A legal way to avoid China 301 tariff is to source one essential component of an
article from someplace other than China. We have assisted clients, with
concurrence from Customs, to implement this mitigation strategy. It is a
strategy many importers have employed.
For example, Yamaha Motor Corporation, USA, imports motorized bicycles assembled in
China from the components
made in China, Japan, and Taiwan. The frame is from Taiwan, which makes the
entire bike, assembled in the China with significant Chinese components, a
product of Taiwan.
This mitigation strategy works due to two CBP practices regarding country of origin
1. Simple assembly
does not confer origin. "Simple assembly means the fitting together of
five or fewer parts all of which are foreign (excluding fasteners such as
screws, bolts, etc.) by bolting, gluing, soldering, sewing or by other means
without more than minor processing."
transformation confers origin." The substantial transformation
criterion is based on a change in name/character/use method (i.e., an article
that consists in whole or in part of materials from more than one country is a
product of the last country in which it has been substantially
transformed into a new and different article of commerce with a name,
character, and use distinct from that of the article or articles from which was
so transformed)." The test for determining whether a
substantial transformation will occur is whether an article emerges from a
process with a new name, character or use, different from that possessed by the
article prior to processing.
When determining country of origin of an article that underwent a
simple assembly operation in the last countries of processing before
importation, Customs looks to the country of origin of the components of the
articles. Where the components were made determines the country of origin of
the article. When the components come from multiple countries, Customs will try
to determine what component imparts the "essential character" of the
article. In the case of the bikes assembled in China (simple assembly) of
components from China, Japan, and Taiwan, Customs ruled that when steel was
substantially transformed into a bike frame in Taiwan, that frame took on the
character of a bike. In general, Customs is able to determine the single
component that confers origin. Many importers of articles assembled in China
have relied on that practice to avoid China 301 tariffs by identifying the
single component that determines what the article is and relocating the
sourcing of that component out of China.
Recent (May 18, 2021) Customs guidance regarding imported golf
clubs raises questions.
Complete golf clubs are made of prefabricated components
consisting of a head, shaft, and grip. These components may be manufactured in
multiple countries and are subject to Section 301 duties if the country of
origin is China.
While the entire golf club has one tariff classification,
the country of origin of the components of the golf club may need to be
Here's where it gets interesting. If either the
head or the shaft is of the same origin as the country where the assembly of
the golf club occurs, the country of origin of the entire club is the country
of its assembly.
But, where the origin of both the head and the
shaft is different from the country of assembly of the golf club, the golf club
will have multiple countries of origin, including the countries of origin of
the head and the shaft.
Where a golf club has multiple countries of origin, importers
must report the applicable trade remedies on each golf club component This will
allow reporting of the correct country or countries of origin, value and any
applicable Section 301 duties. Customs gives the example of a golf club
assembled in Mexico of head from Taiwan, shaft from China, and grip from
Mexico. The value of the Chinese-origin shaft is subject to 301 tariff.
Legal avoidance of China 301 tariffs may be possible, but
Customs is actively seeking ways to maximize tariff revenues under the 301
Before you assume you can locate that one essential
character you need to research whether Customs might determine that there is
more than one essential component and potentially more than one country of
origin. In the case of golf clubs with components from multiple counties,
Customs reached back to old rulings from 1996 through 2005 that addressed the
issue. In those rulings, the question was country of origin marking. Multiple
countries had to be indicated. It had no effect on the tariff because it was
the same for each country. Now that China has a higher tariff, Customs has
become very interested in an old question of country of origin. This raises
questions about other articles with multiple essential components. Customs has
found a way to take some old ruling relating to marking and turn them in tariff
revenue. Will they be coming for your imports next?
Customs regulations are complex, and ever changing. Failure
to comply, even if not intentional, may result in unexpected tariff charges and
potential penalties. Don't try to go it alone, seek professional assistance
before you try to reduce or eliminate 301 tariffs
An initial analysis of your businesses' import patterns is offered free of
charge. This preliminary assessment will allow us to determine the best
strategy to mitigate 301 tariffs or other import costs. Contact Glenn at firstname.lastname@example.org or David email@example.com or by calling
David at 617-285-6004 or Glenn at 603-957-8247.