Customs & International Trade Law ExpertSection 301 Tariff Updates: USTR Grants Exclusions & Seeks Comments on Products Necessary to Combat COVID-19! - Customs & International Trade Law Expert

The Office of the United States Trade Representative (USTR), faced with the current COVID-19 pandemic, has moved quickly to grant numerous exclusion requests in March 2020; many of which are for medical supplies. USTR is also seeking comments from industry on whether products are necessary to combat COVID-19 spread and should be excluded from the additional duties. DTL has assisted clients in submitting comments to the USTR – this is the time to let your voice be heard.

Below is a chart summarizing recent changes to Section 301 Tariffs:

BREAKING NEWS: U.S.-China Phase 1 Deal is Officially Signed

On January 15, 2020, U.S. President, Donald Trump, and Chinese Vice Premier, Liu He, signed the U.S.-China Phase 1 Deal in the White House. The partial trade deal is an eight-part agreement consisting of 94 pages.

   

Simultaneously, the Office of the United States Trade Representative (USTR) published a Federal Register Notice announcing tariff changes in accordance with the President’s direction (tweeted December 13, 2019) to modify the action taken pursuant to the Section 301 investigation.

Section 301 - List 3 Tariff Exclusion Requests Open Until September 30th

On May 9, 2019, the Office of the United States Trade Representative (USTR) published a Federal Register Notice announcing that an exclusion process will become available for all goods included on List 3. All products included on List 3 are now subject to an additional 25 percent tariff (raised from 10%).

On Monday, June 24, 2019, USTR released a Notice detailing the exclusion process. As discussed in our previous blog, the exclusion process opened up via an online portal on June 30, 2019, and will remain open until September 30, 2019.

Wondering if your Exclusion Request has been granted or denied? Find out here!

Since the inception of the Trade War with China, the Office of the United States’ Trade Representative (USTR) has provided citizens, primarily those in industries directly affected by the imposition of ad valorem duties (tariffs), the opportunity to request that certain products be granted exclusions. Each list of tariffs has its own specific process to ensure that concerned citizens may voice their opinions as to why given products should not be subjected to additional duties upon importation, as prescribed in the Section 301 investigation.

List 4 Split into Two HTS Lists

As published by the USTR TODAY: USTR Announces Next Steps on Proposed 10 Percent Tariff on Imports from China

The United States Trade Representative (USTR) today announced the next steps in the process of imposing an additional tariff of 10 percent on approximately $300 billion of Chinese imports.

On May 17, 2019, USTR published a list of products imported from China that would be potentially subject to an additional 10 percent tariff.  This new tariff will go into effect on September 1 as announced by President Trump on August 1.

Certain products are being removed from the tariff list based on health, safety, national security and other factors and will not face additional tariffs of 10 percent.

Section 301- List 4 Tariffs in Effect Starting September 1

President Donald Trump, left, poses for a photo with Chinese President Xi Jinping during a meeting on the sidelines of the G-20 summit in Osaka, Japan, Saturday, June 29, 2019. (AP Photo/Susan Walsh) Despite the reignition of tensions in May, hopes of reconciliation began to grow in the preeminence of the G-20 international economic forum, held in June. While substantial progress was not made, President Trump and potential dictator for life Xi Jinping appeared to slow the escalation, coming to a bilateral good-faith agreement. Supposedly, the two nations agreed that the United States would soften the sanctions imposed on Chinese tech giant, Huawei, contingent that China begins to repurchase American agricultural products, as well as halt their exportation of Fentanyl. The tentative “cease-fire” also intended to delay the United States’ imposition of the threatened list 4, which would levy a 25% ad valorem on roughly $300 Billion worth of Chinese goods. The new round of tariffs looms over China, considering that 2019 proved to be their worst fiscal year in recent memory. In fact, this is the most sluggish Chinese economy in nearly three decades, which many directly attribute to President Trump’s vigilant economic policies. However, approximately a month since the United States graciously showed the illicit regime restraint, China refuses to uphold their end of the bargain. Chinese imports of American agriculture has failed to accelerate, and similarly, their exportation of Fentanyl remains a major health threat to the United States. “China agreed to...buy agricultural product from the U.S. in large quantities, but did not do so,” President Trump said. “Additionally, my friend President Xi said that he would stop the sale of Fentanyl to the United States—this never happened, and many Americans continue to die.”

...buy agricultural product from the U.S. in large quantities, but did not do so. Additionally, my friend President Xi said that he would stop the sale of Fentanyl to the United States – this never happened, and many Americans continue to die! Trade talks are continuing, and...

