Effective Date of Increase and Customs Reporting Guidance
On May 9, 2019, the Office of the U.S. Trade Representative (USTR) announced an increase in duties pursuant to Section 301(b) of the Trade Act of 1974, as amended (Section 301), from 10% to 25%, on over 5,700 Harmonized Tariff Schedule of the United States (HTSUS) products imported from China. The increase, covering $200 billion in products that were subject to 10% additional duties since September 24, 2018, was set to rise to 25% at the beginning of this year, only having to be postponed twice to allow U.S.–China trade negotiations to bear fruit. They did not.
The 25% duty rate took effect on all covered products that are (1) entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. Eastern time on May 10, 2019, and (2) exported to the United States on or after May 10, 2019. U.S. Customs and Border Protection (CBP) has instructed importers to report HTSUS subheadings 9903.88.03 or 9903.88.04 for these products.
Any covered products exported to the United States prior to May 10 are eligible for the preexisting 10% duty rate, provided they are entered into the United States before June 1, 2019. CBP has instructed importers to report HTSUS subheading 9903.88.09 for these products.
For those bewildred by this headlong dive into the abyss, the tariff rise stems from USTR’s investigation into certain acts, policies, and practices by the Government of China related to technology transfer, intellectual property, and innovation (82 FR 40213). During the investigation, which began on August 18, 2017, USTR determined that the acts, policies, and practices of China under investigation are unreasonable or discriminatory and burden or restrict U.S. commerce, and are thus actionable under Section 301.
The full list of covered products is available in the PDF here. We have previously discussed the impact in an alert here, and note the following wide range of product groups affected by the tariffs:
• Printed circuit boards, printed circuit assemblies, disk drive storage units, panel and screen assemblies, and other components of electronic appliances.
• Engines, transmission belts, transmission shafts and cranks, gearboxes, tires, rearview mirrors, bumpers, seatbelts, brakes, and other vehicle components.
• Iron and steel pipe fittings, structures, containers, appliances, housewares and kitchenware, nails, screws, and bolts.
• Metal pliers, bolt cutters, shears, saws, hammers, screwdrivers, tweezers, brackets, rivets, and tool sets.
• Air conditioners, refrigerators, freezers, microwaves, dryers, fans, lamps, and other household appliances.
• Photocopiers, monitors, automatic teller machines, vending machines, and other commercial and office appliances.
• Rubbers, plastics, and other polymers, chemical compounds, and chemical intermediates.
• Fertilizers, dyes, paints, inks, cosmetics, soaps, polishes, insecticides and herbicides, and other chemical products.
• Intermediate and finished wood and paper products.
• Fruits, vegetables, grains, beans, nuts, seafoods, and other food items.
• Coal, petroleum products, natural gases, biodiesels, and other fuels.
• Fibers, yarns, and weaves of wool, cotton, nylon, rayon, polyester, and other textile materials.
• Diamonds, gold, silver, platinum, and other precious metals.
• Bicycles (and components), boats, trailers, and certain other vehicles.
• Chairs, cabinets, tables, beds, and other furniture.
Additional USTR Action
On May 13, 2019, the USTR announced that, pursuant to an order by the president, the USTR will initiate the process for implementing 25% tariffs on an additional $300 billion in imports from China. Said increase would impact 3,805 HTSUS subheadings set out in the Annex to the announcement. The proposed additional tariffs will impact all apparel, footwear, and manufactured textile products. However, it will not include pharmaceuticals, certain pharmaceutical inputs, certain medical goods, and critical minerals.
Surprising None, China Reciprocates
Apparently, the increase in tariffs did not incentivize China toward trade negotiations. Instead, on May 13, 2019, China’s Finance Ministry announced an increase in tariffs, from 10% to either 20% or 25%, on a wide range of imports from the United States. The increase will impact approximately $60 billion worth of products, including beer, wine, swimsuits, pork, aluminum scrap, and liquefied natural gas.
What Should You Do?
Engage with your trade attorney to review your products against the present exclusion lists, discuss whether your specific product may benefit from a tariff engineering analysis. Further, although the May 9 notice mentions that USTR will establish an exclusion process, no details of said process are yet available. In advance of any such guidance, we recommend that if you are impacted by these tariffs, you can begin preparing the sort of documentation previously required by USTR for product exclusion. This documentation generally includes information on the quantity and value of the Chinese-origin product that the requestor purchased in the last three years and asks to address the following factors:
• Whether the particular product is available only from China and specifically whether the particular product and/or a comparable product is available from sources in the United States and/or third countries.
• Whether the imposition of additional duties on the particular product would cause severe economic harm to the requestor or other U.S. interests.
• Whether the particular product is strategically important or related to “Made in China 2025” or other Chinese industrial programs.
This type of documentation, like any submission to the federal government, should not be thrown together. Careful consideration to ensure its accuracy, correctness, and completeness is essential and should be performed with the assistance and supervision of experienced counsel.