Section 301 Protest Volume Seen as Potentially Overwhelming
Lawyers speaking at the Foreign Trade Association’s World Trade Week event said CBP is already drowning because of the consequences of the massive increase in post-importation tariff exclusions, and they're expecting it to get worse. Michael Roll, from Roll & Harris trade law firm, said he's betting that the Office of the U.S. Trade Representative will reopen the exclusion process for Section 301 tariffs before summer's over. But he expects it will take until late 2021 or early 2022 for exclusions to be granted, which means many imports that entered after exclusions expired, or that never had exclusions, will have been liquidated by the time the importers learn they didn't have to pay the tariff.
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He said the volume of protests is going to be impossible for CBP. Already, there were 27,000 protests covering 72,000 entries last year, and so far this year, 7,000 protests covering 33,000 entries.
If you think that's crazy, what if importers win their case that the goods subject to 7.5% tariffs on List 4a and the goods subject to a 25% tariff on List 3 should not have faced these tariffs. There are millions of entries covered by those lists (see 2105170007 and 2011100038). So lawyers in that litigation, which includes Roll, say that liquidation should be suspended until the case is decided. He said the government's position seems to be that a ruling that the tariffs were illegal is "only going to apply to tariffs going forward or not liquidated," he said May 20.
Su Ross, who chairs the regulatory practice at Mitchell Silberberg, said that for the first time in her career, she's seen CBP go past the statutes of limitation on rulings. She said a protest needs to be resolved within three months to be commercially useful, and now it's taking two, three or four years.
Panelists talked about congestion for inbound traffic at the ports, and the difficulty for exporters to get spots on ships heading back to Asia, as carriers would prefer to return more quickly with empty containers.
One webinar attendee said, "As an exporter we are not even being asked to pay higher rates for outbound containers. Our bookings are simply being rolled or canceled. It’s hard to see how this is purely an economic commercial decision."
Ross said one would hope that the Federal Maritime Commission would step in over this practice and blank sailings. "Realistically, they're not going to,” she said.
Ross said the FMC, even if it had the stomach to challenge the practice of sailing back with empty containers, the regulatory process is not a fast solution. She said she thinks a bill will be introduced to "put a stop to the nonsense," and said the National Industrial Transportation League is calling for a wholesale rewrite of the Shipping Act of 1984. "We’re going to see some changes, but we’re not necessarily going to see anything short term," Ross said.
Foreign Trade Association Vice President Mark Hirzel, who was moderating the panel, asked if, with the recent departure of three senior trade officials at CBP, the agency will be able to manage all these challenges.
Ross said, "I don’t want to suggest they can’t learn the ropes,” referring to new political appointees, but she said that with the loss of the institutional knowledge, it will be hard. "There are a lot of really good people at Customs,” she said, "but they’re in a tough spot. They’ve lost a lot of their first, second and third levels.”
Roll agreed, and added that they're authorized for 1,200 import specialists, and there are only about 800 on staff.