U.S. Section 301 Exclusion Extensions

2020 UPS® Tradenomics Webcast Series
How Section 301 exclusions and renewals can
impact your bottom line
May 27, 2020
Thank you for joining.
The webinar will begin shortly.

Proprietary and Confidential: This presentation may not be used or disclosed to other than employees or customers, unless expressly authorized by UPS. This document is for informational purposes
only. It does not constitute legal advice – please consult with your own legal counsel for such advice. Also, do not rely on this information without performing your own research.
© 2020 United Parcel Service of America, Inc. UPS, the UPS brandmark, the color brown are trademarks of United Parcel Service of America, Inc. All rights reserved.
Poll results
2
Is your company currently taking advantage of one or more tariff exclusions?
A. yes 78/117 ( 67%)
B. no 36/117 ( 31%)
What will your company likely do if an exclusion you are enjoying is not given an extension?
A. Continue to import from China at higher rate 66/146 ( 45%)
B. Ramp up importing from China in advance of expiration 29/146 ( 20%)
C. Import into an FTZ (privileged foreign status) 28/146 ( 19%)
D. Import from an alternate country 54/146 ( 37%)
E. Procure from within the United States 27/146 ( 18%)
F. Seek substitute goods to import 13/146 ( 9%)
G. Seek supplier concessions 32/146 ( 22%)
H. Seek price adjustments 26/146 ( 18%)

8_21 6_84
Section 301 tariffs exclusions and renewals
Presenters
• Host
• Greg Maddaleni,
LCB, JD
• Customs Brokerage
Sr. Manager
• Panelist
• Stuart Schmidt, LCB
• Trade Compliance
Manager, UPS
Customs Brokerage

2020 UPS® Tradenomics
Webcast Series
4
Previous (recording available)
• February 6 - U.S. Export Compliance Year in Review
• March 12 – Brexit: the transition period
• April 15 – USMCA – Transitioning to the new free trade agreement
• May 20 – U.S. Trade Policy and Trader Implications
Upcoming (more to be scheduled)
• May 27 – Section 301: imminent exclusions expirations & possible renewal
• Sept 24 – Brexit: Transition / new trade agreement update
Link to registration and recordings: http://bit.ly/2020Tradenomics
Dates subject to change

2020 UPS® Canada Customs Brokerage Webinar Series
5
UPS Webinars
• April 15 – CUSMA – Transitioning to the new free trade agreement
• June 23 – Canadian Export Reporting System (CERS)
• Sept 15 – CBSA Assessment and Revenue Management (CARM)
3PM ET, 45 minute duration
Registration:
http://bit.ly/UPSCUSMA
http://bit.ly/UPS_CERS
http://bit.ly/UPS_CARM
Please join UPS’s customs brokerage and public affairs subject matter experts as we
explore how these topics could impact your international trade Dates subject to change

This presentation will be available upon check out to all attendees
as well as a link to the event recording.

This presentation is for informational purposes only.
It does not constitute legal advice - please consult with your own legal
counsel for such advice.
Do not rely on this information without performing your own research.

8
Any questions?
Ask our panelists
using the “Q&A”
function
1 CCS/CES/MES
Credit
Agenda
• Tariffs overview
• Exclusions overview
• Exclusion extensions/renewals
• UPS® Tradenomics
• Best practices/lessons learned
• Exclusions still pending

9
Agenda

UPS Customs Brokerage Update
Overview of Section 301 – China tariffs
List 1 List 2 List 3
Value of goods
(US)
Duty:
Effective Date:
$34B
25%
7/9/2018
$16B
25%
8/23/2018
$200B
25%
(10% prior to 5/10/2019)
9/24/2018
$133B
Was 15%
Reduced to 7.5% on
2/14/20
9/1/2019
List 4a
$166B
Suspended
Indefinitely
(was to have
been enacted
12/15/19 @
15%)
List 4b
Note: The US government decided against imposing an additional 5% duty on goods from lists 1, 2, and 3, originally scheduled for October 15.

