Goods Originating Under USMCA May Be Subject to Section 301 Tariffs

Companies moving goods between the US and Mexico should be aware of a recent United States Customs Service ruling declaring that certain Chinese-origin goods deemed originating in North America for purposes of the United States-Mexico-Canada Agreement (the “USMCA”) can nevertheless be subject to Section 301 tariffs.

On September 11, 2020, the United States Customs Service issued a letter ruling which affirmed that certain goods of Chinese origin moving between the United States, Canada and Mexico may be considered originating in North America for purposes of the USMCA. The facts underlying this ruling included goods of Chinese origin which were imported to but not altered in Mexico and were only subject to picking, packing and shipping services in Mexico. A related ruling by Customs and Border Patrol deemed such Chinese origin goods to be originating in North America for purposes of the USMCA and eligible for USMCA preferential tariff treatment when imported into the United States. However, the United States Customs Service found such originating goods are still subject to the Section 301 tariffs if they are ultimately Chinese in origin.

Section 301 tariffs are currently being challenged in the Court of International Trade, but as of this date no injunction has been entered regarding enforcement of the tariffs while the case is pending. Contact your Honigman relationship attorney for more information.