Flexport: Clients Still Confused Over Section 232 Tariffs on New Derivatives

"We are hoping to get guidance from Customs soon here. ... Right now, we're a little bit in the dark here about what actually is the correct value to report when it comes to these derivative products," said Marcus Eeman, senior manager for customs at Flexport.

He later continued, "The best thing we can say right now is be consistent, is to have a set method, have it defined, and say this is how we're valuing our product, and do that on every single shipment. You may not get it right at first, but that means you'll at least have a set formula of how we can go back and if we do have to make any sort of adjustments or corrections on this, if there's any additional duty that does need to be paid as a result of this, we now at least have some frame of reference on this."

Eeman noted that there have been some challenges implementing the Section 232 tariffs on steel and aluminum derivatives, particularly as they pertain to steel and aluminum derivatives outside of Chapters 73 and 76.

"We are noticing a few cracks around the edges here where maybe this hasn't been quite as smooth. For instance, what if your product is on the derivative list but contains no aluminum whatsoever," Eeman said. "Well, it is still mandatory to report the country of melt and pour on that aluminum derivative."

He continued, "So, an accessory to a computer is a mouse pad. You're familiar with a mouse pad: squishy foam, textile cover on top. I was having to declare the amount of aluminum in a mouse pad, because a mouse pad is an accessory to an automated data processing machine of 8471. So it's a very interesting topic to say, what do I report? There hasn't really been clear guidance on that, when there's zero aluminum content in a certain product."

Eeman also said he and others noticed that "there is a bit of discordance between what was programmed and what the Federal Register says," as "we've identified at least eight HTS codes" where products were subject to Chapter 99 codes but were not programmed in the CBP system.

"I'm sure Customs will clean this up in the next coming few days here, but that is something we are struggling through a little bit, where we're trying to figure out, wait a minute, are we crazy or is Customs crazy? Sometimes it's us, but there's a couple cases where it's Customs for sure," Eeman said.

Eeman also called for clients to be aware of the Department of Commerce's Section 232 investigations on copper and lumber (see 2503110057), as the investigations also refer to derivative products of those commodities.

"Does that just mean intermediate copper products, or does that include wiring kits, boot harnesses? We're not quite sure yet. So this investigation is just starting to take shape," Eeman said.

He advised webinar listeners to reach out to their suppliers so that their commercial invoices can be adjusted to account for the value and weight of products containing steel or aluminum derivatives. That additional information will help make entries "go faster for your brokers" and it will result in "faster clearances all around." The additional information also will be helpful for when CBP begins auditing the entries.

Eeman also said companies should "start to right size your customs bond," since this is "an important [administrative] step that nobody thinks about until, all of a sudden, you can't import anymore because your bond expires."

Anna Zajac, senior manager for Flexport's trade advisory, said, "The major thing is to have a compliance procedure and make sure your compliance procedure and process can support some of the changes so that you don't have compliance gaps. A lot of times we see something slips through the cracks in an importing scenario and results in prior disclosure years later. And nobody wants that because of unpredictable costs."

In addition to discussion of the tariffs on new steel and aluminum derivatives, Flexport advisers also talked about the potential for a quick end to de minimis eligibility for Canada, Mexico and China once Commerce notifies President Donald Trump that systems are in place to process previously de minimis entries (see 2503020001 and 2502070052).

"Based on what we saw last week, it's very possible that a notification could be sent overnight to the president, and the next day, the new procedure goes into effect," Zajac said. "So, I do think companies should be considering whether they have a sustainable business process in place to transition de minimis shipments to regular entry procedures if that change comes into place sometime soon."