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04 October 2019
List 4A goes into effect, all Section 301 tariffs are to increase by 5%, the US Trade Representative (USTR) deadlines loom and the president has ordered US companies to "search for alternatives" to China sourcing. This is your end-of-summer Section 301 China tariffs roundup.
The weeks before Labour Day (which falls on the first Monday in September) were marked by more uncertainty at home and retalitory trade measures abroad. On 20 August 2019 the USTR published the fourth list of Chinese products to be subject to additional tariffs under Section 301 of the Trade Act 1974 (84 FR 43304). Following a series of public hearings, the USTR dropped just 25 tariff lines from its proposed List 4, ordering that 3,780 full or partial tariff lines with an annual trade value of approximately $300 billion would be subject to an additional 10% duty.
List 4 is divided into two parts:
On 23 August 2019, the day before the G7 was set to meet in France, the Chinese government announced that retaliatory tariffs of between 5% and 25% would take effect on the same days on a total of $75 billion of US goods across 5,078 tariff lines. In response, President Trump indicated that the US administration would raise all Section 301 tariffs on Chinese goods by 5%.
On 30 August 2019 the USTR published the 15% increase on List 4, without the benefit of a comment period, and the List 4A tariffs became effective as planned at 12:01am on 1 September 2019 (84 FR 45821). The Chinese tariffs on US goods also took effect on 30 August on 1,717 tariff lines (including crude oil) at 5% to 10%, with the remainder scheduled for 15 December 2019 – the same date as List 4B. On 3 September 2019 the USTR published the proposal to increase tariffs on Lists 1 through 3 from 25% to 30%, effective 1 October 2019, soliciting comments on this action by 20 September 2019 (see below) (84 FR 46212).
The United States began to levy Section 301 tariffs in 2018 to eliminate certain Chinese government acts, policies and practices relating to technology transfers, intellectual property and innovation that it determined to be unreasonable and burdensome to US commerce pursuant to an investigation initiated at the president's direction. Overall, the action now covers $550 billion of Chinese imports – nearly all save certain pharmaceuticals, medical devices and minerals – on 10,622 full or partial tariff lines.
Negotiations, which have been ongoing for more than a year, have had mixed results during that period, and the White House continues to send mixed signals on the trade war with China, as evidenced by statements made during the G7, during which the president indicated that he was having "second thoughts"; however, Press Secretary Stephanie Grisham explained Trump's comments to mean that "he regrets not raising the tariffs higher". Talks between the parties are expected to continue later in October 2019.
The deadline to submit requests for exclusions for products covered by List 3 was 30 September 2019 (for further details see "July update on China Section 301 tariffs: latest from China-US talks"). To date, the USTR has granted one round of exclusions from List 3, covering kayaks, canoes and other boats, wet wipe dispensers and pet cages, among other items (84 FR 38717).
The proposal to raise tariffs on Lists 1 through 3 by 5% includes a request for public comments. The notice asks commenters to address specifically whether the increase "would be practicable or effective to obtain the elimination of China's acts, policies, and practices" or "would cause disproportionate economic harm to US interests, including small- or medium-sized businesses and consumers" – similar to criteria for exclusion requests. Comments were due no later than 20 September 2019.
Additionally, for List 1, whether the USTR will renew the exclusion process for exclusions granted that will soon expire is unclear. Certainly, the need for the exclusion process to continue while these tariffs are in place will be an appropriate topic for the comments being solicited by the USTR.
For further information on this topic please contact David R Hamill, Teresa Polino, David Salkeld or Russell A Semmel at Arent Fox LLP by telephone (+1 202 857 6000) or email (firstname.lastname@example.org, email@example.com, firstname.lastname@example.org or email@example.com). The Arent Fox LLP website can be accessed at www.arentfox.com.
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