12 July 2018
Additional 25 Percent Tariffs Begin on Range of Mainland Chinese Products; Product Exclusion Process Announced
The United States on 6 July began collecting additional duties of 25 percent on US$34 billion worth of imports spanning 818 tariff lines from mainland China. As previously reported, a large percentage of these goods are from HS Chapters 84, 85, 87, 88 and 90, such as engines and motors; construction, drilling and agricultural machinery; machines for working minerals, glass, rubber or plastic; rail locomotives and rolling stock; motor vehicles and motorcycles; helicopters and airplanes; and testing, measuring and diagnostic instruments and devices.
In retaliation for this action, Beijing has imposed a reciprocal 25 percent tariff on a total of 545 U.S. products also worth some US$34 billion, including a broad range of agricultural and food products (such as soybeans, sorghum, rice and dairy products) as well as raw cotton and automobiles. Additionally, mainland China has said it will invalidate the trade and economic agreements that it reached recently with the United States.
Meanwhile, the Office of the U.S. Trade Representative issued on 6 July a notice outlining the process by which U.S. stakeholders may request that particular products classified within a covered tariff subheading be excluded from the Section 301 tariffs. Key improvements over the Section 232 product exclusion process include the fact that exclusions will apply to specific products rather than specific petitioners and trade associations will be able to file requests on behalf of their members.
Each request must specifically identify a particular product in terms of its physical characteristics, such as dimensions, material composition or other characteristics, that distinguish the product from other products within the covered 8-digit subheading. USTR will not consider requests that identify the product at issue in terms of the identity of the producer, importer, ultimate consumer, actual use or chief use, or trademarks or tradenames, or that identify the product using criteria that cannot be made available to the public. The request must also include the applicable 10-digit subheading as well as information on the ability of CBP to administer the exclusion. Additionally, requesters must provide the annual quantity and value of the mainland Chinese-origin product that the requester purchased in each of the last three years. For trade association requesters, this information should be provided based on their members’ data. If precise annual quantity and value information are not available, an estimate and an explanation of the basis for the estimation should be provided.
Product exclusion requests must also lay out the rationale for the requested exclusion, including whether (i) the particular product is available only from mainland China (in addressing this factor, requesters should address specifically whether the particular product and/or a comparable product is available from sources in the United States and/or in third countries), (ii) the imposition of additional duties on the particular product would cause severe economic harm to the requester or other U.S. interests, and (iii) the particular product is strategically important or related to “Made in China 2025” or other mainland Chinese industrial programmes. Requesters may also provide any other information or data that they consider relevant to an evaluation of the request, and any request that contains business confidential information must be accompanied by a public version.
USTR strongly encourages interested persons to use the request form the agency has posted on its website, although use of that form is not mandatory. All submissions must be in English and sent electronically via www.regulations.gov.
USTR will evaluate each request on a case-by-case basis, taking into account whether the exclusion would undermine the objective of the Section 301 investigation. Any exclusion will be effective starting from the 6 July effective date of the additional duties and extending for one year after the publication of the exclusion determination in the Federal Register. USTR intends to periodically announce decisions on pending requests. The agency must receive all requests to exclude a particular product by 9 October, with responses to an exclusion request due 14 days after the request is posted on the appropriate docket number (USTR 2018-0025) on www.regulations.gov. Any replies to responses to an exclusion request are due seven days after the close of the 14-day response period.
Also of potential interest for Hong Kong and mainland Chinese exporters is the following information issued by U.S. Customs and Border Protection on filing requirements for goods imported from mainland China that will be subject to the additional 25 percent tariffs.
Any article classified in a covered subheading that is a product of mainland China will be subject to a 25 percent ad valorem duty rate in addition to the general (Column 1) duty rate. This additional tariff will be effective with respect to goods entered or withdrawn from warehouse for consumption on or after 12:01 a.m. Eastern Standard Time on 6 July. The tariff is based on the country of origin, not the country of export.
In addition to reporting the HTSUS Chapter 1-97 classification of the imported good, importers must also report the HTSUS 9903.88.01 special tariff number for covered goods.
HTSUS Chapter 98
The additional tariff will not apply to products for which entry is properly claimed under a heading or subheading in Chapter 98. When submitting an entry in this case, the filer must first report subheading 9903.88.01 followed by the applicable Chapter 98 subheading and the Chapter 1-97 classification for the commodity being imported.
Drawback / U.S. Trade Preference Programmes
Section 301 duties are eligible for duty drawback. Covered products that are eligible for special tariff treatment under HTSUS General Note 3(c)(i) will be subject to the additional tariff.
Foreign Trade Zones
Any covered product (except those eligible for admission under domestic status) that is admitted into a foreign-trade zone on or after 12:01 a.m. EST on 6 July may only be admitted as privileged foreign status. Upon entry for consumption such products will be subject to any ad valorem duty rates or quantitative limitations related to classification under the applicable subheading.