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On April 6, 2018, the U.S. Trade Representative (“USTR”) gave notice of its determination that the “acts, policies, and practices of the Government of China related to technology transfer, intellectual property, and innovation covered in the [Section 301] investigation are unreasonable or discriminatory and burden or restrict U.S. commerce.”[1] As a result, the USTR has imposed increased tariffs on certain products imported from China, as set out in the chart below. Section 301 Tariffs At a Glance
*A proposed increase from 25% to 30% for Lists 1, 2, and 3 was scheduled for October 1, 2019.[11] However, pursuant to comments made by Secretary Mnuchin, these increases will not be implemented, pending the "phase one" trade agreement between the United States and China (as announced on October 11, 2019).[12]
Section 301 Tariffs Timeline LIST 4 August 20, 2019 – The USTR imposed a 10% tariff on List 4A products (September 1, 2019 effective date) and List 4B products (December 15, 2019 effective date).[13] Products subject to List 4 can be found here. August 30, 2019 – List 4 tariffs are increased from 10% to 15%. The increase applies to List 4A products, effective September 1, 2019, and to List 4B products, effective December 15, 2019.[14] January 31, 2020 – Deadline to request a product exclusion for List 4A tariffs.[15] LIST 3 September 21, 2018 – The USTR imposed a 10% tariff on List 3 products (September 24, 2018 effective date).[16] Additionally, it was announced that the tariff would increase to 25%, effective January 1, 2019.[17] Products subject to List 3 can be found here. September 28, 2018 – The USTR modified its September 21, 2018 announcement to ensure conformity in its subheadings of the Harmonized Tariff Schedule of the United States (“HTS”), effective October 1, 2018, per the Presidential Proclamation of July 30, 2018 (Proclamation 9771).[18] December 19, 2018 – The 25% tariff increase is postponed until March 2, 2019.[19] March 5, 2019 – The USTR announced that the 25% tariff increase is postponed “until further notice.”[20] May 9, 2019 – List 3 tariffs are increased from 10% to 25%, effective May 10, 2019.[21] May 15, 2019 – The USTR announced an interim period for certain products exported prior to May 10, 2019 and entered into the U.S. prior to June 1, 2019, that are not subject to the increased 25% tariff duty (products imported during this interim period remain subject to the original 10% tariff).[22] June 10, 2019 – The USTR extended the interim period end date from June 1, 2019 to June 15, 2019. The updated interim period applies to products that are exported prior to May 10, 2019, so long as these products are entered into the U.S. prior to June 15, 2019.[23] September 30, 2019 – Deadline to request a product exclusion for List 3 tariffs.[24] Exclusions granted for List 3 can be found here. LIST 2 August 16, 2018 – The USTR imposed a 25% tariff on List 2 products.[25] Products subject to List 2 can be found here. December 18, 2018 – Deadline to request a product exclusion for List 2 tariffs.[26] Exclusions granted for List 2 can be found here. LIST 1 June 20, 2018 – The USTR imposed a 25% tariff on List 1 products.[27] Products subject to List 1 can be found here. October 9, 2018 – Deadline to request a product exclusion for List 1 tariffs.[28] Exclusions granted for List 1 can be found here. HTS Search To check whether your products are affected by the Section 301 tariffs, please use the following link: HTS Search. In order to use this link, you must know your HTS Subheading, which can be found on your CF 7501. If you do not know your HTS Subheading, please contact your supplier, distributor, or customs broker. Section 301 Exclusion Requests An importer or an interested party (such as a trade association) may submit a Section 301 tariff exclusion request, if the product exclusion request period is open for that list. If an importer is granted an exclusion, such exclusion is not limited specifically to that importer or manufacturer, as the exclusion is product-specific.[29] Requesters must address, at a minimum, the following criteria:[30]
For further assistance in requesting an exclusion, or in otherwise mitigating the impact of this tariff increase through review of tariff classification, country of origin, or other import matters, please contact our office for a consultation. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. [1] Notice of Determination and Request for Public Comment Concerning Proposed Determination of Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 14,906 (Apr. 6, 2018), https://www.govinfo.gov/content/pkg/FR-2018-04-06/pdf/2018-07119.pdf. [2] Notice of Action and Request for Public Comment Concerning Proposed Determination of Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 28,710 (Jun. 20, 2018), https://ustr.gov/sites/default/files/2018-13248.pdf. [3] Notice of Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 40,823 (Aug. 16, 2018), https://ustr.gov/sites/default/files/enforcement/301Investigations/2018-17709.pdf. [4] Notice of Modification of Section 301 Action: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 47,974 (Sep. 21, 2018), https://www.govinfo.gov/content/pkg/FR-2018-09-21/pdf/2018-20610.pdf. [5] Notice of Modification of Section 