by CHARLOTTE, N.C. — When the IEEPA/reciprocal tariffs were implemented, an exception was granted to goods that were laden on a vessel prior to April 5 and entered for consumption prior to May 27. The exception has been widely used by importers to obtain relief from these tariffs for goods that had already been purchased and shipped. Since then, clarity has been sought on several issues surrounding this exemption.
Recently, it was confirmed that the exemption would apply only to ocean-going vessels; goods shipped via air would not be eligible. A larger question surrounds the standing of goods loaded onto a feeder vessel or goods that transship before arriving in the U.S. The consensus, though not exclusive, opinion was that once the goods had been loaded onto a vessel with the intent of delivery to the U.S., the loading date on the first conveyance vessel would apply. In an FAQ issued May 15, Customs has offered guidance that the lading date for the vessel that will arrive in the U.S. is the date to be used when applying the exemption. The FAQ provided guidance based on the following scenarios:
SCENARIO A: Prior to the cutoff date for the reciprocal tariff in-transit provision, U.S.-bound cargo is loaded onto a vessel destined for the U.S.. En route to the U.S., this vessel stops at foreign ports to load/offload other cargo or refuel, but the U.S.-bound cargo remains onboard. This vessel arrives at a U.S. port of entry to unload the U.S.-bound cargo and make entry.
The cargo in this scenario does qualify for the exception from reciprocal tariffs pursuant to the in-transit provision because prior to the cutoff date, the U.S.-bound cargo was laden onto a vessel destined for the U.S. upon departure from the original port of loading and was never unladen or transferred onto another vessel.
Consequently, this vessel constitutes the “final mode of transit” for the laden goods.
SCENARIO B: Prior to the cutoff date for the reciprocal tariff in-transit provision, U.S.-bound cargo is loaded onto a vessel destined for a foreign port prior to shipment to the U.S. At this foreign port, after the cutoff date, the U.S.-bound cargo is transferred onto a different vessel that is destined for the U.S. This new vessel then arrives at a U.S. port of entry to unload the U.S.-bound cargo and make entry.
The cargo in this scenario does not qualify for the in-transit exception for reciprocal tariffs because the U.S.-bound cargo was laden onto a vessel destined for the U.S. after the cutoff date, irrespective of when it departed from the original port of lading; it was thus not loaded onto a vessel that was the final mode of transit prior to the cutoff date for the reciprocal tariff in-transit exception.
Thus, only goods loaded prior to April 5 and which remain on a vessel in transit to the U.S. can claim the exemption. This will have a serious impact for goods from certain countries. A final question is whether goods that meet the cutoff date and enter the U.S. prior to May 27 and are subsequently entered under an immediate transportation (IT) entry move are eligible. Under 19 CFR 141.69, it would appear that the date the goods are placed under the IT is the determining date for the exemption. However, it would not be surprising in the current environment for Customs to rule that a formal or informal entry date prior to May 27 is required to meet the exemption. This question has not yet been answered.
Regardless of what happens next, it would not be surprising if the rules governing the exemption are subject to legal action. The rate level of the tariffs that are being collected make this exemption an important issue.
Sam McClure is director, compliance and customs service at freight forwarding and compliance firm CV International. Home News Now is reprinting this information from a bulletin that McClure recently sent to its clients and other industry professionals.
