China 301 List 2 – Effective August 23, 2018 – in US and China

Source: Canada US

USTR Lighthizer yesterday published notice that the 25% tariff on goods appearing on List 2 will become effective on August 23, 2018. For those who wonder if filing comments makes a difference, the answer is yes! In his announcement, USTR Lighthizer made the point the list dropped from 284 to 279 tariff items based on testimony and comments which had been received.  None of this, of course, helps those companies which are taking a serious financial hit from these tariffs, but then once the official notice is published in the Federal Register, an exclusion request will be included, and so companies should be gearing up to do two things:

1. File exclusion requests for any products on Lists 1 and 2; and
2. File comments for those products on List 3.

While those impacted hope for a quick resolution, prudence dictates planning for a List 4.   List 1 is discussed in the general press as worth $34 billion. List 2’s goods are worth $16 billion, and List 3’s good are worth $200 billion. Both President Trump and USTR Lighthizer have spoken of imposing additional tariffs on $500 billion worth of goods imported from China. If that happens, any product not on the other lists will end up on List 4.

It continues to be a significant challenge to predict how events will play out. Nonetheless, the Administration has repeatedly said the tariffs seek to change China’s behavior. The fact that China published a proposal on August 3, 2018 to impose its own retaliatory tariffs at 5%, 10%, 20% and 25% without an effective date certainly suggests the back and forth will continue.

The nature of the notice published by USTR also infers the tariffs will continue. The USTR made a point of stating: “Specifically, the Section 301 investigation revealed:

• China uses joint venture requirements, foreign investment restrictions, and administrative review and licensing processes to require or pressure technology transfer from U.S. companies.
• China deprives U.S. companies of the ability to set market-based terms in licensing and other technology-related negotiations.
• China directs and unfairly facilitates the systematic investment in, and acquisition of, U.S. companies and assets to generate large-scale technology transfer.
• China conducts and supports cyber intrusions into U.S. commercial computer networks to gain unauthorized access to commercially valuable business information.”

It certainly seems this trade war will take a long time to resolve.  Do you know on which lists your products appear? Have you filed comments? Any exclusions requests? Which remedy applies to which of your goods? By what deadline must you file?  Have you consulted with your trade advisors to know which options are best for your business?

The latest USTR announcement can be found here: https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/august/ustr-finalizes-second-tranche .

*** China has just announced its own revised List 2 on which an additional 25% tariff will be imposed on goods imported from the U.S. More details can be found here: http://www.mofcom.gov.cn/article/ae/ai/201808/20180802773926.shtml – where both the announcement and the list of affected products were published. This is China’s version of a $16 billion list of products.

For the most current information, please feel free to visit the Tricks of the Trade page of MSK’s blog, which offers updates on these tariffs and other topics relating to international trade.

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