China 301 Tariffs Took Effect – What Happens Next?

China tariffs

Photo credit: iStock.com/ANNECORDON

By Susan Kohn Ross

The U.S. Trade Representative (“USTR”) issued a press release on July 6, 2018 in which the process companies can use to seek exclusion from the 25% tariff imposed on the same day on goods from China was announced. The timeline requires all original exclusion requests to be filed by October 9, 2018. Each will be reviewed to insure completeness and will then be posted for public review, and 14 days from the date of any posting, all objections are due. No more than 7 days later, any applicant may file its reply. All such submissions are filed through regulations.gov and must reference Docket No. USTR-2018-0025.

The first noticeable difference between the 301 and 232 product exclusion processes is the provision allowing replies. Another notable difference with the 301 exclusion process is trade associations are permitted to submit requests. As before, each request must relate to a specific product and provide the required supporting data and basis for the exclusion request. Details about what exactly is required can be found in the Federal Register notice referenced in the USTR press release. Another notable difference from the 232 process is that for any product where exclusion is granted, that exclusion applies to all imports of that product, not just those of the applicant. Further, all exclusions granted for the proscribed one year period will be retroactive to July 6, 2018, when the tariff was imposed.

Forms are recommended for the request, objection and reply, along with allowing more expansive information to be filed in the form of a public version of any filing and one filed with business proprietary information (“BPI”). Once the official Federal Register notice is published, the trade can expect those forms will be accessible from the regulations.gov portal.

Obviously, USTR learned from the 232 experience and is attempting to streamline the process, and cut the workload. Some of the 232 applications have been ruled upon and, right now, the only sense one gets is if your application was not subject to objection, it was granted. However, if an objection was filed, the application was denied. It will be interesting to see how much impact the ability to file a reply will have on the ultimate determination.

If you have not already done so, now is the time to engage in a few best practices when it comes to dealing with the 301 tariffs (and frankly any others which may be imposed).

  1. Have you confirmed your product is properly classified?
  2. If not, do so, and figure out where it should be classified and how that impacts the duty you have been paying. Should a prior disclosure be filed?
  3. If you are on the 301 list, what options do you have for alternate sourcing? How long will it take for any foreign or U.S. suppliers to ramp up production to meet your needs and those of your competitors?
  4. One of the steps which quickly became clear in the 232 context was any number of American companies who objected to an exclusion request by saying they could produce the product in question and claimed any past attempts to be a supplier to the applicant ended up in a disagreement over price. Quite often, that was a simple answer, and declining to use the American supplier had more to do with any number of objective factors such as quality, quantity, timing, and so on, not just the price.
  5. Should you file for an exclusion? If so, can you distinguish your product from those of your competitors to a significant enough degree that the cost and effort you incur helps you the most, rather than your competitors?

While companies are dealing with implementation of the 25% tariff imposed on first round of Chinese-made goods, List 2 continues through the notice and comment process. That timeline is:

  • 6-29-18: Due date to request to appear and submit a summary of testimony and filing pre-hearing submissions.
  • 7-20-18: Due date for written comments.
  • 7-24-18: Public hearing
  • 7-31-18: Due date for submission of post-hearing rebuttal comments.

Where do you stand in being ready to deal with the 301 tariffs – those imposed and those threatened? Many medium and smaller sized companies are still trying to figure out how they will cope. Make sure to work with your trade compliance consultants to carefully balance the very real need for many to stay in business, with the practical need to stay compliant. Anecdotally, we are hearing about many suppliers who are offering options that do not really work. CBP continues to carefully monitor trade volumes, and any major shift in those patterns will be met with appropriate enforcement action. This is, of course, in the face of the continuing concern about transshipments. Finally, are you prepared for List 3? This would be the list that results from President Trump’s instruction to USTR Lighthizer to identify another $200 billion in Chinese goods on which to impose additional tariffs.

USTR Press Release

Pre-publication Federal Register

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