U.S. Trade Representative Robert Lighthizer should put in place a process for exclusion from the 10 percent Section 301 tariffs on $200 billion worth of Chinese imports, which the Trump administration imposed last month (see 1809240015), a group of 169 members of Congress said in an Oct. 15 letter to the USTR. While the USTR allowed for exclusions to each of the first two lists of Section 301 tariffs, there's been no mention from the administration about a similar process for the latest list of tariffs. A wide range of industries asked the USTR for an exclusion process in a letter last month (see 1809270038).
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.
BOSTON -- The effects of the 10 percent Section 301 tariffs on $200 billion worth of Chinese imports, which the Trump administration imposed last month (see 1809240015), aren’t likely to be felt at retail this holiday season, Consumer Technology Association President Gary Shapiro said Oct. 15 at the association's Innovate Celebrate conference. Shapiro’s bigger concern is what happens after Jan. 1 when the tariffs are scheduled to rise to 25 percent. Jan. 1 is a “very critical date because 10 percent is a lot different than 25 percent, Shapiro” said. “Ten percent hurts; 25 percent makes companies reel. The pain throughout the industry is real -- and soon to the consumer and retail is real.”
The Miscellaneous Tariff Bill Act took effect on Oct. 13 (see 1809140004) and CBP programmed all Harmonized Tariff Schedule numbers in ACE in preparation, the agency said in an Oct. 12 CSMS message. The MTB provisions are in subchapter II to Chapter 99, the agency said. The MTB reduces tariffs on nearly 1,700 items. "Since approximately half of the 1,660 MTB-eligible items are produced in China, there is overlap with Section 301 tariffs," CBP said. "Products of China subject to Section 301 tariffs can benefit from MTB’s suspensions and reductions for the general (column 1) rate of duty, but remain subject to the 25 percent ad valorem rate of duty imposed by headings 9903.88.01 and 9903.88.02 or 10 percent ad valorem rate of duty imposed by headings 9903.88.03 and 9903.88.04."
Voxx International expects soon to impose price increases to offset higher costs of Section 301 tariffs on Chinese imports, CEO Pat Lavelle said on an Oct. 11 earnings call. Printed circuit assemblies took an especially heavy hit among the items targeted with 10 percent tariffs that took effect Sept. 24 and are scheduled to rise to 25 percent on Jan. 1. Most of the products “within the competitive field” on which Voxx plays are sourced from China, but all manufacturers of similar ilk face the same challenges, he said. “I don't see anybody having a real distinct advantage based on where they're getting their product,” Lavelle said. “Most of it comes out of China. So as the tariffs come through, we will adjust our prices, our selling prices, and you'll see increases in prices. That is the game plan.”
It’s impossible to forecast how many product-specific exemptions to the Section 301 tariffs on Chinese imports the Office of the U.S. Trade Representative will grant “because we’re in uncharted territory,” David Cohen, a trade expert with Sandler Travis, told a Sports & Fitness Industry Association webinar Oct. 11. With Tuesday’s deadline having lapsed for requesting exemptions to the first round of tariffs that took effect July 6, USTR denied 108 requests of the more than 10,000 filed and has yet to grant a single exemption, Cohen said.
A toolset that is classifiable under a subheading not covered by the Section 301 tariffs is still subject to those tariffs because one of the components is subject to the tariffs, CBP said in a Sept. 6 ruling, HQ H299857. CBP's ruling followed a request for reconsideration of a ruling on the toolset at issue. Marilyn-Joy Cerny of Sandler Travis filed the reconsideration request and argued that the initial ruling "improperly extended the Section 301 measures to sets classified in subheading 8206.00.00," CBP said.
International Trade Today is providing readers with some of the top stories for Oct. 1-5 in case they were missed.
Finished motors assembled in Mexico from three components from China are classifiable in subheading 8501.10.4060 and subject to the 25 percent tariffs under Section 301, CBP said in a Sept. 13 ruling modification. CBP reached the same conclusion as in the ruling being modified, NY N299096, but said that ruling was "incorrect as to the application of the NAFTA Marking Rules and the country of origin of the product." The original ruling request came from Johnson Electric in July, CBP said.
Witnesses from the United States Council for International Business, the Aluminum Association and the International Intellectual Property Alliance say that China is not living up to its World Trade Organization commitments on many fronts, even as there are some signs of movement away from practices that damage foreign competitors.
Reclassifying Chinese imports into Harmonized Tariff Schedule codes for goods not exposed to Section 301 tariffs is perhaps the least understood, most underused strategy that companies can try for minimizing the duties’ impact, a UPS executive said during an Oct. 3 webinar on high-tech supply chains. “If you’re not participating in what that classification process looks like, you’re taking a risk, I would say, at a minimum,” said Ron Shepherd, vice president at UPS Trade Management Services.