— Donald J. Trump (@realDonaldTrump) August 1, 2019

China’s most recent defiance led President Trump to announce that the US will proceed to implement a 4^th list of tariffs. Despite the fact that the originally proposed list would levy 25% ad valorem, the new list, which is set to go into effect on September 1, will start at a 10% ad valorem tariff (and can be increased to a 25% tariff at a later date). The list still targets $300 Billion worth of goods and is set to affect almost all items not included in List’s 1, 2, and 3. Whereas list’s 1 and 2 affected steel, aluminum, and other metals, list 3 began to cast a wider net. List 4 however, includes a variety of goods ranging from clothing to basic electronics.

BREAKING NEWS: EXCLUSION PORTAL TO OPEN FOR LIST 4A

                      

USTR announced it will open the exclusion request process for HTS’s on List 4A. List 4A includes products covered by Annex A of the August 20, 2019 notice (84 FR 43304)  that are subject to 15% duty as of September 1, 2019.

 

List 4 has a total of 300 Billion worth of products and includes both lists 4A & 4B. 15% duties for List 4B (products covered by Annex C of the August 20 notice) are effective December 15, 2019, and no exclusion process has yet been discussed for 4B.

Exclusion portal opens October 31, 2019, and closes on January 31, 2020.

Contact us today to get your request in timely!

DTL helps clients strategize how to identify the strongest argument to persuade the government in granting your exclusion request. DTL was active in assisting clients submit exclusion requests for List 3.

NEWS ALERT - USTR’s newly Announced List 3 Exclusion process and List 4 Comment and Hearing Process

USTR published a Federal Notice on May 21, laying out the exclusion process for list 3. USTR anticipates that the exclusion period will open up on or around June 30^th. USTR estimates that over 60,000 US Stakeholders will request an exclusion for a particular product. On May 13, USTR proposed a 4^th list, which slaps a 25% tariff on roughly 300 billion worth of goods. From food products to furniture, the proposed list would include “essentially all products not currently covered” under previously imposed lists including literally thousands of irrelevant goods. If your product appears on any Section 301 tariff list there are three avenues to potentially get it removed. You may submit a comment, attend public hearings, or obtain an exclusion. Below is a big picture of the past and future opportunities get products off tariff lists:

As the trade war between United States and China drags into its second year, a resolution does not appear to be in the near future. In fact, following the most recent wave of escalations, the US stock market plummeted over 600 points leading into Monday, May 13.

While the trade war continues, neither side seems ready to reconcile. In early May, the two parties came close to a consensus. According to President Trump, China backed out of the deal, re-igniting tensions. In response to China reneging on the tentative agreement, President Trump called for an additional 25% tariff increase on Chinese Products on List 3.

UPDATE: USTR Increases Section 301 Tariffs to 25% Duty for Products on List 3

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.

China Tariff Hike Postponed - USTR to Establish an Exclusion Process – Seminar on “China Tariffs/AD/CVD 101”

The on-going trade war continues as China and the US make progress to come to an agreement. For background information on past actions taken by the Trump Administration to protect American Intellectual Property, check out our previous blogs.

China Tariff Increase is Postponed

President Trump reported in a February 24th tweet that as a result of the “substantial progress” in trade negotiations with China on “important structural issues” he will be delaying the increase from 10 percent to 25 percent in the additional Section 301 tariffs on the List 3 goods (valued at about US$200 billion) that is scheduled to take place on  March 2nd. To formalize the extension, the administration will have to publish a Federal Register notice stating the Section 301 additional tariff on the so-called List 3 products will remain at ten percent for now and the notice will likely provide the new date for the tariff increase. To date no formal notice has been published.

PAYING CHINESE TARIFF’S & YOUR COMPETITORS AREN’T?

Now that the Section 301 tariffs are effective, importers are required pay additional duties – but not all are doing so. We found that while some importers know their product is subject to one of the 3 Chinese tariff lists, they are either using HTS’s not on the list (even though that is not the correct HTS for their product), or using an HTS subject to additional tariffs, but, not paying the additional tariffs. If you are an honest importer paying the correct amount of additional duties, this may leave you unable to compete in the current market.

If you’ve noticed that some of your competitor’s pricing has not been affected by the additional tariffs and you have been forced to increase your prices to stay in business, you have an option to help equal the playing field.

CATCH UP ON DTL’S TOP BLOGS FROM 2018!

We want to make sure you stay up to date with the hottest trade topics from 2018. below is a summary of what you missed by category. Enjoy!

Deadline Approaching - Why Should Your Product Not Be on The 301 List!

We have been working hard to keep you up to date on the current Trade War between the United States and China.China has taken retaliatory actions against the United States in response to the first wave of additional U.S. duties that became effective on July 6, 2018. The United States is gearing up to impose a second round of 10% additional duties on approximately $200 billion worth of products of Chinese origin. The USTR has also been directed to consider levying a 25% tariff on these $200 billion worth of Chinese imports - thereby increasing the 10% to 25%.

