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Trump Threatens More Tariffs on Chinese Goods as Details Emerge on Section 301 Duties

Wednesday, June 20, 2018
Sandler, Travis & Rosenberg Trade Report

President Trump is threatening to raise tariffs on another $400 billion worth of goods from China if Beijing retaliates for the 25 percent tariff the U.S. is planning to impose on Chinese products beginning July 6. The Office of the U.S. Trade Representative is publishing this week a formal notice announcing those tariffs, which will affect more than 800 products, and setting forth a schedule for public comment on whether to take similar action on nearly 300 others.

The Trump administration announced June 15 two lists of goods imported from China that will or could be hit with higher duties 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. China immediately said it would respond in kind by levying a 25 percent tariff on 545 U.S. goods as of July 6 and expanding that list by another 114 products on an as-yet-undetermined date.

President Trump said June 18 that China’s response “clearly indicates its determination to keep the United States at a permanent and unfair disadvantage” and that “further action must be taken to encourage China to change its unfair practices, open its market to United States goods, and accept a more balanced trade relationship with the United States.” The president therefore directed USTR to identify another $200 billion worth of Chinese goods that would be subject to an additional 10 percent tariff “if China refuses to change its practices” and “insists on going forward with the new tariffs that it has recently announced.” Trump added that if China increases its tariffs yet again the U.S. “will meet that action by pursuing additional tariffs on another $200 billion of goods.”

Meanwhile, USTR will publish in the June 20 Federal Register a notice that (a) formally modifies the Harmonized Tariff Schedule of the U.S. to reflect the pending imposition of an additional 25 percent tariff on 818 products from China and (b) sets forth a schedule for public comment on the possibility of similar action against 284 other Chinese products.

The USTR notice modifies subchapter III of HTSUS Chapter 99 to create new subheading 9903.88.01 and new U.S. note 20 listing the Chinese products that will be subject to the additional tariff effective for goods entered or withdrawn from warehouse for consumption on or after 12:01 a.m. EDT on July 6. These tariffs will be in addition to all other applicable duties, fees, exactions, and charges, including antidumping and countervailing duties. However, the additional tariffs will not apply to products for which entry is properly claimed under a Chapter 98 heading or subheading.

Any covered product admitted into a U.S. foreign-trade zone on or after the effective date of the tariffs may only be admitted as “privileged foreign status.” Upon entry for consumption, such products will be subject to any ad valorem rates of duty or quantitative limitations related to the classification under the applicable HTSUS subheading.

Requests to exclude specific products from these tariffs will be accepted but a notice describing this process (including filing opposition to exclusion requests) will be published separately. USTR suggests that products that may be considered for exclusion include those that are only available from China, those for which an additional tariff would cause severe economic harm to a U.S. interest, and those are not strategically important or related to the “Made in China 2025” industrial policy.

The USTR notice also lists the 284 other HTSUS subheadings that could be subject to an additional 25 percent tariff. USTR will issue a final determination on which of these products will be covered after completing the following process: a hearing will be held July 24, requests to appear at this hearing and pre-hearing submissions are due by June 29, written comments on maintaining or removing specific subheadings from this list are due by July 23, and post-hearing rebuttal comments are due by July 31. USTR states that comments should address whether increased tariffs on specific products would be practicable or effective to obtain the elimination of China’s acts, policies, and practices and whether maintaining or imposing such tariffs would cause disproportionate economic harm to U.S. interests, including small or medium-sized businesses and consumers.

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