End of Year Tariff Increases on Goods from China

TCB+Blog+Tariff+Increase.jpg

The pain felt by many US importers during the last nine months is about to increase, for those who purchase any of a very broad range of goods from China.  The latest group of such items were hit with a 10% “additional duty” tariff about two months ago.  Now, that “additional duty” tariff rate on those items is scheduled to increase to 25% on January 1, 2019.

Importers who bring in shipments of affected types of goods and complete the customs entry process by December 31 will be able to “enjoy” the 10% additional duty rate.  Those who do not both import their shipments and complete the entry process by that date will be stuck, paying the higher 25% “additional duty” rate, on top of any applicable previous “general duty” rate.

How does this work, from a practical perspective?  In the US, the customs entry procedure is a “two step” process:

1.      cargo release

2.      entry summary (including payment of customs duty/fees)

The “cargo release” part of the process starts when the customs broker (or direct-filing importer) electronically sends the entry data to US Customs.  Customs reviews the data, and makes an “admissibility” decision.  If the decision is “yes, these goods are admissible” Customs then sends a preliminary cargo release authorization to the filer, and to the importing carrier.  If the shipment has already been electronically “arrived” at the port of clearance, that preliminary authorization immediately becomes a full cargo release.

If the shipment has not yet been “arrived” at the port of clearance, the preliminary release is “held” in suspense, until the shipment is electronically arrived, and only then becomes a full cargo release.  So, the actual cargo release date is the later of the dates that:

  * Customs issues the cargo release authorization, or

  * the shipment is electronically “arrived” at the port of clearance.

There is also an exception for shipments which arrive at one US port and move in-bond to another port for customs clearance.  These are generally subject to the duty rate which was in effect at the time the in-bond transportation entry was filed at the port of first arrival, rather than the duty rate in effect at the port of eventual clearance at the time the consumption entry is completed there, if there is a difference in those duty rates.  To take advantage of this exception, however, the consumption entry (and its entry summary) must be complete before the date of actual change in duty rate.

The “entry summary” data can be filed up to ten business days after the cargo release date.  (This excludes Saturdays, Sundays, and US Federal holidays.)  As part of the entry summary filing process, the entry filer authorizes US Customs to withdraw the appropriate amount of customs duty and fees for that entry, from the filer’s Automated Clearing House (ACH) account used for paying those charges, and transmits the final entry summary data, including any changes made between the cargo release and entry summary dates.  When Customs accepts the payment authorization, and the entry summary data, the two steps of the customs entry process are complete.

However, the importer (or customs broker) does not have to wait until that tenth working day after cargo release is complete, to complete the second step of the process. 

Example #1: A shipment arrives at the US port of clearance on Tuesday 12-18-2018.  Entry is filed and the shipment is released that same day.  The tenth working day after cargo release is January 3.  (The ten business days after release are Dec. 19-21, 24, 26-28, and 31, and Jan. 2-3.)  If the shipment includes goods subject to the current 10% “additional duty” rate, and the entry summary is filed and duty paid (and accepted by Customs) on or before Dec. 31, the rate paid will be the current 10% “additional duty”, plus any applicable general duty rate.

If the “additional duty” rate increases to 25% effective Jan. 1 as scheduled, and the entry summary is filed and duty paid on Jan. 2 or 3, the rate paid will be the new 25% “additional duty”, plus any applicable general duty rate.

Example #2: A shipment arrives at the US port of clearance on Thursday Dec. 27, but US Customs does not issue a cargo release authorization until Wednesday Jan. 2.  (In this example, it doesn’t matter whether the entry was filed in 2018 but not released by Customs until 2019, or whether both happened in 2019.)  If the “additional duty” rate has increased to 25% by this time, the rate paid will be the new 25% “additional duty”, plus any applicable general duty rate.

Example #3: A shipment arrives at the US port of clearance on Sunday Dec. 30.  Entry is filed and the shipment is released that same day.  The tenth working day after cargo release would be Jan. 14, but the entry filer schedules entry summary including duty payment for Monday Dec. 31, the first working day after cargo release.  If the shipment includes goods subject to the current 10% “additional duty” rate, and the entry summary is filed and duty paid (and accepted by Customs) on Dec. 31, the rate paid will be only the current 10% “additional duty”, plus any applicable general duty rate.

To take advantage of the difference between 10% and 25% in “additional duty” charges on affected types of Chinese goods:

  * Get your shipments of these into the US as early as you can, preferably by mid-December.

  * For shipments arriving mid-December or later, work closely with your customs broker to schedule entry summary filing and duty payment to minimize your duty liability.

To review your options, and identify opportunities to save what could be a lot of money, please contact Transmark Customs Brokers – we’re here to help you!