Flooring Entries Wrongly Hit With 10% Section 301 Tariffs Subject to Exclusion, Importer Says
CBP unlawfully applied 10% Section 301 duties to importer Shaw Industries Group's Chinese flooring entries, since the goods were subject to an exclusion from the tariffs, Shaw argued in an Aug. 29 complaint at the Court of International Trade (Shaw Industries Group v. United States, CIT # 21-00400).
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Shaw's entries were made between May 11, 2019, and June 21, 2019. The importer said in May 2019 that the Office of the U.S. Trade Representative created through a Federal Register notice an "on the water" exception to goods subject to the 25% Section 301 duty on China. The exception said goods subject to the tariffs and exported prior to May 10, 2019, aren't subject to the additional 25% Section 301 duty but are subject to the original 10% Section 301 tariff rate so long as the products are entered before June 1, 2019.
The notice amended the Harmonized Tariff Schedule to create a new secondary subheading, 9903.88.09, for goods that qualify for the exception. The exception was then extended to cover all goods exported on or after May 10, 2019, and entered prior to June 15, 2019.
However, in May 2020, USTR then granted an exclusion for Shaw's flooring entries, which completely exempted the company's products from any Section 301 duties.
The exclusion created a new secondary subheading, 9903.88.46, for the importer's products and specified that it was to apply to all of Shaw's imports classified under HTS subheading 3918.10.1000. Shaw said that as a result of the notice, its products weren't subject to "any List 3 duties while the exclusions were in effect, i.e., from September 24, 2018 to August 7, 2019."
However, USTR's notice included a mistake -- the appendix covering the goods that the exclusion applied to failed to include the new secondary subheading, 9903.88.09. Shaw said this "appears to have been an oversight and led to the odd result that entries covering the small period of time set out in the 'on the water' exception were not subject to an exclusion covering all other goods entered between September 24, 2018 and August 7, 2019."
USTR then recognized the error and amended the notice for Shaw, though not before CBP assessed the 10% tariff on Shaw's goods. While the secondary subheading covering entries subject to the flooring exception weren't added to the HTS at the time CBP denied Shaw's protest, the language of USTR's technical amendment and CBP's CSMS message implementing the amendment "make it clear that the amendment should retroactively apply to the entries in question," Shaw said.
Thus, Shaw said it was improperly subject to the 10% Section 301 duty.