On September 17, 2018, at the direction of the President, the United States Trade Representative (“USTR”) took the latest step in the escalating trade war between the United States and China by imposing a 10% ad valorem tariff on Chinese goods representing about $200 billion in annual imports into the United States. The tariffs will be imposed on goods imported into the United States on or after September 24, 2018. On January 1, 2019, the tariff rate is due to increase to 25% ad valorem. The list of products covered by this latest action is available here.
The products are classified in over 5,700 different subheadings of the Harmonized Tariff Schedule of the United States. They consist of mineral, chemical, rubber, cotton, and steel products, among many others. The products subject to this tariff are in addition to those on which the United States imposed tariffs earlier this year (described in our June 15 and July 11 International Trade Currents and representing approximately $50 billion in annual imports).
The legal basis for the new tariffs on Chinese imports (as with the previous rounds of tariffs) is Sections 301-310 of the Trade Act of 1974. As prescribed therein, and subject to the specific direction of the President, the USTR is authorized to “take all appropriate and feasible action” to obtain the elimination of an act, policy, or practice of a foreign country that the USTR determines is “unreasonable or discriminatory and burdens or restricts United States commerce.” The USTR also is authorized to modify action previously taken where the burden or restriction on United States commerce of the underlying foreign country act, policy, or practice has increased, or where the action as previously designed is no longer appropriate.
After an investigation initiated in August 2017, the USTR determined that Chinese government acts, policies, and practices related to technology transfer, intellectual property, and innovation burden or restrict U.S. commerce. Based on that determination, and at the direction of the President, the USTR imposed the earlier rounds of tariffs. In the USTR’s most recent action, and again at the direction of the President, the USTR determined that the original rounds of tariffs had not eliminated the acts, policies, and practices of concern and that the situation has been exacerbated by China’s imposition of retaliatory tariffs on imports of U.S. goods. In the notice announcing the new tariffs, available here, the USTR stated, “China has been unwilling to offer meaningful modifications to its unfair practices. Furthermore, China openly has responded to the current action by choosing to cause further harm to the U.S. economy, by increasing duties on U.S. exports to China.”
Unlike the previous rounds of tariffs, the USTR has not yet established a procedure (as described in our July 11 International Trade Currents alert) for interested parties to seek to have particular products excluded from the new tariffs. However, it is possible that the USTR eventually will establish such a procedure.
Finally, the USTR has left open the possibility of further China-specific action, which could include a change in the products on which tariffs are imposed, a change in the tariff rates, additional border measures, such as quotas, or any other action deemed appropriate by the President.