The Trump Administration recently announced several major decisions, including: finalizing the List 3 products subject to additional duties and revealing its implementation schedule; threatening imposition of duties on fourth list of products from China; establishing a process for importers to request an exemption for List 2 products; and clarifying the application of Section 301 duties to Chapter 98 entries and entries subject to duty reductions under the Miscellaneous Tariff Bill.
Product List 3
Late on Monday afternoon, September 17, 2018, President Trump announced his determination on the Section 301 List 3 Products, instructing that the tariffs will be implemented on September 24, 2018. The rate of duty will initially be 10 percent, but will rise to 25 percent on January 1, 2019. The President’s statement further noted that, if China retaliates, the US will impose additional tariffs on an additional $267 billion of Chinese imports. By most accounts, such action would result in almost all imports from China being subject to Section 301 duties. See the full statement released by the White House and the Final List 3.
The Final List 3 contains 5,745 full or partial lines of the original 6,031 tariff lines that were on the proposed list of Chinese imports announced on July 10, 2018. USTR determined to fully or partially remove 286 tariff lines from the original proposed list. According to USTR, among the products removed are certain consumer electronics products such as smart watches and Bluetooth devices; certain chemical inputs for manufactured goods, textiles and agriculture, certain health and safety products such as bicycle helmets, and child safety furniture such as car seats and playpens.
To enforce the measures, sources indicate that new 10-digit statistical categories may be created, especially for categories listed in Part 2 to List 3, such as a new category 8517.62.0090, which is referenced in the published list. Additional details on enforcement may be published prior to the effective date.
China reacted by promptly issuing a statement that it would be imposing retaliatory duties of 5 percent to 10 percent on $60 billion worth of US goods sent to China, which represents a lowering of China’s initial statement in August that it would impose duties of 25 percent on US imports if the US moved forward with duties on Product List 3.
The Chinese duties will affect over 5,200 individual US products, such as honey, liquefied natural gas and smoked salmon, and are slated to take effect September 24, the same day the latest round of duties imposed by the US are scheduled to begin.
It remains to be seen if President Trump will follow through with his threat to impose additional duties on yet a fourth list of products.
Product List 2 Exclusion Request Process
Also on September 17, 2018, the USTR released procedures for seeking List 2 product exclusions. As anticipated, the process is very similar to the List 1 exclusion process, however, the USTR is now requiring requesters to provide the following additional information:
- For imports sold as final products, requesters must provide the percentage of their total gross sales in 2017 that sales of the Chinese-origin product accounted for.
- For imports used in the production of final products, requesters must provide the percentage of the total cost of producing the final product(s) the Chinese-origin input accounts for and the percentage of their total gross sales in 2017 that sales of the final product(s) accounted for.
List 2 product exclusions must be submitted by December 18, 2018. If granted, exclusions will apply retroactively to the August 23 effective date of List 2 tariffs, and extend for one year after the publication of the exclusion determination in the Federal Register.
Modifications to Treatment of Chapter 98 and MTB claims
On August 16, 2018, USTR published a clarification of application of Section 301 duties to Chapter 98 entries and entries subject to duty reductions under the Miscellaneous Tariff Bill (“MTB”).
The additional China Section 301 duties do not apply to goods for which entry is properly claimed under a provision of chapter 98 of the HTSUS, except for goods entered under subheadings 9802.00.40, 9802.00.50, and 9802.00.60, and heading 9802.00.80. For subheadings 9802.00.40, 9802.00.50, and 9802.00.60, the additional duties apply to the value of repairs, alterations, or processing performed abroad, as described in the applicable subheading. For heading 9802.00.80, the additional duties apply to the value of the article less the cost or value of such products of the United States, as described in heading 9802.00.80.
Based on this language, the 25 percent duties will be applied to repairs performed on goods of Chinese origin, regardless of where the repairs take place or where the Chinese goods are advanced in value.
The same notice indicated that the Section 301 duties will be applied to goods entered under Chapter 99 MTB subheadings. These MTB subheadings represent the goods for which duty-free treatment was recently provided through the Miscellaneous Tariff Bill. As is made clear in the Notice, the “duty-free treatment” provided in the MTB applies only to regular duties, and does not affect whether or not Section 301 duties are imposed on the products under such subheading.