In-Transit Reciprocal Tariff Exemption Applies to Truck and Air, DHL Official Says

Responding to questions from importers on whether the exemption applies to all modes, McCauley said, "It does."

"We often think of laden on export ... from an ocean perspective. But it also applies to air freight and surface freight, i.e. trucks. Unless it was specifically exempted, the laden of export date would apply," he said during an April 15 webinar on tariffs and trade impacts.

On issues related to the timing of shipments and how they fit in with tariff exemptions for goods in transit, CBP may use multiple factors that might estimate the actual date of export, including dates on bills of lading and invoices, among other pieces of information, McCauley said.

“It’s that type of language within the regulations that gives Customs some leeway on how they actually move forward with enforcement. We have seen enforcement start on these provisions, specifically on exempting, based on the date the freight was laden for export. We have seen it come for large importers as well as small importers,” McCauley said. “And one of the things that comes out is really that question of, is there an arrival notice? Is there a bill of lading with an export date actually denoted on it? Keep in mind, Customs does have AMS records, but they normally focus on the bill of lading update dates. So, it is something … to make sure you’ve got firm documentation on what day that product actually left.”

Another common question DHL has been receiving is on how the exemption applies to transload shipments, "or shipments that are actually moving out on one vessel, a feeder vessel … [to] another," McCauley continued. "Really, the essential issue is, as long as that freight is not ... taken off the vessel and rebooked, you should have a reasonable justification to U.S. Customs if they were to inquire that you did leave the freight intact and you did move that freight through."

When asked whether the tariff goes into effect for a product once it’s loaded on the mother vessel or the feeder vessel, McCauley said “it’s when it’s actually export[ed] or laden for export to the U.S. So, if it’s going on a feeder vessel, if it was exported from that country, that would be the date. That would be important information to detail and track, because that will be part of a CF-28 if Customs comes back and requests it.”

During the webinar, McCauley also fielded numerous questions on how customs brokers should respond to various tariff exemption scenarios.

When asked if an individual company could succeed in getting a tariff exemption, McCauley was skeptical, saying that it would be "very hard" to exempt a specific importer through the ACE system because CBP would have to create a temporary HTS number that would specifically call out the importer.

Rather, exemptions such as the ones on cell phones and computers (see 2504120001) may potentially be the fruit of lobbying on a united front, he suggested.

"When you look at the laptops and the mobile phone exclusions or exemptions that were actually completed, in a lot of cases, it was probably a collaborative effort from a number of importers that did one of the things we had mentioned before," McCauley said.

That might have been because, as DHL officials have advised clients previously, "having your CEO get in front of the president and make your case, or using any one of the means out there to actually influence his thoughts, are really key to this entire process," he continued.

While some exemptions already have been announced, such as those based on HTS numbers in Annex II, McCauley said to expect President Donald Trump to place even more products under tariff exemptions.

"It's widely expected that additional exemptions could be forthcoming. There could be exemptions for a number of different factors, and the president has even noted that some of it may be for strategic products that are actually brought in for national security," McCauley said. "That does help in some cases, because you could see exemptions actually help with some products, but once again, seems very speculative."

What might also influence U.S. trade activity is how governments worldwide negotiate with the U.S. over reciprocal tariffs, which, despite a 10% tariff all around, has been put on pause for roughly three months.

McCauley noted that Cabinet members have indicated that these negotiations could be less over tariff amounts and more about non-tariff barriers. For instance, discussions involving Vietnam appear to be focusing more on the non-tariff barriers that exist for U.S. goods into Vietnam as well as Vietnam's relationship with China.

Furthermore, other countries may decide to pursue retaliatory tariffs, as China has done (see 2504110027), and that potential activity also could affect U.S. exports.

"Retaliatory measures, especially in those non-tariff barriers, may become more important. Certificates, licenses [and] phytosanitary certificates may become more and more common and more and more popular as tools that are not tariff-related measures but are measures to actually slow the import of products, specifically U.S. products [a]cross borders," McCauley said.

In the meantime, CBP seems to be upping its enforcement efforts on the tariffs. McCauley said he and his team have seen increased enforcement on claims filed under USMCA. He urged webinar participants that if their product is not wholly manufactured within North America, that companies undergo the solicitation, qualification and certification process to ensure that products are compliant with USMCA. Products will have a certification if they have gone through the process properly, and U.S. customs officials are following up to see if products are compliant, according to McCauley.

"We have seen U.S. Customs come back and request certificates at this point. ... Also, keep in mind [that] Customs does publish and track statistics based on chapters in the [HTSUS]. So there are some chapters that are more likely to be subject to USMCA certification, say, for example, some agricultural products and other things," McCauley said. "However, when you get into some of the industrial products -- engines, machinery -- there are very few. Thirty [percent] to 40 percent of those actual claims are actually made to U.S. Customs. So, when they see an importer with 100 percent USMCA certificates on engine parts, you could be in a situation where that will raise suspicion and require a notice of information, a CF-28."

There are signs that increased enforcement activity is slowing down the ability to process customs entries, according to McCauley.

This is due to multiple factors, he said. Part of it is filing complexities: some products must now have two to four HTS numbers in place, and that might require some training. Correct entry filing is especially important because CBP has noted that it may conduct audits, and penalties could result if products are improperly filed.

"The penalties for IEEPA duty avoidance are substantial. In a lot of cases, CF-28s, as they come out, can actually be very detrimental if they're not responded to timely" and CBP can put out a notice of action, or CF-29, to request duty payment, McCauley said.

Another potential pain point is at the ports, he continued.

"There's more requests for clarification on commercial invoices. There's more declaration processing involved overall, so you can start to see shipments starting to clear slower and then getting picked up and moved out of the terminals. So, in a lot of cases, are there backlogs that are going to develop? There could be," McCauley said.

Meanwhile, the Department of Government Efficiency also may be seeking to reduce the workforce within DHS, so that could mean that CBP could face reductions in staffing as some government employees look to get out of the workplace. If this were to happen, even though “it’s highly unlikely enforcement areas would actually be decreased,” processes at CBP could move slower amid backlogs at facilities, such as the ports, he said.

McCauley noted that customs brokers of all stripes, including himself, are grappling with trying to find suitable and proper responses to all the regulatory changes that have come about through the ever-shifting U.S. trade environment.

“One of the challenges you have with this process is it’s complicated. There’s no question about it. I’ve been in this business for over 30 years, and there’s still times that I can get myself twisted up, cornered, try to think through a problem, try to think through a situation.”