Re: Section 301 — The U.S. Imposes Additional Duties on ~$200 Billion Worth of Chinese-Origin Imports

Further to the below, the USTR has now released the finalized List 3.  The USTR’s website provides as follows:

“The list contains 5,745 full or partial lines of the original 6,031 tariff lines that were on a proposed list of Chinese imports announced on July 10, 2018.  Changes to the proposed list were made after USTR and the interagency Section 301 Committee sought and received comments over a six-week period and testimony during a six-day public hearing in August.  USTR engaged in a thorough process to rigorously examine the comments and testimony and, as a result, determined to fully or partially remove 297 tariff lines from the original proposed list.  Included among the products removed from the proposed list are certain consumer electronics products such as smart watches and Bluetooth devices; certain chemical inputs for manufactured goods, textiles and agriculture; certain health and safety products such as bicycle helmets, and child safety furniture such as car seats and playpens.”

A copy of the complete list is attached here for your reference: Tariff List_09.17.18  It will also be published in the Federal Register later this week. 

Best regards,

Ted


Dear Friends,

President Trump announced today that the United States would be moving ahead to impose additional duties on a further $200 billion worth of Chinese-origin imports (referred to as ’List 3’).  According to the announcement, the additional duties will start at 10% and run through the end of the year.  If the matter has not been resolved satisfactorily by then, the rate will be increased to 25% on January 1, 2019.  The additional duties will become effective next Monday, September 24, 2018.  A copy of the Statement from the President is attached for your reference:

The additional duties will apply to Chinese-origin goods classified in the tariff subheadings included on the final list.  This list has not been published yet, but, given the effective date (a week from now), it is expected in the next day or two.  The Section 301 Committee has been considering the comments and testimony received on the list of 6,031 tariff subheadings originally proposed for List 3.  It is being reported that a relatively small number of tariff subheadings (a few hundred) are being removed from the final list as a result of this process.

Once the final List 3 is published, it is widely expected that China will retaliate by imposing additional duties on a list of U.S.-origin products worth approximately $60 billion.  It is also being reported that China may decline any invitation issued by the United States to begin negotiations until after the midterm elections and/or may engage other levers domestically to squeeze U.S. companies doing business in China.

If China does retaliate, the President’s statement says that the Administration “will immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports.”  This would be List 4 and it would cover all of the remaining imports from China.

This is the latest (and undoubtedly not the last) salvo in the on-going trade war between the United States and China.  Unfortunately, it is hard to view this salvo as being effective.  Rather than force the parties to the table, an additional 10% duty is arguably offset by the declining value of the yuan (which is down high single-digit percentages in a year) and is likely going to be viewed as a sign of wavering resolve from a president in a contentious midterm election year.  In short, today’s announcement will likely prolong the trade war, rather than help bring it to a speedy conclusion (which, in all fairness, may be the plan after all – if the war drags on long enough, companies will start to leave the war zone . . .).

We hope this is helpful.  If you have any questions about the Section 301 duties (or China’s retaliation), please let us know.

Best regards,

Ted

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The Art of the Deal – Update on Section 232 Duties on Steel & Aluminum

Dear Friends,

Late last week, the President issued two proclamations amending his earlier proclamations imposing additional duties on imports of steel and aluminum.  Copies of these proclamations may be found here and here.

The proclamations made a number of important changes to the section 232 duties.  Most notably, the President extended the temporary exemption previously afforded to Canada and Mexico, to Australia, Argentina, South Korea, Brazil and the EU.  In addition, the temporary exemption will now only run through April 30, 2018.  As of May 1, 2018, covered steel and aluminum articles from all countries will be subject to the additional 25% (steel) and 10% (aluminum) duties unless a further agreement is reached.

The President also indicated that, if any long-term agreements are ultimately reached with any countries, such that the exemption is continued beyond April 30, 2018, he will consider whether to adjust the additional duty rates (the 25% and 10%) to ensure that the desired goal is achieved (limit imports sufficiently to allow for domestic production utilization of 80%).      

The proclamations also include provisions that discuss the possible implementation of a quota on imports from exempted countries, place restrictions on articles admitted into Foreign Trade Zones and provide further detail on the product exclusion petition process (e.g., additional criteria for approval and retroactive treatment for approved petitions).

Regardless of what you think of the policy, the threat of significantly increased duties has (thus far) had the desired result, as many countries have sought to negotiate with the United States.  It will be interesting to see what unfolds over the next few weeks (e.g., will the imposition of section 232 duties to Canada and Mexico be tied to concluding the NAFTA renegotiations? will countries like Japan seek its own long-term exemption? if long-term exemptions are granted, will the duty rates be increased to even higher rates? what sort of voluntary-restraint type of agreement/quota will be required in order to obtain a long-term exemption?).  All companies that utilize steel or aluminum articles (whether imported or domestically-produced) should be taking steps now to review the economic impact the section 232 duties will have on their business.  Consideration should be given to the impact on long-term supply agreements (whether upstream or downstream – who bears the cost of increased duties?), the impact on market competition (e.g., are you making a product here with imported steel or aluminum, but competing against finished products produced abroad and imported into the United States without being subject to the section 232 duties?), etc.

We are assisting numerous companies navigate these issues (as well as the product exclusion process) and would be happy to discuss your situation with you further.  If you would like to do so, just let us know. 

Best regards, 

Ted