today, I encourage them if they want some more information or we didn't talk about something they were interested in today to visit our web site tariff management dot com or give us a call 2037578777. I know you for one are always willing to chat with somebody and see if we can help them out and help them recover some of those three on ones that they've paid and see if we can help you increase your bottom line. So thank you so much for sitting down with me today. You're very welcome. Always enjoyed talking about tariffs. You know you do. And we enjoy hearing you talk about tariffs. So thank you all for joining us today. And as I mentioned, this is our second in a series of frequently asked questions in regards to customs related issues. We talked about duty drawback last month and today was the three O ones. And next time we'll be talking about class vacation, which I know Jay loves to talk about, So maybe he will join me again. It will be my pleasure. I think there's a million eyes and millions of dollars to be saved by importers that do not look at the classification situation properly. And we hope that they would listen. And because we are sure that we can help them recover a significant amount of money by classifying their products properly. Great. What a teaser. I love it. That wasn't even that wasn't even planned. Perfect teaser. Thank you again, everybody. And thank you, Jay. You're very welcome. We hope you've gained some valuable insight into the world of customs tariffs. With all the supply chain challenges, the world is facing, our aim is to maximize your duty drawback dollars and boost your bottom line. We hope you'll subscribe to our podcast to stay current with each new episode in which will unveil numerous ways to improve your international trade profitability. Thanks for listening.