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Year-End Alert: Duties on Many U.S. Imports to Increase January 1, 2021

Posted December 29, 2020

Several duty relief measures that currently provide zero or reduced tariff rates for a vast number of imported goods are set to expire at the end of the year, owing to the U.S. Congress failing to reauthorize them in a timely manner, or in the case of the Section 301 exclusions, because of “the cumulative effect” these exemptions were thought to be having on the effectiveness of the administration’s trade enforcement action against China. 

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Which Duty Relief Measures Will Soon Be Expiring?

Effective January 1, 2021, the following duty relief programs and temporary measures are set to expire: 

  • Generalized System of Preferences (GSP) Renewal
  • China 301 Tariff Exclusions
  • Miscellaneous Tariff Bill (MTB) Suspensions

As a result of these changes in the tariff status of thousands of products, customs brokers’ processes and clearance of imports will be affected significantly at the start of 2021.


Generalized System of Preferences Expiration

Starting on January 1, 2021, roughly 5,000 products from nearly 120 beneficiary countries that had been previously treated as duty-free, will require duties (at the “Most Favored Nations” rate) to be paid by importers.

Established by the Trade Act of 1974, the GSP is the largest and oldest U.S. trade preference program. The GSP aims to promote economic growth in developing parts of the world by eliminating duties on thousands of imported products from qualifying beneficiary countries. 

Renewal on the program is widely considered likely in early 2021 when it will become retroactive to January 1st (as has been the case on several previous occasions when Congress allowed the GSP to expire prior to being renewed). In the meantime, as per this recent guidance, U.S. Customs is expected to identify and flag GSP-eligible imports and will be collecting the applicable duties until the program is once again extended.


Section 301 Exclusions

Section 301 tariffs are duties currently being applied to a large majority of Chinese products following their imposition in 2018 as the Trump administration’s trade war with Beijing escalated.

During the past two years, a series of Section 301 exclusions granted by the U.S. Trade Representative has shielded many U.S. businesses from the steep duties that would otherwise apply to a wide range of Chinese inputs and goods not readily available from domestic production. 

Hundreds of the Section 301 China tariff exclusions are now set to expire on January 1, 2021

  • Importers will be required to pay 25% or 7.5% trade tariffs on products from China.

Note: A relatively few exclusions (e.g., for medical-care products related to COVID-19) have been extended until March/April of 2021. Please refer to the 32-List 1 Exclusions and 8-List 1 Exclusions for more details.


Miscellaneous Tariff Bill Expiration

The Miscellaneous Tariff Bill temporarily suspends or reduces import duties on 1,660 products, primarily intermediate goods or materials used in domestic manufacturing, from Oct. 13, 2018, through Dec. 31, 2020. As such, all temporary duty suspensions under the U.S. Harmonized Tariff Schedule Heading 9902 will expire on January 1, 2021.

  • Importers will be required to pay normal MFN duty rates as of the start of the new year.

During the current review cycle, the International Trade Commission reported that it considered 3,442 duty relief petitions and indicated that nearly 2,700 of them meet or could meet (with minor modifications) the requirements for approval. This expanded range of products could be included in renewed MTB legislation should this be taken up by a new session of Congress in 2021.

Note: If these temporary duty provisions are eventually reinstated next year, it remains unclear at this point whether they would be made retroactive to January 1.


Need More Information?

We advise that importers review their year-end arrivals that may be affected by these deadlines and ensure that entries are promptly filed to avoid incurring the tariff increases scheduled currently for Jan. 1, 2021.

Should you have any questions about the impact of these changes and/or steps that can be taken to mitigate them, please don’t hesitate to reach out to one of our knowledgeable trade experts. 

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