The US Business Owner’s Guide to 301 China Tariffs

October 2, 2019 - 11 minutes read

Everything you need to know about China’s 301s.



The beauty of eCommerce is that it empowers ambitious business owners, like you, to connect with clients, partners, and suppliers around the world without the need to travel. But, as a US business owner, due diligence is essential, particularly when it comes to the import or export of goods.

Recently, 301 tariffs were implemented for business owners importing goods between China and the United States. These China 301 tariff enforcements are proving costly for budding US eCommerce business owners, but there are ways you can navigate these murky waters to your advantage.

Here, we’ll explore the implications of 301 China tariffs and how it’s possible to minimize or even avoid these import-export taxes legitimately, saving you time, money, and stress in the process.


301 China tariffs explained


301 China or section 301 tariffs are US-specific import duties placed on goods. These import duties were implemented on June 23, 2018, and have since cost importers billions of dollars in taxes.

These inflated import tariffs cover industrial products, food & beverages, and key consumer goods such as sporting equipment, electronics, and homeware.

Due to rising tensions and a heated trade war between the US and China, US business owners are expected to pay a 10-25% import duty on all goods, particularly those of ‘technological significance’ (this would largely apply to electronic or industrial items).

The total value of the China 301 tariffs is said to fall at around the $300 million mark—a colossal sum in anyone’s book.

At this point, it’s impossible to say if or when the 301 China tariffs might cease, but as trade tensions rage on, the best course of action is legal avoidance or mitigation. If you know how to reduce the duty you pay on Chinese imports, you’ll be able to keep growing your eCommerce empire while dealing in the products that keep your business ticking.


How to navigate the 301 China tariff


If you rely on importing goods from China and want to continue doing so without facing severe financial penalties, these mitigative strategies will steer you in the right direction.

So, if these tariffs apply to you, here’s what to do:

‘Drawback,’ if you can

If your eCommerce business imports a product and re-exports the same product, you could be eligible to file for Drawback. 

Drawback gives you the option to recapture any duties or tariffs that you’ve paid on products that you’ve ultimately exported. There are several factors to consider concerning Drawback eligibility, and the ability (or green light) to file for this form of tariff relief is reviewed on a case by case basis.

If you conduct ample research regarding your eligibility and making your case water-tight, this could be a viable option for avoiding colossal 301 duty fees.

File for exclusion

Concerning import legislation, there are usually exclusions on certain goods—301 China tariffs are no exception. 

While these duties are quite stringent, particular Chinese products could be excluded from the 301 China tariffs. Product exclusions are sometimes complicated to file, so if you’re looking to do so, working with an experienced professional is recommended. 

When looking at your exclusion application, the government will consider the following factors:

  • Whether the product in question is only available in China only or if there are comparable products available in the United States or other countries. 
  • Whether the imposition of additional duties on the product would cause economic harm to the importer (you) requesting exclusion or to the United States’ interests. 
  • Whether the product is strategically significant or related to the “Made in China 2025” Chinese Government industrial program.

By teaming up with an import expert with a sound understanding of the latest red tape practices and most recent exclusions, navigating the process should be fairly seamless.

Look at your product classifications

Another useful area to explore when dealing with 301 China tariffs is product classification.

Carve out time to sit down and ask yourself the question: Are my product classifications accurate and up-to-date? 

By conducting a comprehensive review of your imports as well as the classifications you’ve applied to these goods at least three times a year, you stand to save yourself a substantial amount in tariffs. Carrying out periodic classification reviews will save you money while minimizing the potential for Customs fines or penalties if you’ve misclassified your imports.

Leverage Foreign Trade Zone procedures

In most businesses, establishing a Foreign Trade Zone and utilizing Foreign Trade Zone Procedures can prove an effective tool for weaving into your supply chain, thereby reducing or even eliminating the additional burden of import duties, 301 China tariffs included.

Leveraging Foreign Trade Zoning Procedures will serve as a loophole for reducing the burden of the imposed 301 China fees without breaking any trade laws. To help you get started, here is a relevant Foreign Trade Zoning report for your reference.

Consider establishing a customs bonded warehouse

Establishing a customs bonded facility is another savvy means of diluting the impact of 301 tariffs on a sustainable basis.

Filing for the privilege of using your existing warehouse as a customs bonded facility could help you mitigate the additional costs of import tariffs.

A customs bonded warehouse is an establishment or facility in which you can store dutiable goods. In a bonded warehouse, it’s possible to manipulate your goods or conduct manufacturing operations without payment of duty. Such facilities may be managed by the state or by a private enterprise.

Businesses can store and produce (or modify) products in customs bonded warehouses for up to a five- year period. Duties are only added once products leave the area, warehouse, or facility for consumption. As such, it’s possible to protect yourself from the tariffs in the short run while formulating additional mitigation strategies for focusing on other areas of business growth.

Remember to conduct your activities with due diligence. Get a firm grasp of the policies, ensure you complete every step of the journey with the utmost attention, and work with a consultant if necessary.

This official guide from CBP will help you understand the finer details of custom bonded facilities as well as the terms and application process.

Try disaggregation tactics

301 China tariff legislation applies to ‘products of China,’ which means that as a US business owner, you’re required to pay tax on whole items or ‘complete systems.’

Based on that notion, if you have a Chinese product you heavily rely on as a business, in most cases, you can avoid paying heavy duty fees by purchasing the individual components of said product and assembling it in-house (in your customs bonded warehouse, perhaps) before selling them to consumers.

You will be required to pay a duty on the individual components, but typically, this will come out to considerably less than paying a tariff on the complete product or system.

Naturally, exclusions, rules, and regulations apply, so it’s worth doing your homework before taking action. Section (e) from this Baker McKensie report will help get you started.


Final Thoughts


In conversation about the 301 China tariffs with Transport Topics News, Marianne Rowden, president of the American Association of Exporters and Importers in Washington, explained:

“We haven’t seen anything like this most of our careers. Since the Reagan administration, we’ve had trade liberalization pretty much uninterrupted, except maybe during the financial crisis.”

These comments alone are a testament to the colossal financial impact of the 301 China tariffs across sectors. In some cases, the impact of the duties could be considered devastating, particularly for SMBs or budding US-based eCommerce businesses looking to make their mark in an increasingly competitive landscape.

However, as the saying goes: where there is a will, there’s a way. While it’s impossible to avoid 301 China tariffs completely, with planning, consideration, and the right course of action, you can reduce the hit on imported Chinese goods.

You might decide to stop importing certain goods from China and start sourcing viable alternatives or realigning your fulfillment strategy. But, of course, there will be certain goods that you still need to import from China—and you should be able to do so without consequences.

Dealing with these tariffs may be a challenge, but by exploring the tips and tactics above, you will be able to continue conducting business on your terms, shaping the direction of your eCommerce empire without paying out endless amounts on import duty. Put your mitigative initiatives in place today, and you’ll secure a brighter, more prosperous tomorrow for your business.

For more business-boosting tips and insights, check out our guide to improving your eCommerce business strategy by harnessing the power of data.