CBP has assessed more than $10.3 billion in duties under the recent major trade remedies started during the Trump administration as of Nov. 20, a CBP spokeswoman said. That marks an increase in assessed duties of more than $3 billion since the previous CBP update with numbers from about a month ago (see 1811210013). Most of that increase stems from the Section 301 tariffs on goods from China, which now account for about $5.8 billion in assessed duties, she said. The first tranche of Section 301 tariffs took effect on July 6 (see 1807050033); the second list took effect on Aug. 23 (see 1808070046); and the third, on Sept. 24 (see 1809240015). CBP also has assessed about $3.1 billion under the Section 232 tariffs on steel and $991 million under tariffs on aluminum, the spokeswoman said. The Section 201 trade remedies on washing machines and solar cells (see 1801230052) account for $489 million in assessed tariffs, she said.
Section 301 Tariffs
Section 301 Tariffs are levied under the Trade Act of 1974 which grants the Office of the United States Trade Representative (USTR) authority to investigate and take action to protect U.S. rights from trade agreements and respond to foreign trade practices. Section 301 of the Trade Act of 1974 provides statutory means allowing the United States to impose sanctions on foreign countries violating U.S. trade agreements or engaging in acts that are “unjustifiable” or “unreasonable” and burdensome to U.S. commerce. Prior to 1995, the U.S. frequently used Section 301 to eliminate trade barriers and pressure other countries to open markets to U.S. goods.
The founding of the World Trade Organization in 1995 created an enforceable dispute settlement mechanism, reducing U.S. use of Section 301. The Trump Administration began using Section 301 in 2018 to unilaterally enforce tariffs on countries and industries it deemed unfair to U.S. industries. The Trump Administration adopted the policy shift to close what it deemed a persistent "trade gap" between the U.S. and foreign governments that it said disadvantaged U.S. firms. Additionally, it pointed to alleged weaknesses in the WTO trade dispute settlement process to justify many of its tariff actions—particularly against China. The administration also cited failures in previous trade agreements to enhance foreign market access for U.S. firms and workers.
The Trump Administration launched a Section 301 investigation into Chinese trade policies in August 2017. Following the investigation, President Trump ordered the USTR to take five tariff actions between 2018 and 2019. Almost three quarters of U.S. imports from China were subject to Section 301 tariffs, which ranged from 15% to 25%. The U.S. and China engaged in negotiations resulting in the “U.S.-China Phase One Trade Agreement”, signed in January 2020.
The Biden Administration took steps in 2021 to eliminate foreign policies subject to Section 301 investigations. The administration has extended and reinstated many of the tariffs enacted during the Trump administration but is conducting a review of all Section 301 actions against China.
CBP has assessed more than $7.1 billion in duties under the recent major trade remedies started during the Trump administration as of mid-October, a CBP spokeswoman said. That includes $3.4 billion in duties from the Section 301 tariffs on goods from China as of Oct. 17, she said. The first tranche of Section 301 tariffs took effect on July 6 (see 1807050033); the second list took effect on Aug. 23 (see 1808070046); and the third, on Sept. 24 (see 1809240015). CBP also has assessed about $2.6 billion under the Section 232 tariffs on steel and $738 million under tariffs on aluminum as of Oct. 16, the spokeswoman said. The Section 201 trade remedies on washing machines and solar cells (see 1801230052) account for $416 million in assessed tariffs as of Oct. 16, she said.
Best Buy CEO Hubert Joly estimated that some 7 percent, or $2.3 billion, of the total cost of goods sold were affected by the 10 percent tariffs imposed at the end of September under Section 301, he said during a Nov. 20 Q3 earnings call. Many of the products on that list of goods were accessories, he said. Costs have been mitigated “in a variety of ways” and the impact affects a “very small portion of our business,” he said. Looking to Jan. 1, when tariffs are scheduled to rise to 25 percent, Joly said his personal view is that “the journey may not be linear, [but] the negotiations with China will progress,” and Best Buy is working with vendors to reduce the effects if tariffs do rise at the first of next year.
The exemption from Section 301 tariffs for goods entered as Section 321 de minimis shipments amounts to a "loophole" that blunts the intended effects of the tariffs, said Michael Stumo, CEO of the Coalition for a Prosperous America, in a Nov. 20 post on the conservative website LifeZette. "It’s a rather strange decision by CBP," Stumo said. "The administration had imposed a tariff on thousands of products that fall within the Section 301 list. But CBP then decided that, as long as an importer brings in less than $800 worth of an item on a particular day, no duties will be collected." Stumo alleged that there's no "statutory or regulatory foundation for the decision, and it contradicts the administration’s goal of changing China’s behavior."
Cisco saw “immaterial” impact in its Q1 ended Oct. 27 from the 10 percent Section 301 tariffs that took effect Sept. 24 on $200 billion worth of Chinese imports, because the tariffs kicked in with only a month to go in the quarter, CEO Chuck Robbins said on a Nov. 14 earnings call. Though Cisco hiked prices on Chinese-sourced goods in Q1 to cover the higher tariff costs, it “saw absolutely no demand change” between the week before and the week after the price increases took effect, he said.
International Trade Today is providing readers with some of the top stories for Nov. 5-9 in case they were missed.
Lipstick packaged in China from U.S. origin lipstick mass is not subject to Section 301 tariffs because its country of origin remains the U.S., CBP said in a Nov. 2 ruling. The lipstick, which is shipped from the U.S. to China before being poured into Chinese-made lipstick tubes and caps, does not undergo a substantial transformation that causes its country of origin to be China for the purposes of the additional duties, CBP said in NY 301371.
NEW YORK -- Clients are asking "how can I make a bad situation better," said Mary Jo Muoio, senior vice president for trade services for Geodis, a customs broker firm. Muoio, who was speaking on a panel on "Tackling the Trade War: Solutions for Companies Across the Supply Chain" at the Apparel Importers Trade and Transportation Conference, said some of those client questions and plans are not sophisticated. She quoted one client who asked: "If I send it to Taiwan and label it Taiwan, does it get me out of the 301?" She quipped, "Well, it gets you in jail."
While the next chairman of the House Ways and Means Committee is clear -- Rep. Richard Neal, D-Mass. -- the leadership of the Senate Finance Committee and the Ways and Means Trade Subcommittee is up in the air. Neal, who represents a slice of Western Massachusetts that has suffered from deindustrialization, voted against NAFTA, but for giving China permanent most favored nation status. He also voted no on the most recent fast-track renewal in 2015.
NEW YORK -- The Section 301 tariffs largely have spared apparel, but U.S.-China Business Council Vice President Erin Ennis told industry representatives that tariffs on all remaining Chinese goods could follow. "You should hope for the best, but, as businesses, you should be planning for the worst on that front," she said. "We're not at the end of this yet." Ennis was speaking at the Apparel Importers Trade and Transportation Conference Nov. 7.