Now, you have the ability to tell USTR why your products should not be on the 301 List.

Chinese Telecom Giant, ZTE, Faced with Largest Penalty Ever Levied

In our previous post, we discussed ZTE’s record penalty for selling technology with US-origin chips to North Korea and Iran, in violation of US trade laws. The company initially received a $1.19 billion in penalties and was ordered to reprimand the executives responsible for the malfeasance's as a condition to re-enter the United States (US) market after a three-year suspension. Despite telling the US government that the guilty executives had been properly punished, it became clear that they were instead rewarded with bonuses. This violation triggered an automatic ban of ZTE from the US market for seven (7) years. As the 4^th largest seller of cell phones to the US, the ban on ZTE serves as a means of protecting American production.

After the announcement, the ensuing backlash from Beijing, as well as trade talks in China, President Trump stated that he and Chinese president Xi Jiping are working together to bring ZTE “back into business”.

Now, the Trump administration threw a metaphorical lifeline to this tech giant, seemingly easing tensions with Beijing. Secretary Ross announced a $1.4 Billion dollar settlement with ZTE.

ZTE has agreed to severe additional penalties and compliance measures to replace the U.S. Commerce Department’s Bureau of Industry and Security (BIS) denial order imposed as a result of ZTE’s violations of its March 2017 settlement agreement.  Under the new agreement, ZTE must pay $1 billion and place an additional $400 million in suspended penalty money in escrow before BIS will remove ZTE from the Denied Persons List. These penalties are in addition to the $892 million in penalties ZTE has already paid to the U.S government under the March 2017 settlement agreement.

The announcement of a deal stirred up controversy in Washington, due to the administration’s uncertain stance towards China. The deal provides ZTE the opportunity to buy American parts, so long as it complies with specific parameters. The US not only levied over 1 Billion in penalties against ZTE, but also placed $400 million in escrow, in the event it reneged on the deal. The agreement will be enforced by a handpicked US compliance team, which will serve at the US Commerce Department for the next decade. The team is tasked with overseeing ZTE’s replacement of its entire board of directors, as well as oversight of general compliance.

The conditions set on ZTE to reenter the US are the toughest sanctions ever to be placed on a public or private company. Although the move faced backlash in Washington, “analysts say the ban is likely to have cost ZTE billions of dollars in lost revenue, tarnished its brand and strained its relationships with customers around the world”. As one of the largest and most profitable companies in China, ZTE, touting over 160 corporate and governmental clients worldwide, plays a vital role in the China’s functioning.

The initial announcement of ZTE’s ban, included “Commodity, Software or Technology” products as items prohibited to be sold or exported to ZTE. Effectively, the ban would do more than just tarnish the brand, rather it would have potentially ended ZTE’s ability to function as a mobile electronics production company.

While seemingly gracious for the Chinese government and the Chinese economy, the deal sets a precedent that sanction violators may never face severe consequences. Although the company must pay over $1 Billion in penalties, it was granted a gift. Assuming that they work within the confines of the deal, the penalties will be a minuscule price to pay, while ZTE maintains its position and its prowess.

China Sourcing Fair - How to Solve U.S. Customs Issues When Importing From China

 The rewards of sourcing from China are well known, but succeeding at it is far from simple. With a sluggish global economy resulting in unpredictable market changes, cost-effective sourcing is important.

To help you build or sharpen your China sourcing strategies, I am thrilled to be part of a new series of "How to Source from China" conferences at the China Sourcing Fair (July 10-12, Miami)!

The conferences are led by industry experts, and reveal real-life sourcing risks in China. We will share actionable knowledge at every step as the project moves from concept to delivery, and the conference will offer in-depth insights and practical tips on do's and don'ts of China sourcing. Whether you're a beginner or veteran buying professional, the FREE conference program is your chance to learn how to source efficiently and effectively from the "world's factory".

Register now to enhance your importing skills and knowledge today! Conference seats are limited and are on a first-come, first-served basis.

I will be speaking on "How to Solve U.S. Customs Issues When Importing From China".

Intellectual property rights (IPRs) are a priority trade initiative for U.S. Customs. Most confiscated China imports violated US Customs' IPR laws, which should serve as a reminder when buying from China.

In my seminar, we will look at ways of preventing and dealing with these issues. In particular, we will cover:

• Trademark / copyright violations (What U.S. Customs looks for)
• Top compliance tips in advance of importation (What you need to know before your goods go!)
• Statistics of seizure cases (concentrating on China statistics)
• How cases progress with U.S. Customs

Join this session and you'll leave with a better understanding!

Register now to confirm your seat!