This week the USTR added $4 billion in goods to the previous list of $21 billion in goods that may be subject to increased tariffs.
Any company that imports listed products from the EU to the U.S. or that sells these products or uses them for further manufacture may soon experience supply chain disruption and the need to raise prices for the final product to consumers.
This week, the U.S. Administration’s use of confusion as a negotiating tactic has emerged in the WTO dispute between the U.S. and the EU over subsidies to the production of large aircraft (Airbus and Boeing).
Previously in May, the Office of the United States Trade Representative (USTR) published a list of approximately $21 billion in imported goods to potentially be tariffed and this week suddenly published an additional list of $4 billion. The step was surprising because the U.S. has estimated the damage to the U.S. from the EU subsidies at $11 billion and the expectation is that the final amount that the World Trade Organization (WTO) will authorize in August will be in the range of $8 billion. So, why is the U.S. putting forward such a high value list of goods?
The answer is 1.) that the U.S. must be considering a tariff rate of less than 100% (100% has been the approach in previous WTO comparable retaliation cases). The retaliation amount authorized will be the amount that the U.S. will collect in duties– and not the overall value of the goods listed. So, the U.S. could choose to impose a 25% tariff, for example, on a broader range of goods; rather than a 100% tariff on $11 billion of goods (or whatever the arbitrator finally determines is the appropriate amount).
And 2.) that the U.S. is looking for maximum political leverage in choosing the products that will be tariffed. In past comparable cases, countries retaliated against products with a symbolic or emotional value such as Brazilian retaliation against Canadian maple syrup or U.S. retaliation against EU Roquefort cheese and truffles.
Note that even though the dispute was about large aircraft that the U.S. is within its WTO rights to impose tariffs on other goods. There is some question about whether the U.S. could take action against services or intellectual property, but goods are fair game under WTO rules.
Note that USTR could decide to impose duties on certain EU countries or certain products and not others. USTR has indicated that it would tariff aircraft products from France, Germany, Spain and UK, and not all 28 EU countries (because these 4 countries are the countries where Airbus is subsidized). With a long list of products and variable countries, products and rates, maximum uncertainty is being leveraged by USTR.
What you can do before August to protect yourself from being hit by additional tariffs:
- Affected importers or downstream users whose products are covered by the second list should consider presenting their views to the USTR and the Section 301 interagency committee by filing comments and presenting testimony. We can assist in drafting comments, and preparing and presenting testimony.
- You should also confirm tariff classification or country of origin and if appropriate obtain a binding ruling from U.S. Customs and Border Protection. We can advise on how to proceed in confirming or declaring the tariff classification and country of origin of imported goods.
- Companies, particularly those whose investments and U.S. job creation are threatened, should reach out to their elected municipal, state and congressional representatives to express their position on the additional duties and to request communication to USTR.
- July 24, 2019: Deadline for Requests to Appear at Public Hearing
- Those who wish to appear at the August 5, 2019 public hearing must submit a request to appear. Remarks at the hearing may be no longer than five minutes.
- August 5, 2019: Public Hearing
- USTR will convene a public hearing.
- August 5, 2019: Deadline for Written Comments
- Comments on:
- The specific products on the second list.
- The extent of the duty rate increase (if any).
- Any adverse effects the additional duties may have on U.S. stakeholders, including small businesses and consumers.
- August 12, 2019: Deadline For Submission of Post-Hearing Rebuttal Comments
- Comments on:
USTR will now consider a second list of products as part of its proposal to impose duties on European Union imports pursuant to Section 301 of the Trade Act of 1974 (19 U.S.C. § 2411). The second list covers $4 billion in EU imports classified in 89 subheadings of the Harmonized Tariff Schedule of the United States (HTSUS). This list supplments the preliminary list of April 12, 2019, which includes 325 separate 8-digit and 10-digit subheadings covering $21 billion in EU imports. The USTR published the second list following a May 15-16, 2019 hearing and its receipt of over 600 public comments on the initial proposal. According to the USTR, the new list responds to a number of comments requesting that the USTR consider additional products absent from the preliminary list.
The USTR will potentially draw products from both lists if it decides to move forward with the proposed action. Which products remain on the list will depend on 1.) the tariff rate imposed; 2.) the WTO determination, which is still pending, on the level of countermeasures the U.S. may impose on the EU and its member states for harm caused by subsidies to aircraft manufacturer Airbus.
The second list is 4 pages with 3 of the pages listing food and agriculture products.
Products Included on the Second List
The 89 HTSUS subheadings on the second list include:
- Various cheeses not covered by the preliminary list
- Butter substitutes, whey protein concentrates and other dairy products
- Certain olives not covered by the preliminary list
- Various fruits, fruit juices and fruit preserves not covered by the preliminary list
- Roasted and instant coffees
- Various pork products
- Waffles and wafers
- Certain condiments and seasonings
- Certain nitrogenous fertilizers, including urea
- Certain cast iron pipes and pipe fittings
- Copper and copper alloys in various forms.
If implemented, the additional duties would apply to products of any of the 28 EU member states.
Products Previously Announced on List 1
The 326 total HTSUS provisions targeted for additional duties cover a broad range of products, including (but not limited to):
- Fish, clams, crab, lobster, octopus, oysters and other seafood.
- Butter, yogurt, chocolate milk and numerous cheese varieties.
- Oranges, bergamots, mandarins, grapefruits, lemons, limes and other citrus fruits.
- Various jellies, jams, pastes, purees and juices.
- Brandy, liqueurs, various wines and other alcoholic beverages.
- Olives and olive oil.
- Various essential oils, resinoids and oleoresins.
- Various paper products.
- Books, pictures, photographs, transfers, lithographs and other printed materials.
- Various fibers, yarns and other textile materials.
- Handbags with a certain value threshold.
- Sweaters, sweatshirts, suits, ski wear, anoraks, pajamas, swimwear and other clothing.
- Blankets, linens, rugs, carpets, tapestries and other textile furnishings.
- Various stone materials.
- Stemware, other household glassware, glass tiles and mosaics and other glass materials.
- Ceramic tiles, mugs, cups, spoons, shakers and other ceramic housewares.
- Palladium, rhenium, vanadium and other metals in various forms.
- Various wooden implements.
- Various types of knives and cutlery.
- Pliers, tweezers, shears, pipe cutters, axes, bolt cutters, screwdrivers, nails, tacks, staples and other tools and construction items.
- Motorized handheld tools and vehicular machinery.
- Motorcycles, mopeds, and their components.
- Bicycle components;
- Lenses for projectors, certain cameras, and photographic equipment.
- Wall clocks and clock components.
- Helicopters, airplanes, other aircraft and certain aircraft components.
The list 1 duties on aircraft and certain components would apply to products of France, Germany, Spain and the United Kingdom. The remaining additional duties would presumably apply to products of all EU countries: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czechia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden or the United Kingdom.