301 Action: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 84 Fed. Reg. 20,459 (May 9, 2019), https://ustr.gov/sites/default/files/enforcement/301Investigations/84_FR_20459.pdf. [6] Additional Implementing Modification to Section 301 Action: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 84 Fed. Reg. 26,930 (Jun. 10, 2019), https://ustr.gov/sites/default/files/enforcement/301Investigations/Additional_Implementing_Modification_to_Section_301_Action.pdf. [7] Notice of Modification of Section 301 Action: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 84 Fed. Reg. 43,304 (Aug. 20, 2019), https://www.govinfo.gov/content/pkg/FR-2019-08-20/pdf/2019-17865.pdf. [8] Notice of Modification of Section 301 Action: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 84 Fed. Reg. 45,821 (Aug. 30, 2019), https://ustr.gov/sites/default/files/enforcement/301Investigations/Notice_of_Modification%E2%80%93August_2019.pdf. [9] n7. [10] n8. [11] Request for Comments Concerning Proposed Modification of Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 84 Fed. Reg. 46, 212 (Sep. 3, 2019), https://www.govinfo.gov/content/pkg/FR-2019-09-03/pdf/2019-18946.pdf. [12] United States, Oval Office, Remarks by President Trump and Vice Premier Liu He of the People's Republic of China in a Meeting (Oct. 11, 2019), https://www.whitehouse.gov/briefings-statements/remarks-president-trump-vice-premier-liu-peoples-republic-china-meeting/. [13] n7. [14] n8. [15] Procedures for Requests To Exclude Particular Products From the August 2019 Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 84 Fed. Reg. 57,144 (Oct. 24, 2019), https://www.govinfo.gov/content/pkg/FR-2019-10-24/pdf/2019-23181.pdf. [16] n4. [17] n4. [18] Conforming Amendment and Modification to Section 301 Action: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual property, and Innovation, 83 Fed. Reg. 49,153 (Sep. 28, 2018), https://www.govinfo.gov/content/pkg/FR-2018-09-28/pdf/2018-21303.pdf. [19] Notice of Modification of Section 301 Action: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 65, 198 (Dec. 19, 2018), https://ustr.gov/sites/default/files/enforcement/301Investigations/83_FR_65198.pdf. [20] Notice of Modification of Section 301 Action: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 84 Fed. Reg. 7,966 (Mar. 5, 2019), https://ustr.gov/sites/default/files/enforcement/301Investigations/84_FR_7966.pdf. [21] n5. [22] Implementing Modification to Section 301 Action: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 84 Fed. Reg. 21,892 (May 15, 2019), https://ustr.gov/sites/default/files/enforcement/301Investigations/2019-09990.pdf. [23] n5. [24] Procedures for Requests To Exclude Particular Products From the September 2018 Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 84 Fed. Reg. 29,576 (Jun. 24, 2019), https://ustr.gov/sites/default/files/enforcement/301Investigations/Procedures_for_Requests_to_Exclude_Particular_Products_from_the_September_2018_Action.pdf. [25] n3. [26] Procedures to Consider Requests for Exclusion of Particular Products From the Additional Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 47,236 (Sep. 18, 2018), https://ustr.gov/sites/default/files/enforcement/301Investigations/2018-20246.pdf. [27] n2. [28] Procedures to Consider Requests for Exclusion of Particular Products From the Determination of Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 83 Fed Reg. 32,181 (Jul. 11, 2018), https://ustr.gov/sites/default/files/enforcement/301Investigations/FRN%20exclusion%20process.pdf. [29] E.g. Office of the U.S. Trade Representative, FAQ’s for Product Exclusion Process on Additional $200 Billion Trade Action, https://ustr.gov/sites/default/files/enforcement/301Investigations/%24200_Billion_Trade_Action_Exclusion_Process_FAQs.pdf. [30] n29. [31] The Made in China 2025 Initiative “is the latest in a series of ambitious state-led programs introduced by the Chinese government that seek to modernize the Chinese economy, boost productivity, and make innovation a driver of economic growth.” Critics of the initiative “contend that the plan represents a state-directed industrial policy intended to reduce not only China’s dependence on foreign technology but to help Chinese firms become dominant global players in numerous advanced industries.” Congressional Research Service, The Made in China 2025 Initiative: Economic Implications for the United States (Apr. 12, 2019), https://fas.org/sgp/crs/row/IF10964.pdf. Importers need to be aware of the many laws and regulations that govern imports, as failing to adhere to these laws can lead to serious consequences. 19 U.S.C. § 1592 permits U.S. Customs and Border Protection (“CBP”) to issue civil penalties against importers for customs law violations. In 2017 alone, more than $253.6 million in penalties were levied on importers for fraud, gross negligence and negligence for antidumping and countervailing duty (“AD/CVD”) violations.[1]
