Ready for More Section 301 Duties? Here They Come on EU Products!
On October 2, 2019, the Office of the U.S. Trade Representative announced that the United States has won the largest arbitration award in World Trade Organization (WTO) history in its dispute with the European Union over illegal subsidies to Airbus. This award grew out of an allegation that the European aircraft manufacturer had received illegal subsidies from various European countries. Under the WTO award, the U.S. can apply special duties under Section 301 on $7.5 billion European products annually.
The final list of affected products has now been published and the additional duties will take effect on October 18th. See the list of affected countries and HTS numbers published by the USTR at the following url:
https://ustr.gov/issue-areas/enforcement/section-301-investigations/section-301-large-civil-aircraft
As one would expect, the U.S. will impose a 10% additional duty on aircraft of France, Germany, Spain, or United Kingdom origin, that are classified under HTS 8802.40.00. Will there also be special duties on aircraft parts and aircraft related items? No – the additional duties under Section 301 will be imposed primarily on consumer products. The duties vary by HTS and country of origin.
For example: There will be an additional duty of 25% on sweaters, suits, blankets and linens of United Kingdom origin. Such items as coffee, tools, magnets and lenses of German origin will take an additional 25% duty. Do you like olives? Olives of France, Germany, Spain or the United Kingdom origin (do they grow olives in Germany?) will require an additional duty of 25%.
Some of the additional Section 301 duties will apply to a large group of European countries. There will be a 25% additional duty on Swiss cheese classified under 0406.9046 from Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, or the United Kingdom. Note that Switzerland is not on the list for Swiss cheese duties. That country is not affected by this issue. Many other cheeses, pork products, butter, juices and other food products from this group of countries will take the additional 25% duty – all determined by the HTS classification.
In order to determine if a European product takes the additional duty, it will be necessary to
- determine the country of origin,
- classify it in the HTS,
- look for a footnote next to the classification referring you to Chapter 99,
(a) products provided for in new HTSUS subheading 9903.89.05 will be subject to an additional ad valorem duty of 10 percent; whereas
(b) Products provided for in new HTSUS subheadings 9903.89.10, 9903.89.13, 9903.89.16, 9903.89.19, 9903.89.22, 9903.89.25, 9903.89.28, 9903.89.31, 9903.89.34, 9903.89.37, 9903.89.40, 9903.89.43, 9903.89.46, and 9903.89.49, will be subject to an additional ad valorem duty of 25 percent. - determine if the Section 301 duty applies to that combination of country of origin and HTS.
If it does, the importer is liable for the normal duty, MPF, HMF, any special fees such as the Pork Fee, any IRS taxes on alcoholic beverages, and the Section 301 duty.
For subject goods destined to a foreign trade zone, these goods must be admitted in ‘privileged foreign status’ such that upon entry for consumption both ad valorem rates of duty and section 301 duties related to the classification under the applicable HTSUS subheading are paid.
Importers of affected products should also check their bond sufficiency.
Look for details on implementation of the special Section 301 duties to be published by U.S. Customs & Border Protection (CBP).
CBP already has its hands full dealing with issues of trans-shipment, false declarations related to aluminum and steel products, and Chinese products. Now it will face even more challenges with European products. Is the Swiss cheese made in Switzerland – or was it made in Austria and labeled as Swiss origin? It looks like the CBP laboratory will be busy doing analyses of European food products.
Are the Europeans going to sit still and accept this? No. Airbus has countered that Boeing also receives subsidies. As a result, the EU is planning to assess additional duties on specific U.S. exports, but there are rumblings this may happen sooner than when a final WTO’s decision is expected in 2020. The proposed list of European retaliatory duties includes such items as seafood, nuts, fruits, wine, tobacco. plastics, suitcases, tractors, and video games of U.S. origin.
When will these duties end? Unfortunately, there is no end in sight.
Contributing Advisors
