The US-China trade war heated up a few more degrees in the last few days. Over the past week, the bilateral talks stumbled and actions and reciprocal actions were taken by the US and China, respectively.

What Happened

  • List 3 Tariff Increase. Last weekend, President Trump unexpectedly announced that he would increase the List 3 tariffs from 10% to 25%. The Office of the US Trade Representative (USTR) formalized this threat by posting a Federal Register notice on May 9, 2019. The tariff increases technically went into effect on May 10, but there is some leeway for goods that had already left China and are in transit to the United States. The full list of List 3 tariffs can be found in the SPB Tariff Book.
  • List 4 Tariffs. This Tuesday, May 14, 2019, USTR released a Federal Register notice that details a new List 4 of Section 301 tariffs. The proposed List 4 could impose tariffs “up to 25 percent” on $300 billion worth of products from China, potentially affecting nearly 4,000 tariff lines.
  • China Retaliation. In response to the List 3 tariff increase, China announced on Monday, May 13, 2019, that it would impose retaliatory tariffs on US$60 billion (or 5,140 tariff lines) worth of US imports. While the announced tariff descriptions are only available in Chinese, numeric tariff lines can be searched in the following four documents released by China’s Ministry of Finance:
  • 25% tariff increase (here)
  • 20% tariff increase (here)
  • 10% tariff increase (here)
  • 5% tariff increase (here)

Influential (but so far nongovernmental) voices within China are speculating China’s retaliation could eventually include: (1) a pause in the purchase of US agricultural and energy products, (2) a reduction in the orders of Boeing products, and (3) restriction on the trade of US services.

Where We Can Help

  • US Product Exclusion Process – List 3

Similar to what has been done for Lists 1 and 2, the Trump Administration announced that it would create a product exclusion process for List 3, which will provide companies with a mechanism to seek relief from the increased tariffs. No details have been released on how the process will be structured or when submissions will be due.

We have significant experience in preparing, reviewing and filing product exclusion requests and can assist you with your submissions.

  • Public Comments Seeking Tariff Line Removal – List 4

The USTR established the following schedule for the public to comment on List 4:

June 10, 2019: Deadline for filing requests to appear and a summary of planned testimony at the public hearing

June 17, 2019: Deadline for submission of written comments and date of the public hearing

7 days after last day of public hearing (assumes multiple days of testimony possible): Deadline for submitting post-hearing rebuttal comments

For comments seeking to remove tariff lines from List 4, USTR requests the comments “address specifically whether imposing increased duties on a particular product would be practicable or effective to obtain the elimination of China’s acts, policies, and practices, and whether imposing additional duties on a particular product would cause disproportionate economic harm to U.S. interests, including small- or medium-size businesses and consumers.”

We have in depth experience with the comments submission process and can help you prepare your written submissions and/or post-hearing rebuttals to optimize your success for removing tariff lines of concern.

As you may recall from the previous tariff rounds, this is just the first step – before imposing tariffs, USTR will release a final list reflecting its decisions based on these submissions. USTR has not indicated if it will create a product exclusion process for List 4.

  • China Product Exclusion Process

China’s Ministry of Finance also announced that it would set up two-batch exclusion process for its retaliatory tariffs. The exclusion process does not apply to automobiles and autoparts that are not subject to tariffs or have suspended tariffs. Once the final exclusions are announced, they will be in place for one year.

According to the US-China Business Council’s unofficial translation of the Chinese announcement, “Once the final exclusion lists are announced, they will be in place for one year. Tariff exclusion applications will be evaluated on: 1) difficulty of obtaining alternative goods, 2) economic damage to the applicant, and 3) major structural impacts on any relevant industries from the tariff increase.”

The exclusion requests are to be submitted via the website of the Ministry of Finance’s tariff policy research center. Below is the schedule for the exclusion request submission:

June 3, 2019 – July 5, 2019: Submission period for first batch of exclusions for tariff lines included in List 1 (imported goods from the US worth US$50 billion – Tariff Commission Announcement #5) and List 2 (imported goods from the US worth US$16 billion – Tariff Commission Announcement #7)

September 2, 2019 – October 18, 2019: Submission period for second batch of exclusions for tariff lines included in Tariff Commission Announcement #6

Outlook on US-China Trade Talks

Despite the escalation of trade tensions, US and Chinese negotiators met again in Washington last week. While the talks did not produce a deal, it is a positive sign that both sides continue to meet. The Chinese delegation reportedly invited their US counterparts to Beijing for another round of negotiations, but no date has been set. On Monday, May 13, it was announced that President Trump would meet with President Xi during the G20 meetings set to take place in Japan at the end of June, providing an opportunity for the two leaders to strike a deal or another pause in the ongoing trade dispute.