Supply chain location changes are difficult and take time, so companies are turning to other ways to avoid or reduce Sections 301 and 232 tariffs, experts said at a March 7 Georgetown Law International Trade Update (see 1903070033) panel on the Trump administration and the supply chain. For steel and aluminum imports, there's been "a big uptake in foreign-trade zones," said Lynlee Brown, a senior manager at Ernst & Young. With Section 301, companies are using drawback, and after a recent CMS message, they may be taking advantage more often of substitution drawback. But the best bang for the buck, Brown said, is in customs valuation. Companies are making changes there not only because of Section 301, but also because of the administration's tax reform.
Section 301 (too broad)
Two hand tool sets that undergo some work in China are not subject to the Section 301 tariffs because the sets are classifiable based on the ratchets, which are of Taiwan origin, CBP said in a Feb. 14 ruling N301954. Apex Tool, through Sandler Travis lawyer Marilyn-Joy Cerny, sought CBP's advice on classification, marking and the country of origin. Unlike another recent ruling involving Cerny and Apex Tool that found the Section 301 tariffs do apply (see 1810100040), CBP said the set can be classified through General Rule of Interpretation (GRI) 3.
Section 301 tariffs on Chinese imports have had a diverse impact on electronics companies serving the custom installer industry, according to manufacturers at the ProSource Summit Expo in Nashville on March 3. Origin Acoustics has seen a wide variety of impacts within its product line, CEO Nick Berry told Consumer Electronics Daily, a sister publication to International Trade Today. Passive speakers, which lack a built-in power source, have been relatively immune, but the effect on amplifiers has been “extreme,” he said. Tariffs on a container of electronics that Origin imported from China in December cost the company more than all the tariffs it paid the prior year, he said. The hike in the duty rate to 10 percent from 1 percent -- “an extreme scenario” -- was going to be a “clear negative” to the balance sheet, so the company, entering its fifth year in business, implemented its first-ever price increase for 2019, he said.
International Trade Today is providing readers with some of the top stories for Feb. 25 - March 1 in case they were missed.
General Electric, a major U.S. exporter, remains supportive of "the notion of trying to open markets," said Drew Quinn, director of trade policy at GE. But, the tariffs the U.S. is using to try to bludgeon China into a more open stance are worse than the status quo, he said. Quinn, who was speaking at a March 5 Washington International Trade Association program on Asia, said that tariffs are generally pretty low on the aircraft engines, MRI machines and turbines it sells. There aren't a lot of investment barriers, either. "The biggest issue for us is the host country's industrial policies, and how they favor their national champions," he said. But even there, Quinn said, GE has found a way to work with foreign countries where it has facilities, and has been able to participate in subsidies. "We may have a different and less absolutist position than some people."
A deal is shaping up with China that would lift most of the Section 301 tariffs on Chinese imports, according to a report from The Wall Street Journal . The article cautioned it could still fall apart over enforcement, or over political pressures on either side that the deal is too favorable to the other country. President Donald Trump tweeted that "I have asked China to immediately remove all Tariffs on our agricultural products (including beef, pork, etc.) based on the fact that we are moving along nicely with Trade discussions.... and I did not increase their second traunch [sic] of Tariffs to 25% on March 1st. This is very important for our great farmers - and me!"
Because of the input from industry, the direction of the president, and "progress of the additional rounds of negotiations" with China since December 2018, the Office of the U.S. Trade Representative has announced that the duty for about 5,700 tariff lines will remain at 10 percent "until further notice." List 3 of the Section 301 tariff action was originally due to increase to 25 percent on Jan. 1, 2019, and that increase was delayed until March 2 because of the status of negotiations. This latest announcement was expected, because President Donald Trump tweeted Feb. 24 that the increase would not happen (see 1902240001). The 10 percent rate of additional duty for about $200 billion worth of Chinese products went into effect Sept. 24, 2018. The USTR noted that the Section 301 statute authorizes his office "to modify or terminate any action being taken under Section 301" if the action is no longer appropriate."
Just over 4,500 Section 301 exclusion requests have been denied by the Office of the U.S. Trade Representative, according to an update published late Feb. 28. There have been 985 exclusion requests granted, covering 21 tariff lines. The largest number of the granted requests were for plastic injection molds, three types of radial bearings, linear-acting hydraulic motors and water coolers. This is much larger than the last update, published Dec. 21, 2018, when fewer than 25 had been granted (see 1812240010).
CBP issued the following releases on commercial trade and related matters:
The day after U.S. Trade Representative Robert Lighthizer told Rep. Jackie Walorski at a hearing that he still believes there's no need for exclusions from 10 percent tariffs on Chinese imports, she and Rep. Ron Kind have introduced a bill that would force him to put the process in place. Their bill -- which has a Senate companion written by Sen. James Lankford, R-Okla., and Sen. Chris Coons, D-Del. -- is called the Import Tax Relief Act.