Customs Attorneys Urge Importers to Practice Reasonable Care Amid Section 232 Discrepancies

Earlier this week, CBP listed new subheadings for steel and aluminum derivatives subject to Section 232 tariffs. However, some of these subheadings were never actually in a White House proclamation or in the Harmonized Tariff Schedule (see 2506040053).

Meanwhile, there are three subheadings for aluminum derivatives that are subject to the tariffs and are listed in the tariff schedule. However, those subheadings weren't included in CBP's CSMS messages earlier this week.

"Customs itself can’t add or subtract to the list of derivatives," Barnes and Richardson customs attorney Larry Friedman said. However, he said if he had a client who was importing one of those products from France, for example, his advice would be that "the safe conservative penalty-avoidance approach" would be to pay the duty and then file a protest of the assessment.

Friedman said the way that President Donald Trump's June 3 proclamation is written, the newly listed derivatives mentioned are subject to 25% tariffs when they are products from the U.K., but are not subject to 50% tariffs if originating in other countries.

However, the CSMS message on June 3 already said those HTS codes are subject to the doubled, at 50%, metals tariffs.

Customs attorney Su Ross of Mitchell and Silberberg also said an importer may need to file the entry before it can dispute the tariffs.

"In the short term ... whether or not the tariff numbers were on the executive order, Customs is going to collect this money. And then importers are going to have to wait until the entry is liquidated to file a protest. And then the protest, of course, will very likely be denied. This is going to again end up in court," Ross said.

Customs technically is not supposed to go beyond what's in the Federal Register notice, Ross continued. However, "since Customs isn't being told about these changes -- more than, from what I'm hearing on average is one or two days before they're announced -- they have to figure out how to program and what to program the computer to include," Ross said. "So, if the tariff numbers they've added are, quote, unquote, reasonably associated with the tariff numbers that were listed, then the court could uphold what they've done. But it's going to take a legal challenge to undo any changes that were made or any expansions that were made beyond the Federal Register notice."

Friedman indicated that the federal government could easily solve the question of legality of Section 232 tariffs on derivatives that had not been properly notified through an amendment to the action -- it could just publish another notice to add specific derivatives, as it has twice this year.

"That’s the problem with how fast and chaotic this is happening," and importers have questions of what is required, as well as what is allowed, he said. Friedman also said that before this week, some manufacturers were thinking they could add a tiny amount of aluminum to a product, and avoid tariffs on most of the good. However, the tariff changes this week made it so not only does the steel or aluminum content of the derivative face duties, but also the non-metal portion of the good face reciprocal tariffs.

Other customs attorneys agreed that importers should practice due diligence, although opinions differed on which guidance to follow.

"The best we can ascertain as of today is that CBP made a mistake in its CSMS. The Annexes published in the Federal Register, which update the HTSUS, are legally binding, not the CSMS," one customs attorney said. "We anticipate that CBP will revise its CSMS to list the correct subheadings for derivatives. Brokers should transmit entries in conformity with HTSUS subheadings as published."

Another attorney said to follow the attached list to the June 3 CSMS message.

"As a practical matter, the exercise of reasonable care compels the importer of record to follow the guidance provided by US-CBP. As a result, importers should be using the most up-to-date lists provided by US-CBP as well as monitor for any changes/corrections that we may see over the coming days," the attorney said. "Given the fast and furious tempo to these trade actions, US-CBP should be given some leeway if errors occur and corrections are needed."

With regard to the HTS codes that were in the March Federal Register notice of derivatives but not in that CSMS message, the attorney said importers should request guidance before stopping payments.

The lists are likely to change soon anyway, he continued, as the U.S. makes deals with more partners. "US-CBP still needs to update the Section 232 FAQ to account for this week’s developments," the attorney said. "In short, follow the lists for additions. If there are deletions/omissions, request guidance from US-CBP before stopping any duty payments."

He continued, "Beyond the day-to-day aspects, it is likely that we are seeing different HTSUS codes as the 'lists' will likely be updated as the U.S. makes deals over the coming days and weeks. It is highly likely that these changes reflect some of the deals that are near close or closed."

The subheadings listed by CBP in the June 3 CSMS message on aluminum but not listed in the HTS are 8418.10.00, 8418.40.00, 8418.30.00, 8422.11.00, 8450.11.00, 8450.20.00, 8451.21.00, 8451.29.00 and 8516.60.40.

CBP also listed the following HTS subheadings in the June 3 CSMS message on steel tariffs that aren't in the tariff schedule: 8418.10.00, 8418.40.00, 8418.30.00, 8422.11.00, 8450.11.00, 8450.20.00, 8451.21.00, 8451.29.00, 8516.60.40 and 9403.99.9020.

On the other hand, the CSMS message on aluminum also didn’t include three HTS subheadings that have been subject to the tariffs: 8424.90.9080; 8473.30.2000; 8473.30.5100.