Section 301 – China tariffs
Cumulative (potential) duties at applicable rates (US$B)
$8.5
$12.5
$32.5
$62.5
$72.5
$82.5
$95.0
$120.0
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
$140.0
List 1
List 2
List 3
List 3
Increase
List 4a
Lists 1,2,3
Suspended
increase
List 4a
Reduction
List 4B
Suspended
Phase I
Deal

12
Agenda

Section 301 Exclusions
13
• Who defines? USTR
 HTS code and product-specific description
• Who interprets? CBP
• How administered? By CBP using the
protest/PSC (dependent on timing) as
the mechanism
• An imperfect mechanism

The timing of Section 301 Lists 1 & 2
14
7/2018 1/2019 7/2019 1/2020 7/2020 1/2021
List 1 R1 R2 R3 R4 R5 R6 R7 R87/6
12/28
3/25
4/18
5/14
6/11
7/9
9/20 10/02
R1E R2E R3E
Initial exclusion time period Extension time period -12 mos., ongoing
List 2 R1 R2 R38/23
7/31 9/20 10/02
R1E R2E R3E
Initial Round 1 exclusion time period Potential extension time period
• Product exclusions under List 1 and List 2 were granted for one year in several rounds
• Each round of exclusions has been subject to an extension application process one year after
publication
Source: CBP Summary of Section 301 Duties on Products of China

The timing of Section 301 Lists 3 & 4A
15
7/2018 1/2019 7/2019 1/2020 7/2020 1/2021
List 3 Exclusion rounds 1-139/24/2018 8/7/2020
Unified end
date/extension
date
Initial exclusion time period for all rounds Extension time period – up to 12 mos.
List 4A Rds 1-49/1/2019 9/1/2020
Unified end
date/extension
date
Initial exclusion time
period for all rounds
Potential extension time
period – up to 12 mos.
Exclusion
publication dates
• Product exclusions under List 3 and List 4A continue to be granted in rolling rounds subject to
a unified end date
• USTR has begun an extension application process for List 3 exclusions, but no such process
for List 4A has yet been announced
Source: CBP Summary of Section 301 Duties on Products of China

16
Agenda

Upcoming List 3 exclusion extensions
17
 Deadline: June 8 is the deadline
for submitting comments pertaining
to extensions
 The extension rate so far has been
modest, at just 31%
 See table at right
Note: some List 1 and List 2 exclusions
that are set to expire in July 2020 are also
available for comment (deadline June 1)
19% 36% 38% 33%
31%
Round 1
Extensions
Round 2
Extensions
Round 3
Extensions
Round 4
Extensions
Overall Rounds 1-4
Extensions
List 1 Exclusions Extension Rates
These rates are based on UPS's own calculations and therefore are not official.

What comments should include
18
 The current status of U.S. and/or 3rd country sourcing availability
 What efforts the importer has made to source from U.S. or a 3rd country
 Values and quantities of imports of the product covered by the exclusion
 Changes in the global supply chain since the exclusion was granted
 Any other relevant industry developments
 Whether the imposition of additional duties will result in severe economic harm
unless the exclusion is extended
Comments are submitted using USTR’s online portal, which requests information about:
Source: https://www.federalregister.gov/documents/2020/05/06/2020-09653/request-for-comments-concerning-the-
extension-of-particular-exclusions-granted-under-the-200-billion

What options/alternatives may be available if I don’t get an
extension?
19
 Local sourcing
 Alternate country sourcing
 Substitute materials/inputs not subject to a tariff currently, or more easily sourced
from another country
 Stockpiling inventory prior to expiration
 Leveraging an FTZ (under privileged foreign status)
 Possible supplier concession
 Price adjustments
Note: for informational purposes only; please consult with your trade consultant, tax account and/or legal counsel for specific advice

20
Agenda

Claiming an exclusion
21
 Claiming at the time of entry, filing
a PSC (post summary correction),
or following the protest process
 PSC is prior to liquidation
 Regarding the protest process, the
importer must file a protest within
180 days of the entry’s date of
liquidation
 (See liquidation timings on next
slide)

