U.S.-China Trade Uncertainty: Section 301 Tariff State of Play

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The Situation: Recent reports indicate that the United States and China may soon reach an initial, limited trade deal that could involve the United States phasing out some existing tariffs on Chinese-origin goods while refraining from imposing a new round of tariffs scheduled for imposition on December 15, 2019.

The Result: Since July 2018, the United States government has imposed billions of dollars in tariffs on Chinese-origin goods pursuant to Section 301 of the Trade Act of 1974 ("Section 301"). During September 2019 alone, the United States collected approximately $7 billion in tariffs on imports of Chinese-origin goods. Although limited relief may be in store, until a comprehensive resolution of the "trade war," companies with trans-Pacific trade or supply chains will contend with the threat of additional tariffs.

Looking Ahead: Companies should continue to consider and take advantage of options to mitigate or avoid paying Section 301 duties. This includes monitoring product exclusions granted by the United States Trade Representative ("USTR") for goods included on the first three lists of Chinese-origin products subject to Section 301 tariffs and filing product exclusion requests for goods on the fourth list of Chinese-origin products subject to Section 301 tariffs and any other future lists.

Reports indicate that the trade deal could involve the United States refraining from imposing new tariffs on approximately $155 billion in goods that were scheduled to go into effect on December 15 (the so-called "List 4B" tariffs), but also that the United States would eliminate duties on the $110 billion worth of goods imposed in September 2019 ("List 4A"). There also reportedly has been discussion about lowering the 25% duty on approximately $250 billion worth of goods imposed over the last year and a half ("Lists 1-3"). Despite these reports, President Trump has refuted the idea that the United States had agreed to roll back all Section 301 tariffs on Chinese-origin goods, and has indicated that the United States will increase tariffs on Chinese-origin goods if the two countries cannot reach an agreement.

Against this backdrop of continued uncertainty, the table below reflects a snapshot of the current state of play of Section 301 tariffs on Chinese-origin goods. Companies should continue to consider using all available options to avoid or mitigate effects of the current tariffs. We previously explained certain of those options here.

For example, companies should carefully evaluate whether Chinese-origin goods imported into the United States qualify for product exclusions already granted by the USTR, and should continue to monitor granted exclusions, which the USTR issues on a rolling basis. Notably, USTR's issued exclusions are product-specific, not company specific. As such, a party does not need to have submitted a product exclusion request to use a product exclusion granted by USTR as long as the imported product qualifies under the language of the granted product exclusion. The table includes links to product exclusions that have been granted to date by USTR for Lists 1-4A. While the window to submit product exclusion requests for goods on Lists 1-3 has closed, exclusion requests may be submitted for goods on List 4A until January 31, 2020.

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List

Approximate

Value

Tariff Rate

Effective Date

Product Exclusions Granted

Product Exclusion Details

List 1

$34 billion

25%

July 19, 2018

Exclusion Requests Status Index

December 28, 2018

 

March 25, 2019

 

April 18, 2019

 

May 14, 2019

 

June 4, 2019

 

July 9, 2019

 

September 20, 2019

 

October 2, 2019

All granted exclusions are retroactive to July 6, 2018, and remain in place for one year after the exclusion determination was published in the Federal Register.

 

USTR is seeking public comment regarding whether to extend the exclusions granted in December 2018, which otherwise will expire on December 28, 2019. Public comments may be submitted until November 30, 2019.

List 2

$16 billion

25%

August 23, 2018

Exclusion Requests Status Index

 

July 31, 2019

 

September 20, 2019

 

October 2, 2019

All granted exclusions are retroactive to August 23, 2018, and remain in place for one year after the exclusion determination was published in the Federal Register.

List 3

$200 billion

25%

May 10, 2019

 

August 7, 2019

 

September 20, 2019

 

October 28, 2019

 

November 7, 2019

 

All granted exclusions will be retroactive to September 24, 2018, and will expire August 7, 2020.

List 4A

$110 billion

15%

September 1, 2019

No exclusions have been granted to date.

The USTR Exclusion portal opened on October 31, 2019. The deadline to submit exclusion requests is January 31, 2020.

List 4B

$155 billion

15%

December 15, 2019

Not available

These duties are not yet in effect. As such, there is not yet a product exclusion process available.

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Three Key Takeaways

  1. Recent reports—subsequently rejected in part by the President—suggested that the United States and China may be close to a trade deal that could involve the United States reducing previously imposed additional duties on Chinese-origin goods and foregoing additional tariffs scheduled for December 15, 2019.
  2. Companies should carefully evaluate whether imported goods qualify for exclusions already granted by the USTR, continue to monitor exclusions granted by the USTR on a rolling basis, and consider their options for requesting additional exclusions.
  3. While the window to file for exclusions for goods on Lists 1-3 has closed, exclusion requests may still be submitted for goods on List 4A until January 31, 2020.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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