What Is Prohibited? 19 U.S.C. § 1592 prohibits an individual from entering merchandise into the United States through fraud, gross negligence, or negligence, “by means of any document or electronically transmitted data or information, written or oral statement, or act which is material and false, or any omission which is material.”[2] Aiding or abetting another person to do the same is also prohibited.[3] Prior Disclosures In order to avoid a 19 U.S.C. § 1592 penalty, an importer should be knowledgeable about, and should ensure compliance with, the applicable laws and regulations. However, if an importer discovers that there might have been a violation of 19 U.S.C. § 1592, submitting a prior disclosure. and paying the applicable duties owed, could allow the importer to avoid or mitigate these harsh penalties. A prior disclosure provides for reduced maximum penalties where an importer discloses the circumstances of a violation prior to, or without knowledge of, CBP’s commencement of a formal investigation of such violation. Due to the technical issues involved in submitting a prior disclosure, it is always advised that the importer contact a trade or customs attorney to assist them in such matters. 19 U.S.C. § 1592 Notices and Assessed Penalties If CBP finds reason to believe that an importer has violated the provisions of 19 U.S.C. § 1592, CBP will issue a pre-penalty notice, typically providing the importer with thirty (30) days to respond and to provide any reasons why they should not be penalized.[4] In the event that CBP does assess penalties under 19 U.S.C. § 1592, a penalty notice will be sent to the importer. The maximum penalty assessable will depend upon the level of culpability determined to be present, but the actual penalty assessed against the importer may be able to be mitigated after receipt of the penalty notice. The maximum penalties, and their respective categories of culpability, are as follows:
If you are an importer and have reason to believe that a 19 U.S.C. § 1592 violation has occurred, or if you have been sent a pre-penalty or penalty notice and need expert legal advice, please contact our office to speak with an experienced customs lawyer. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. [1] U.S. Customs and Border Protection, CBP Trade and Travel Fiscal Year 2017 Report 6 (Feb. 13, 2018), https://www.cbp.gov/sites/default/files/assets/documents/2018-Feb/CBP-FY17-Trade-and-Travel-Report-Final.pdf [2] 19 U.S.C. § 1592(a)(1). [3] n2. [4] See 19 U.S.C. § 1592(b)(1). [5] 19 C.F.R. Appendix B to Part 171(C)(3). [6] 19 U.S.C. § 1592(c)(1). [7] 19 C.F.R. Appendix B to Part 171(C)(2). [8] 19 U.S.C. § 1592(c)(2). [9] 19 C.F.R. Appendix B to Part 171(C)(1). [10] 19 U.S.C. § 1592(c)(3). With the global marketplace continuing to expand at an exponential rate, it has become increasingly more difficult for brand owners to control the distribution channels for their goods. Consequently, this has enabled a market for “gray market goods” to rapidly develop. Gray market goods are goods that are legitimately produced and sold in a foreign country under the authorization of the U.S. brand owner, “but which are imported and sold in the United States without the consent of the U.S. distributor of like domestic goods.”[1] “Although the goods are genuine in that they bear an authentic, rather than a copied or simulated mark, they may have been produced for foreign markets and consequently may be of an inferior quality to that of the product in which the trademark owner has developed a good-will and reputation in the U.S. market.”[2] Moreover, sellers of gray market goods are often able to offer them for sale at a lower price than domestic authorized goods – directly harming the market for domestic authorized goods. “Unlike counterfeit (black market) goods . . . gray [market] goods may be lawfully sold in the United States if they are identical to their U.S. cousins.”[3] However, there are steps that a brand owner can take to limit the importation of gray market goods into the U.S. Protecting Yourself Against the Gray Market Brand owners should take advantage of the ability to record their trademarks with U.S. Customs and Border Protection (“CBP”), so that CBP can assist in preventing the importation of gray market goods. While a recorded trademark alone will not result in CBP stopping gray market goods from entering the United States, brand owners are also able to apply for Lever Rule protection, if they are able to identify physical material differences between the U.S. authorized goods and the gray market goods entering the U.S.[4] Knowing what to look for to identify gray market goods, and to subsequently show a material difference, is therefore key. While this list provides a good starting point of what to look for to identify gray market goods, it should not be construed as exhaustive:
Further Enforcement Options Some further enforcement options include: sending cease and desist letters, initiating infringement actions, and instituting a Section 337 proceeding at the International Trade Commission (“ITC”). For instance, the Lanham Act offers a number of remedial measures to those who are harmed by the distribution of unauthorized gray market goods. Such measures include seeking an order of exclusion, and various monetary relief measures, such as disgorgement of profits.[6] As is the case with CBP recordation, in order to be awarded any form of relief under the Lanham Act, it must be proven that a material difference exists between the authorized and gray market goods.[7] “In such cases, a material difference between goods simultaneously sold in the same market under the same name creates a presumption of consumer confusion as a matter of law.”