On May 20, 2018, Secretary of the Treasury Steven Mnuchin stated that the US was “putting the trade war on hold,” pending negotiations with China to reduce the US trade deficit and address certain acts, policies, and practices related to intellectual property rights. Secretary Mnuchin subsequently clarified that his comments referred only to the proposed 25 percent tariff pursuant to Section 301 of the Trade Act of 1974, which has not yet taken effect. The 25 percent tariff on steel imports and 10 percent tariff on aluminum imports to protect US national security, which took effect on March 23, 2018, are not impacted by the discussions with China and remain in effect.
On March 23, 2018, at the direction of President Trump, Commerce Secretary Wilbur Ross initiated a new Section 232 investigation into imports of automobiles and automotive parts to determine their impact on US national security. For additional details please see our previous alert. Arent Fox will continue to monitor and update on these additional tariffs in future alerts.
Secretary Mnuchin’s recent comments raised questions regarding the status of the various safeguard tariffs that have been announced by the Trump Administration on imports from China and other countries. Because the Administration may remove the “hold” on the Section 301 tariffs at any time, interested parties should continue to monitor the situation and remain engaged in the exemption processes. For this reason, Arent Fox LLP provides an update on the Section 232 and Section 301 tariffs below.
On March 8, 2018, President Trump signed two proclamations imposing a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports from all countries to protect US national security.
Unlike the Section 301 duties, which are targeted specifically at China, the Section 232 tariffs apply to all countries, unless a country exemption has been issued. As a result, the tariffs on steel and aluminum imports are not part of the United States’ separate and bilateral discussions with China and these Section 232 tariffs will remain in force regardless of the success or failure of negotiations.
When the Section 232 tariffs took effect on March 23, 2018, Canada, Mexico, Australia, Argentina, South Korea, Brazil, and member countries of the European Union were exempted. Currently, imports from Canada, Mexico, and the European Union continue to be excluded from the steel and aluminum tariffs through May 31, 2018, while Australia, Argentina, and Brazil have been granted an indefinite exemption pending further negotiations.
South Korea is permanently exempted from the tariffs on steel imports after agreeing to a quota to limit its exports of steel. More detail on the quota provisions is provided in a separate alert. South Korea may ultimately agree to a quota for aluminum, but at this point remains subject to the 10 percent tariff on imports of aluminum to the United States.
There is also a product specific exclusion process for steel and aluminum through the Department of Commerce. A separate request must be submitted for each distinct type and dimension of steel or aluminum product to be imported. To date, nearly 10,000 exclusion requests have been received for steel and 1,500 exclusion requests for aluminum. Thus far, no exclusion requests have been granted. If granted, product exclusions will be limited to the product, volume, and supplier requested and to the organization/ importer of record submitting the request, and will be effective as of the date posted by the Department of Commerce for public comment. Please see our prior alert for more information on the Section 232 exclusion process.
In the meantime, the European Union, China, Japan, Russia, Turkey, and India have notified the WTO of potential retaliation to the Section 232 tariffs under the WTO’s Safeguards Agreement.
On April 3, 2018, in response to a directive from President Trump, USTR published a list of products potentially subject to an additional 25 percent tariff on Chinese imports to combat issues primarily related to intellectual property theft. The Section 301 tariffs have not yet taken effect pending a notice and comment process to determine whether products should be added or removed from USTR’s proposed list.
The current tariff list includes imports from China covering approximately 1,300 separate tariff lines and $50 billion in terms of estimated annual trade value for calendar year 2018. As discussed in our previous alert, the proposed product list covers products in 19 separate HTSUS chapters, but is primarily targeted at the technology sector, including the aerospace, information and communication technology, robotics, and machinery industries. Indeed, more than 40 percent of products on USTR’s proposed list are in Chapter 84 of the HTSUS, which covers Nuclear Reactors and Mechanical Machinery.
The interagency Section 301 committee held a three day hearing on May 15-17, 2018 to allow stakeholders to testify on retaliation measures by the US Government against China. The hearing followed a request for comment from USTR that received over 3,000 submissions on the recommended additional tariff line items proposed by several government agencies.
Meanwhile, on April 2, 2018, China’s Ministry of Commerce threatened tariff increases of either 25 percent or 15 percent on 128 targeted products imported from the United States and worth about $50 billion in 2017. This retaliatory list included primarily agricultural and steel products.
Secretary Mnuchin stated on May 20, 2018 that the Section 301 tariff has been placed on hold, as the United States engages with China to reduce the trade deficit. Implementation of the 25 percent tariff on certain products from China is therefore paused indefinitely. If China agrees to certain unnamed concessions, the Section 301 tariff may not take effect at all. If future negotiations with China are not successful, however, President Trump has indicated that plans to impose the Section 301 tariffs may be revived.
Thus far, the United States and China have agreed upon “meaningful increases” in agricultural and energy exports from the United States to China, and the Chinese Government has ended an antidumping investigation on imports of US sorghum. China has also announced that it will reduce tariffs on imported passenger vehicles from 25 percent to 15 percent of their wholesale value, and will standardize tariffs on vehicle parts at 6 percent.