The U.S. Trade Representative’s Office made available this afternoon an advance copy of the notice that will be published in the Federal Register later this week beginning the process of imposing additional duties of up to 25% on all remaining imports from China (i.e., List 4). List4 According to the notice, “[i]n light of China’s failure to meaningfully address the acts, policies, and practices that are subject to this investigation and its response to the current action being taken in this investigation, and at the direction of the President, the Trade Representative proposes to modify the action being taken in this investigation.” The modification being proposed is imposing additional duties of up to 25% on “essentially all [Chinese-origin] products not currently covered” by one of the previous lists. This new “List 4” covers approximately $300 billion worth of imports from China and includes, for example, subheading 8517.62.0090, HTS which was created in an earlier phase of the investigation and excluded from duties at that time. Articles such as pharmaceuticals, pharmaceutical inputs, select medical goods, rate earth materials and critical minerals are excluded; as are articles covered by previously granted product exclusions.
Before taking such action, the USTR is soliciting public comments like was done in previous phases of this investigation. There will be an opportunity to participate in a public hearing that will begin on June, 17, 2019, as well as to submit written comments. The notice asks that interested parties address:
(1) the tariff subheadings to be subject to increased duties (whether the ones included in the Annex to the notice should be retained or removed, or others not on that list added);
(2) what the appropriate additional duty rate should be (i.e., 25% or something less); and
(3) whether the entire ~$300 billion in imports should be targeted, or something less.
For (1), the USTR asks that commenters specifically address “whether imposing increased duties on a particular product would be practicable or effective to obtain the elimination of China’s acts, policies, and practices, and whether imposing additional duties on a particular product would cause disproportionate economic harm to U.S. interests, including small- or medium-size businesses and consumers.”
In terms of timing, we expect that the hearing will last at least one week. Rebuttal comments are due 7 days after the close of the hearing. Based on this timing, the Administration would not be in a position to impose the additional duties until after President Trump and President Xi have the opportunity to meet at the G20 summit in Japan (June 28-29th). That means there is a (slim) chance that, if negotiations continue in the meantime, that a final resolution can be reached at that meeting and these additional duties will never be imposed. Obviously, however, no one can bank on that happening. As a result, all companies that are impacted by List 4 should participate in this process. There seems to be genuine misunderstandings within the Administration over issues such as ‘who pays the additional duty’ and how quickly U.S. companies can modify their supply chains. Participating in the process offers the chance to clear this up. In addition, we believe that participation in the public hearing can help (somewhat) with the product exclusion process (which, if the additional duties are set at 25%, should be created at or around the same time). While we do not expect that many articles will actually be excluded based on public participation given the current state of US-China trade relations, we nevertheless believe it is important for all companies to participate in one form or another.
To paraphrase Winston Churchill, this is not the beginning of the end, but is hopefully getting us closer to the end of the beginning. If you have any questions, or if you would like to discuss participating in the process, please let us know.