5 Aug 2019
U.S. to Impose 10 Percent Additional Tariff on All Remaining Imports from Mainland China on 1 September
President Trump has announced that beginning on 1 September he will impose a 10 percent additional tariff on virtually all of the remaining US$300 billion worth of goods imported from mainland China that are not already subject to Section 301 tariffs (List 4 goods). While the precise inventory of tariff lines subject to the additional tariff will be laid out in a Federal Register notice expected to be issued shortly, initial indications are that the tariff – which would be in addition to any other applicable tariffs – will be applied on the entire list of 3,805 full and partial subheadings announced in May.
The proposed List 4 (available here) includes key consumer items like apparel, footwear, home textiles, and toys and games, as well as a range of machinery and electrical and electronic articles of HS Chapters 84 and 85 and various other products of potential interest to exporters in Hong Kong and mainland China. The Office of the U.S. Trade Representative has indicated that the proposed list excludes pharmaceuticals, certain pharmaceutical inputs, select medical goods, rare earth materials and critical minerals. Moreover, product exclusions granted by USTR on prior tranches will not be affected.
Based on experience with List 3 goods, it is not expected that requests to exclude specific products from List 4 will be accepted while the tariff rate remains at 10 percent. If this rate is increased to 25 percent, which could happen if the administration deems it necessary to gain additional leverage in the on-going U.S.-Sino trade talks, an exclusion process could be established. Legislation recently introduced by Sen. Sheldon Whitehouse (Democrat-Rhode Island) would mandate a product exclusion process for List 4 products and require USTR (as well as the U.S. Department of Commerce for any Section 232 product exclusion requests) to render a decision within 30 days and provide a rationale for any denials.
With only a month until the tariff is set to be imposed, companies should explore the legal options available for reducing or eliminating their exposure. They should also carefully examine export dates and projected arrival dates to conform with the 1 September tariff start date.
It is worth noting that three senators (Sens. Portman, Isakson and Scott) sent a letter to U.S. Trade Representative Robert Lighthizer on 31 July calling for the removal from the proposed List 4 of 96 tariff lines that were previously excluded from List 3 because of the severe harm any additional tariffs would cause on a narrow group of U.S. businesses. According to the lawmakers, the affected businesses “are finding it impossible to engage in required business planning given the uncertainty created by removing goods from the supplemental trade action and then putting these same goods back on the proposed supplemental trade action only months later.” The forthcoming issuance of the definitive List 4 by USTR will show whether the concerns of these lawmakers were ultimately heeded.