In recent years, U.S. Customs and Border Protection (CBP) has aggressively pursued the collection of Section 301 “retaliatory tariffs” on imports deemed to be “Products of China.” Imposed by the Trump Administration in 2018 and 2019 under Section 301 of the Trade Act of 1974, these tariffs affect over $400 billion worth of Chinese imports annually. Many goods are subject to an additional 25% tariff, with some facing a 7.5% rate on top of regular duties. These tariffs were intended as retaliation for alleged Chinese intellectual property practices that reportedly compel U.S. firms to transfer valuable IP to Chinese counterparts. And if you believe the China tariffs have actually focused on these concerns, we have a lovely bridge in Brooklyn to sell you.

A Skeptical Perspective.

CBP has employed questionable methodologies, including contentious rules of origin determinations, to maximize tariff revenue. For example, products manufactured outside of China may still be deemed Chinese-origin due to the inclusion of Chinese components or processing. CBP frequently claims, without legal basis, that a single component imparts the “essential character” to a finished product, a standard the U.S. Court of International Trade (CIT) has explicitly rejected in determining origin. Even so, CBP has recently intensified efforts to reclassify consumer products that were initially spared from Section 301 tariffs. For instance, items traditionally classified as toys under Harmonized Tariff Schedule heading 9503 (not subject to Section 301 tariffs) have been reclassified as vehicles, sporting goods, or even pigments, making them subject to additional tariffs.

Impact on Businesses

For small and medium-sized enterprises, such reclassifications can be devastating. A retroactive tariff assessment equal to 25% of a company’s cost of goods sold can cripple cash flow, erode profits, and alienate customers who refuse to absorb increased costs. Compounding the problem, these assessments are often applied retroactively, leaving businesses with no opportunity to adjust pricing or renegotiate terms with customers.

Remedies and Challenges

Importers do have remedies. Within 180 days of CBP liquidating an entry, importers can file a protest and request further review by CBP Headquarters. While this process is theoretically designed to ensure fair and binding nationwide determinations, the protest process is fraught with delays and shoddy administration. CBP is not bound by a statutory deadline to resolve protests, and cases languish administratively for years. In some instances, CBP rulings have taken upward of six to eight years—rendering decisions moot for practical purposes.

Accelerated Disposition: A Path to the Courtroom

Importers cannot afford to wait indefinitely. Fortunately, the law provides a mechanism for expedited resolution. Under Section 515(b) of the Tariff Act, 19 U.S.C. § 1515(b), and 19 C.F.R. § 174.22, importers can apply for “accelerated disposition” of their protest. If CBP fails to act within 30 days of receiving the request, the protest is deemed denied, allowing the importer to challenge the decision in the CIT.

Payment of all assessed duties is a prerequisite for filing suit, but this pathway allows importers to select a “lead protest” for litigation while keeping other protests pending with CBP. Importantly, the CIT operates under judicially imposed timeframes, ensuring swifter resolution compared to CBP’s open-ended timelines.

Why Consider Litigation?

The CIT offers distinct advantages. Unlike CBP—which prioritizes maximizing tariff revenue often at the expense of timely decision-making—the CIT serves as an impartial forum dedicated to delivering fair and legally sound outcomes. Cases are assigned to a judge who actively oversees the proceedings and enforces strict deadlines, fostering a structured and efficient environment for resolving disputes.

While some importers worry about retaliation from CBP if they pursue litigation, these fears are unfounded. The CIT was established as a dedicated Article III Court for addressing tariff disputes, and the government cannot penalize businesses for exercising their legal right to seek judicial relief.

Conclusion

In today’s unpredictable tariff landscape, importers facing substantial reclassifications or adverse origin determinations should consider leveraging accelerated disposition and promptly presenting their claims to the CIT. The potential benefits—timely resolution, impartial adjudication, and financial relief—make this approach especially compelling for businesses where time and strategic planning are critical.

For further guidance, please contact a Neville Peterson LLP professional.