The Office of the U.S. Trade Representative (USTR) April 2019 notice of a third round of additional tariffs on $200 billion worth of goods (List 3 goods) imported from China went into effect today increasing rates from 10 percent to 25 percent. This follows a July 2018 imposition of Section 301 tariffs (List 1) and an August 2018 second round of Section 301 tariffs imposed on different import sectors (List 2). The Federal Register Notice for List 3 item tariff increases was published September 21, 2018 by USTR. The April announcement followed a formal Section 301 investigation into acts, policies, and practices of China related to technology transfer, intellectual property, and innovation.
China retaliated after the announcement with its own announcement to impose tariffs on 128 U.S.-origin goods ranging from dried fruit to stainless steel pipes to be hit with an additional 15% duty while items including pork and aluminum scrap will have an additional 25% hike.
The USTR notice amends the Harmonized Tariff Schedule of the U.S. to provide that the tariff increase for List 3 goods will be effective with respect to goods (a) entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on May 10, 2019, and (b) exported to the U.S. on or after May 10, 2019.
According to the notice, the President elected to increase the additional tariff on List 3 goods due to a lack of progress since March in negotiations toward a bilateral trade agreement and because “China has chosen to retreat from specific commitments agreed to in earlier rounds.” The reference is to China’s decision not to implement the commitments into law but to instead implement them through regulatory and administrative actions, which seems to have raised questions of enforceability for the USTR.
The USTR made no mention of the May 5, 2019 announcement by the President that the administration would impose 25 percent duties on all remaining U.S. imports from China (“List 4”). These additional duties would effectively cover the entirety of U.S. imports from China, possibly including a large amount of raw materials, including steel and aluminum products currently excluded from List 1 duties but subject to additional duties under Section 232. Section 232 allows tariffs for national security issues as opposed to Section 301 response rates.
List 3 covers 5,745 tariff items including raw materials, construction machinery, agricultural equipment, electronics, medical devices, and consumer goods. Already, however, about 300 items were removed from the list by the USTR. The exclusions are for smart watches, Bluetooth devices, certain chemicals used manufactured goods, textiles, agricultural products, and safety items such as bicycle helmets, car seats, and playpens.
USTR also states that it will publish a separate notice describing a process by which interested persons may request the exclusion of specific products from the additional tariff on List 3 goods, including procedures for submitting requests and opposition to requests. While it is unclear when this process may get underway, importers of List 3 goods can start preparing now to file exclusion requests for their products.
Please contact James Rayis from the International Trade practice of Giamarco, Mullins & Horton to consider exclusions requests on your imported goods to mitigate the tariff burden or to discuss how to plan for goods imported from China to protect your interests.