Trying to Dull the Pain – Tariff Exclusions, De Minimis, and MTBs
By Nate Herman
The U.S. travel goods industry faces an existential threat not seen in almost 20 years.
China, which supplies over 2/3 of all travel goods, is experiencing 25% punitive tariffs. The industry faces skyrocketing prices and crowding out in our second largest supplier, Vietnam, as electronics, toys, furniture, clothes, and shoes rush in and steal our capacity. And the U.S. government is aggressively reviewing (and pulling in some cases) the duty-free access of our third choice, the developing countries benefitting under the Generalized System of Preferences (GSP) program.
In the face of these seemingly insurmountable challenges, how can we dull the pain? No, I am not suggesting that everyone start drinking. Instead, I urge the industry to look at opportunities to mitigate the tariffs and rising costs.
Getting Exclusions from the Punitive China Tariffs
The Trump administration recently closed the portal for petitions requesting exclusions from the 25% punitive tariffs on China, receiving 30,327 petitions by the deadline. Of those petitions, 863 requested exclusions for travel goods. If any of those petitions are granted, anyone importing the product described in the petitions, not just the petitioner, will be excluded from (and rebated) the 25% punitive tariffs for a period of almost two years, from the inception of the tariffs back on September 24, 2018 until August 7, 2020.
But there is a catch. First, the process is moving excruciatingly slow. In the month since the portal closed, the Trump administration has only reviewed 2,174 petitions, or 7.2% of the 30,327 petitions submitted, and has granted exclusions for only 156 of those petitions (none for travel goods). Further, if/when a travel goods petition is granted, your product must meet the specific product description in the petition to get the benefits.
Under a little-known provision in U.S. customs law called “de minimis,” you can send a direct shipment to an end consumer duty-free if the value of the shipment is less than $800. This is great for e-commerce. The catch is that the shipment must go directly to the end consumer (no more than one shipment per consumer per day). Moreover, the shipment must come from outside the United States – either directly from the factory OR from distribution centers located in Canada or Mexico. Again, de minimis offers the potential for tariff savings, if you can meet the requirements.
Miscellaneous Tariff Bills (MTBs)
Through the Miscellaneous Tariff Bill (MTB) process, Congress allows importers to petition for the temporary reduction or elimination of tariffs on U.S. imports of certain products. Again, there is a catch. There can be no U.S. production of the product. In addition, the cost to the U.S. Treasury in lost tariffs must be less than $500,000 annually – a tall order for high-tariffed travel goods, but doable. The current process has just started, with petitions due by December 10. The process ends with Congress voting on a final package of MTB provisions in fall 2020, with the temporary tariff reductions going into effect January 1, 2021. While that might seem a far way off, TGA is working with companies NOW to participate in the MTB process, to get petitions in by the December 10 deadline.
I know the future looks bleak, but the industry does have options, and TGA is here to help.
For more information, please contact TGA’s Nate Herman at email@example.com or 202-853-9351.