June 19, 2018

The Trade War With China Continues

By Douglas J. Heffner, Kathleen M. Murphy, James L. Sawyer, Richard P. Ferrin, Luke J. Karamyalil

On June 18, 2018, President Trump directed the U.S. Trade Representative (USTR) to identify $200 billion of additional Chinese imported goods that would be subject to 10 percent retaliatory tariffs. This move is in response to Beijing’s announced retaliation for U.S. tariffs implemented by USTR on Friday, June 15. White House trade advisor Peter Navarro stated that this a purely defensive move to protect against Beijing’s economic aggression.

China’s Commerce Ministry stated in response to President Trump’s comments that Beijing will continue to fight back with qualitative and quantitative measures if the U.S. publishes an additional tariff list subject to retaliatory duties. To which President Trump stated that if China increases tariffs once more in retaliation for the latest move, the U.S. “will meet that action by pursuing additional tariffs on another $200 billion of goods.” If tensions continue to escalate, as it stands, the U.S. will target $450 billion worth of Chinese imported products. USTR stated that an additional list of $200 billion in Chinese imported goods is being prepared. As with previously proposed lists issued by USTR, this list will undergo a notice and comment period in which the public and other stakeholders will have the opportunity to voice their opinions.

Notice and Comment Period for Second List Issued on June 15

As noted in our previous client alert, USTR recently announced a second list of products targeted for additional tariffs on approximately $14 billion in Chinese imports. Pursuant to section 304(b) of the Trade Act, these tariffs may only go into effect after a notice and comment period. Interested parties may present arguments on which products should be removed from, or remain on, the list and why. Today, USTR announced the notice and comment period due dates for the most recent list, including a public hearing date. Those dates are below.

  • June 29, 2018: Due date for filing requests to appear and a summary of expected testimony at the public hearing, and for filing pre-hearing submissions.
  • July 23, 2018: Due date for submission of written comments.
  • July 24, 2018: Public hearing at the U.S. International Trade Commission (500 E Street SW, Washington, D.C., 20436, beginning at 9:30 a.m. ET).
  • July 31, 2018: Due date for submission of post-hearing rebuttal comments.

USTR has indicated that comments should address whether imposing increased duties on a particular product “would be practicable or effective to obtain the elimination of China’s acts, policies, and practices, and whether maintaining or imposing additional duties on a particular product listed … would cause disproportionate economic harm to US interests, including small- or medium sized businesses and consumers.”

In order to appear at the July 24, 2018, public hearing, a party must submit its request to appear by June 29, 2018. Such a request must include a summary of the testimony and may be accompanied by a pre-hearing submission. The remarks at the hearing may be no longer than five minutes.

Companies with products identified in the second list, as well as those companies and investors that have interests in China, or may be contemplating potential tie-ups or investments with Chinese companies, should consider commenting on these proposed retaliatory duties. As the dates detailed above are fast approaching, it is important that companies organize quickly to submit comments and to prepare for the USTR hearing.

Exclusion Requests for First List Issued on June 15 and Tariff Classification Instructions Effective July 6, 2018

USTR also finalized its first list of products targeted for additional 25 percent tariffs on June 15. Those tariffs will go into effect at 12:01 a.m. ET on July 6 and will be identified within a new subheading to the Harmonized Tariff Schedule of the United States, 9903.88.01.

USTR will implement a formal process to allow for exclusion requests for certain products impacted by the additional tariffs for products included in this first list. The procedure for which to request such an exclusion, including the procedure for interested parties to object to an exclusion request, will be published in a separate Federal Register notice.

China’s Reaction

China has signaled it will apply asymmetric methods to retaliate against tariffs imposed by the U.S. Some American companies are already facing additional regulatory scrutiny, as evidenced by increased time for products to clear Chinese customs. Also, Chinese review of Qualcomm’s planned purchase of NXP Semiconductors stalled following the USTR’s announcement of additional tariffs. This acquisition is seen as critical for the U.S. chip maker. Chinese officials are meeting with domestic businesses to discuss shifting contracts for U.S. goods and services to European, Japanese or local suppliers.

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Drinker Biddle’s Customs and International Trade team has extensive experience navigating public comments, having successfully removed certain tariff lines from the initial proposed list. For further information, contact members of the Customs and International Trade team listed below.

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