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List 3 Goods Exported Prior to 10 May from Mainland China Must Be Entered Before 1 June to Avoid Tariff Hike

As previously reported, the Office of the U.S. Trade Representative issued an official notice in the Federal Register on 9 May increasing from 10 percent to 25 percent the additional tariff currently in place on US$200 billion worth of goods imported from mainland China (List 3 goods). The notice indicated and government sources subsequently confirmed (including through a 9 May Cargo Systems Messaging Service (CSMS) message by U.S. Customs and Border Protection) that the increase would be effective with respect to subject go0ds that met both of these conditions: (1) are entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on 10 May; and (2) are exported to the United States on or after 10 May.

However, a CSMS message issued by CBP as well as a supplementary draft Federal Register notice released by USTR on 10 May now assert that List 3 goods that were exported from mainland China to the United States prior to 10 May will continue to be subject to the 10 percent tariff as long as they are entered into the United States prior to 1 June. All List 3 goods entered on or after 1 June will therefore face a 25 percent additional tariff even if they were exported prior to 10 May. U.S. importers have been instructed to use special tariff line 9903.88.09 (10 percent duty rate) for goods exported from the mainland prior to 10 May and entered into the United States prior to 1 June, as well as special tariff lines 9903.88.03 and 9903.88.04 (25 percent duty rate) for all other List 3 goods.

The supplementary USTR notice also states that List 3 products that are admitted into a foreign-trade zone in “privileged foreign” status will retain that status consistent with 19 CFR 146.41(e) and will be subject, at the time of entry for consumption, to the additional duty rate that was in effect at the time of their admission into the FTZ.

Additionally, USTR indicated on 10 May that President Trump has ordered the agency to begin the process of raising tariffs on “essentially all remaining imports from China, which are valued at approximately $300 billion.” This would ostensibly include key consumer products that have not been targeted to date, such as apparel, footwear and toys. USTR added that the process for public notice and comment will be published shortly in the Federal Register and additional details will be uploaded to the USTR website on 13 May as the agency begins the process prior to a final decision on these tariffs.

Not surprisingly, the sudden tariff hike has led to considerable consternation and stock market volatility in the United States. Jacob Parker, vice president of the U.S.-China Business Council, said that the increase “inflicts significant harm on U.S. industry, farmers and consumers” and “will decrease the competitiveness of American companies, reduce the efficiency of their global supply chains, and reverberate through the U.S. economy.” Bill Gordon, vice president of the American Soybean Association, said that farmers are running out of patience with U.S. policy due to declining exports to mainland China. He noted that as many as eight family farms are going out of business each day in Wisconsin alone and claimed that “there’s got to be other ways to negotiate than bringing out a bat every time somebody disagrees with you.”

By the time the negotiations ended for the day on 10 May, the U.S. stock market climbed after U.S. Treasury Secretary Steven Mnuchin described the talks as “constructive” and said that the negotiations would continue.

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