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August 27, 2019

Applications for Customs Duty Exemptions under the Miscellaneous Tariff Bill Are Due Soon

On August 27, the US International Trade Commission (USITC) published amended rules and procedures for the preparation and filing of Miscellaneous Tariff Bill (MTB) petitions and public comments. The new rules take effect on September 26, 2019, signaling the imminent opening of the 60-day filing period for the next round of MTB petitions—anticipated to begin on or after October 15, 2019.

The new procedures are more stringent than those that applied during the last round of MTB petitions (in 2016). Specifically, as set forth in the Federal Register announcement, petitions must:

  • Be supported by United States Customs and Border Protection (CBP) rulings as to the tariff classification of the product; and
  • Include (1) an estimate of both total value and dutiable value for the product for the next five calendar years; (2) an estimate of the share of total imports represented by the petitioner’s imports of the subject article; (3) the names of any domestic producers of the article, if available; (4) a certification of completeness and correctness; and (5) an acknowledgement of the petitioner’s awareness that the information submitted is subject to USITC audit and verification.

In the case of identical, overlapping, or otherwise duplicate submissions by a single petitioner, the USITC will consider the first submission to be the submission of record. Petitions may be withdrawn no more than 30 days after the USITC submits its preliminary report.1

Under the MTB process, US importers may petition for duty-free or reduced-duty treatment of certain imported products by submitting an MTB petition to the USTIC. In the petition, importers propose product descriptions for incorporation into new Chapter 99 subheadings in the Harmonized Tariff Schedule of the United States (HTSUS) that comprise a subset of an existing HTSUS subheading. The proposed tariff description must be administrable by CBP.

Typically, importers request duty relief for manufacturing raw material inputs such as chemicals, electronic components, proprietary components, or other parts that are not produced in the United States. However, there are no restrictions on what can be requested. The more narrowly defined the product, the higher the likelihood that it will be included in the final MTB list.

In general, in order for an individual MTB petition to be successful, there must not be any domestic industry opposition, and any reduction of duties resulting from the change to the duty rate for the proposed product breakout may not exceed $500,000 per annum. Importers can request an elimination or reduction of duties, depending on the annual duty savings anticipated and the $500,000 threshold.

Previous iterations of the MTB process took place through ad hoc legislation in Congress.2 The passage of the American Manufacturing Competitiveness Act of 2016, however, established a more transparent framework for the USITC, the Department of Commerce, and CBP to administer the MTB process via an interagency committee and a public notice-and-comment process.

The first tranche of MTB petitions managed through the new USITC process were accepted in late 2016, resulting in three-year duty reductions for approved products, and are set to expire on December 31, 2020.3 The latest (second) tranche of MTB petitions are anticipated to be accepted by the USITC after October 15, 2019, following the agency’s announcement of the MTB petition process. Any successful petition would then need to pass Congress and be signed into law by the president before becoming effective. As currently envisioned, the second tranche of MTB petitions would become effective January 1, 2021, with an expiration date of December 31, 2024.

Take Aways

To prepare an MTB submission for the latest tranche, companies should:

  • Identify which dutiable products that they import lack domestic sources; this could include raw material inputs for manufacturing or processing that occurs in the United States or semifinished or finished products unavailable from domestic producers;
  • Coordinate internally with sourcing teams to identify potential domestic industry opposition and determine sourcing needs for the next five years;
  • Prepare product descriptions and technical specifications as narrowly as possible to target specific items and to increase the likelihood of success, as well as to distinguish products from competitors. Descriptions should be consistent with supplier invoice descriptions to allow CBP to efficiently identify and grant MTB status to covered imports;
  • Analyze import data and expected purchases to ensure that the estimated value of the MTB duty exemption for each product will not exceed $500,000 in a calendar year; and
  • Identify potential sources of support in Congress for the company’s petition and develop a strategy to build support for the requested exemption.

The key is to be prepared and not wait until the Federal Register announcement in October to start considering opportunities for possible duty savings.

For assistance in identifying which products are likely to receive duty relief through the MTB process, as well as support in crafting the MTB petition and technical product description, please contact James L. SawyerDouglas J. Heffner, Nate B. Bolin,  Kathleen M. Murphy, William R. Rucker, Richard P. Ferrin, Nicolas Guzman, Carolyn M. Bethea, Qiusi Y. Newcom or any other member of the Customs and International Trade Team. 

Previously, petition withdrawal was not subject to any time limits.

2 Previously, companies would submit requests for duty relief directly to their members of Congress, who would then support the duty relief in the larger MTB.

3 The first tranche of successful MTB petitions were not signed into law until October 13, 2018.

The material contained in this communication is informational, general in nature and does not constitute legal advice. The material contained in this communication should not be relied upon or used without consulting a lawyer to consider your specific circumstances. This communication was published on the date specified and may not include any changes in the topics, laws, rules or regulations covered. Receipt of this communication does not establish an attorney-client relationship. In some jurisdictions, this communication may be considered attorney advertising.

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