The exclusion time window
22
 USTR granted exclusions with the intent that they be retroactive to the date of imposition of
the applicable Section 301 tariffs
 In many cases, full retroactivity is not possible because of the timing constraint of the
combined liquidation/protest period
7/2018 1/2019 7/2019 1/2020 7/2020 1/2021
List 3 Rounds 1-139/24/2018 8/7/2020
Unified end
date/ renewal
date
Initial exclusion time period for all rounds Extension time period – up to 12 mos.
Exclusion publication dates
Protest
Period
(180 days)
5/27
Maximum practical retroactive period: 494 days
1/19
Missed
Opportunity
Clearance
Liquidation period
(314 days)

Protests, liquidations and liquidation extensions
Exclusions follow the protest process
23
365 daysOperation Days
Protest 180
Liquidation
• In most cases 314
• PSC, CBP Review Immed.
• By oper. of Law 365
• Liquid. Extension 365
Source: https://www.cbp.gov/trade/programs-administration/entry-summary/protests

UPS® Tradenomics: takeaway (lessons learned)
24
 There are still pending List 3 and List 4A requests (from other companies)
 They are public knowledge
 Ability to evaluate them
 Do any potentially apply?
 Document how goods potentially qualify
 Obtain a liquidation extension for all applicable
 Await release of those exclusions granted
1/2019 7/2019 1/2020 7/2020 1/2021 7/2021
Protest
Period
(180 days)
5/27
Liquidation
Period
(314 days)
Liquidation
Extension
(365 days)
Source: https://www.cbp.gov/trade/programs-administration/entry-summary/protests

Proprietary and Confidential: This presentation may not be used or disclosed to other than employees or customers, unless expressly authorized by UPS. This document does not constitute legal advice.
© 2019 United Parcel Service of America, Inc. UPS, the UPS brandmark, the color brown and photos are trademarks of United Parcel Service of America, Inc. All rights reserved.
Should you look into a General Purpose Zone?
Yes – if you….
• Pay high duties, including Section 301 duties, and
are working to mitigate those expenses
• Inventory finished products, parts, or components
in a warehouse within the US for a period of time
before shipping to customers
• Need an FTZ for a short period of time
• Require an FTZ on an as-needed or critical basis
• E.g., when products need to be destroyed, returned, or
re-exported
• Want to test the concept of using an FTZ without
major investment
• Need to store goods in the US prior to final PGA
approval for US CBP release and distribution.
25
For more information please contact:
UPSZoneSolutions@ups.com

What comments should include
26
 The current status of U.S. and/or 3rd country sourcing availability
 What efforts the importer has made to source from U.S. or a 3rd country
 Values and quantities of imports of the product covered by the exclusion
 Changes in the global supply chain since the exclusion was granted
 Any other relevant industry developments
 Whether the imposition of additional duties will result in severe economic harm
unless the exclusion is extended
June 8 Deadline
Comments are submitted using USTR’s online portal, which requests information about:
Source: https://www.federalregister.gov/documents/2020/05/06/2020-09653/request-for-comments-concerning-the-
extension-of-particular-exclusions-granted-under-the-200-billion

What options/alternatives may be available if I don’t get an
extension?
27
 Local sourcing
 Alternate country sourcing
 Substitute materials/inputs not subject to a tariff currently, or more easily sourced
from another country
 Stockpiling inventory prior to expiration
 Leveraging an FTZ (under privileged foreign status)
 Possible supplier concession
 Price adjustments
Note: for informational purposes only; please consult with your trade consultant, tax account and/or legal counsel for specific advice

Questions and Answers
US Section 301 exclusions and extensions
• Check Out:
• Feedback / value
• Follow up inquiry or consultation
• For more information contact Greg Maddaleni at gmaddaleni@ups.com
• For more information on General Purpose FTZs please contact: UPSZoneSolutions@ups.com

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