Since September 17, 2018, the trade industry has been bracing themselves for the increase of China tariffs from 10% to 25%. The trade community has enjoyed a few months of postponements – January 1st, 2019 to March 1st, 2019. The postponements led many to believe the increase was unlikely, until May 6, when the President emphatically stated that “the 10% will go up to 25% on Friday [May 10, 2019].” via twitter. Only three days later and USTR has officially announced the anticipated 25% increase is effective on 12:01 am, May 10, 2019.
President Trump tweeted that “the United States has been losing, for many years, around 600 to 800 Billion Dollars a year on Trade” and accounted 500 Billion Dollars to China. President Trump emphasized that “we’re not going to be doing that anymore!”
The on-going trade war remains as China and the US make progress to come to an agreement. President Trump tweeted that “the Trade Deal with China continues, but too slowly, as they attempt to renegotiate.” For 10 months, China has been paying Tariffs to the US of 25% on 50 Billion Dollars and 10% on 200 Billion Dollars of other goods. The increases have not led to any resolution and positive outcomes and now the time has come for the infamous 25% increase to be imposed.
To be clear, it is the US importer that pays the extra tariff upon entry of merchandise into the US (not China). Some importers (typically the large ones with negotiating power) are able to negotiate with their Chinese suppliers for lower prices to counteract the tariffs (many small and medium sized importers are not).
As a result of Trump’s threats to impose an additional 25% tariff increase on Chinese Products on List 3, the Chinese Delegation quickly agreed to travel to the US to continue trade talks with the US. Had negotiations arrived at a final agreement, President Trump’s threat would have only been a threat. USTR's Notice of Modification of Section 301 Action states that "[i]n light of the lack of progress in the additional rounds of negotiations since March 2019, and at the direction of the President, the Trade Representative has determined that it is appropriate for the rate of additional duty under the September 2018 action to increase to 25 percent on May 10, 2019."
As instructed by Congress, the USTR has confirmed an exclusion process will become available for products listed on List 3. The Notice of Modification of Section 301 Action provides, USTR will "establish a process by which interested persons may request that particular products classified within an HTSUS subheading covered by the September 2018 action be excluded from the additional duties." USTR will publish a separate notice describing the product exclusion process, including the procedures for submitting exclusion requests, and an opportunity for interested persons to submit oppositions to a request.
For background information on China Tariffs and numerous ways to mitigate the effect of the China tariffs, check out our previous blogs. Diaz Trade Law assist clients in assessing their best options to prepare or mitigate the China tariffs. Our Customs and International Law attorneys are available at 305-456-3830 or info@diaztradelaw.com.
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