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Additional Tariffs on Chinese Goods Effective July 6; Exclusions May be Requested

Monday, June 18, 2018
Sandler, Travis & Rosenberg Trade Report

Hundreds of goods imported from China will be hit with an additional 25 percent tariff starting July 6 after a Section 301 investigation determined that China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation are unreasonable and discriminatory. This duty hike could also be imposed on nearly 300 other goods not included in any previous proposal once the Trump administration has completed a public notice and comment process. However, importers will be able to request exclusions from the tariffs for specific products using a process that will be announced in the coming weeks.

(Click here for ST&R’s web page providing information on the U.S. tariffs imposed under Section 232 and Section 301 as well as the retaliatory tariffs trading partners are levying on U.S. goods.)

According to the Office of the U.S. Trade Representative, the two lists focus on products from industrial sectors that contribute to or benefit from the “Made in China 2025” industrial policy, which include industries such as aerospace, information and communications technology, robotics, industrial machinery, new materials, and automobiles. The lists do not include goods commonly purchased by U.S. consumers such as cellular telephones or televisions.

The first list comprises 818 products with a total import value of $34 billion, down from the 1,300 goods valued at $50 billion that had originally been proposed. A large percentage of the goods on this list are from HTSUS Chapters 84, 85, 87, 88, and 90, such as engines and motors; construction, drilling, and agricultural machinery; machines for working minerals, glass, rubber, or plastic; rail locomotives and rolling stock; motor vehicles and motorcycles; helicopters and airplanes; and testing, measuring, and diagnostic instruments and devices.

The second list comprises 284 tariff lines with a total import value of about $16 billion. Many of these products are also classified in Chapters 84, 85, 97, and 90, but various products in chapters 27, 34, 38, 39, 70, 73, 76, and 89 are also included. Affected goods include plastics and plastic products; industrial machinery; machinery for working stone, ceramics, concrete, wood, hard rubber or plastic, and glass; cargo containers; tractors; and optical fibers.

The announcement of the Section 301 tariffs was met with concern. House Ways and Means Chairman Kevin Brady, R-Texas, expressed alarm that “additional products are now placed on the list for possible future action,” which he said would “make it more difficult to sell more ‘Made in America’ products globally and expose many of our industries … to devastating retaliation.” Senate Finance Committee Chairman Orrin Hatch, R-Utah, echoed those concerns, calling the tariffs “ill-conceived.”

Business groups registered opposition as well. “This is not the right approach,” said U.S. Chamber of Commerce President Thomas Donahue, who worried that the tariffs would place “the cost of China’s unfair trade practices squarely on the shoulders of American consumers, manufacturers, farmers, and ranchers.” National Retail Federation CEO Matthew Shay agreed, stating that the tariffs “won’t reduce or eliminate China’s abusive trade practices” and citing an NRF-commissioned study finding that retaliation by China could “lead to four job losses for every job gained.” Information Technology Industry Council CEO Dean Garfield said the tariffs are “the wrong answer” and urged Trump to “reassess the approach, engage in real negotiations with China, and work with allies to change Chinese policies.”

There was support for the tariffs, though some was guarded. Sen. Marco Rubio, R-Fla., called the tariffs “an excellent move” and Sen. Chuck Schumer, D-N.Y., said they are “on the money.” Ways and Means Ranking Member Richard Neal, D-Mass., said the tariffs are “a significant step forward” but was critical of “the apparent lack of coherence in the administration’s approach thus far with China.” Senate Finance Ranking Member Ron Wyden, D-Ore., made similar remarks, stating that he welcomed the tariffs if they mark “the beginning of a coherent strategy” but that he is concerned they are “more impulsive than strategic.”

If you think you might be negatively impacted by these tariffs, please contact Nicole Bivens Collinson at (202) 730-4956 to review the lists and discuss options, alternatives, and actions that might be pursued to protect your interests.

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