[8] Pursuant to Societe Des Produits, when a manufacturer is able to show that the unauthorized goods have even a single material difference, the distribution of those goods in the U.S. marketplace is unlawful.[9] A Section 337 proceeding at the ITC is also an attractive option for brand owners, as it is often quicker than bringing a District Court case. Moreover, after finding infringement, the Commission can offer the following injunctive remedies: a cease-and-desist order, providing a complete injunction against sales-related activity in the United States; and an exclusion order, prohibiting the infringing goods from entering the U.S.[10] If you are a brand owner and are affected by the importation of gray market goods, contact our office to learn more about your options in obtaining relief. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. [1] https://apps.americanbar.org/buslaw/blt/2009-11-12/mendelsohn-stanton.shtml [2] Donna M, Lach, Note and Comment: The Gray Market and the Customs Regulation – Is the Controversy Really Over After K Mart Corp. v Cartier, Inc.?, 65 Chi.-Kent L. Revi. 221, 221 (1989). [3] n1 (emphasis added). [4] See 19 C.F.R. § 133.23. [5] https://www.bbb.org/new-york-city/get-consumer-help/articles/gray-market-goods/ [6] n1 (referencing 15 U.S.C. § 1114; 15 U.S.C. § 1124; and 15 U.S.C. § 1125). [7] n6. [8] Societe Des Produits Nestle, S.A. v. Casa Helvetia, Inc., 982 F.2d 633, 640 (1st Cir. 1992). [9] n8, at 641. [10] See 19 U.S.C. § 1337(d) and (f). On February 19, 2019, the Coalition for Acetone Fair Trade filed an anti-dumping (“AD”) petition on behalf of AdvanSix Inc., Altivia Petrochemicals, LLC, and Olin Corporation, challenging imports of acetone from Belgium, Korea, Saudi Arabia, Singapore, South Africa, and Spain.
Dumping occurs when exporters of a product, in this case acetone, price that good in the U.S. market for less than normal value, or below cost of production. The petition—filed with both the International Trade Commission and the U.S. Department of Commerce—enables the U.S. government to investigate whether exporters from the listed countries have been dumping acetone into the U.S. market. Upon a finding that there is in fact dumping, and that there is a “material injury” or “threat of a material injury” to the domestic industry as a result of the dumping, the U.S. government can impose AD duties on those affected goods. The filing of this petition came days before AdvanSix held their Q4 2018 earnings conference call (on February 22, 2019) – during which Erin Kane, AdvanSix President and Chief Executive Officer, stated: “Elevated levels of imports into the U.S. as well as aggressive trading activity have put continued pressure on regional pricing and spreads.”[1] In the event AD duties are imposed, it would be the importers of acetone from the listed companies and countries who are affected most within the U.S. market. Scope of the Petition Acetone covered by this petition is acetone of all grades of liquid or aqueous acetone. Acetone is also known under the International Union of Pure and Applied Chemistry (“IUPAC”) name propan-2-one. In addition to the IUPAC name, acetone is also referred to as β-ketopropane (or “beta-ketopropane”), ketone propane, methyl ketone, dimethyl ketone, DMK, dimethyl carbonyl, propanone, 2-propanone, dimethyl formaldehyde, pyroacetic acid, pyroacetic ether, and pyroactic spirit. Acetone is an isomer of the chemical formula C3H6O, with a specific molecular formula of CH₃COCH₃ or (CH₃)₂CO. The scope includes acetone that is combined or mixed with other products, including, but not limited to: benzene, diethyl ether, methanol, chloroform, and ethanol. For such combined products, only the acetone component is covered by the scope of these investigations. Acetone that has been combined with other products is included within the scope, regardless of whether the combining occurs in third countries. Acetone that is otherwise subject to these investigations is not excluded when commingled with acetone from sources not subject to these investigations. Only the subject merchandise component of such commingled products is covered by the scope of these investigations. The Chemical Abstracts Service (“CAS”) registry number for acetone is 67-64-1. The merchandise covered by these investigations is currently classifiable under Harmonized Tariff Schedule of the United States (“HTSUS”) subheadings 2914.11.1000 and 2914.11.5000. Although these HTSUS subheadings and CAS registry number are provided for convenience and customs purposes, the written description of the scope of these investigations is dispositive. Alleged Dumping Margins The petitioners allege the following dumping margins:
If you have any questions regarding this investigation and how it may impact your future imports, please do not hesitate to contact us. [1] https://www.fool.com/earnings/call-transcripts/2019/02/22/advansix-inc-asix-q4-2018-earnings-conference-call.aspx |
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AuthorThe Law Offices of Robert W. Snyder specializes in advising companies on the legal aspects of importing and exporting goods to the United States, including import/export compliance, intellectual property issues, and trade remedies. Categories
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