May 8, 2019

Duty Increase and Exclusion Process for List 3 and Imposition of New Duties under List 4 are Administration’s Next Steps for China Section 301 Tariffs

By the Customs and International Trade Team

The Office of the United States Trade Representative (“USTR”), in response to new developments in negotiations with China and directions from President Trump, is preparing to impose additional duties on Chinese imports under Section 301 and will announce an exclusion process for the $200 billion in Chinese imports covered under the September 21, 2018 Federal Register notice (“List 3”).

The changes come after the United States accused Chinese negotiators of reversing course on a number of commitments made during the course of ongoing trade talks with U.S. negotiators. The administration had previously warned that duties under List 3 would increase to 25 percent if talks with China did not reach a positive outcome. The duties were originally set at 10 percent and scheduled to increase to 25 percent, but the administration postponed the increase until now.

In accordance with a Federal Register notice dated May 9, 2019, USTR will increase duties on List 3 products from 10 percent to 25 percent. The increase will take effect at 12:01 a.m. on Friday, May 10, 2019. The annex to the notice stipulates that the 25 percent duty rate applies to goods that are exported and entered on or after May 10. In other words, goods currently in transit, having been exported from China prior to May 10 but which arrive on or after May 10, will be dutiable at the previous 10 percent rate instead of the new 25 percent rate.

However, it is not clear at this time how this change will be implemented in ACE, so importers should maintain detailed records of all entries of subject goods. Importers should prepare to provide shipment documentation verifying that the goods left China prior to May 10 to avoid the 25 percent duty rate. If the 25 percent duty rate is assessed when the importer believes the 10 percent duty rate should have been assessed, importers may need to file post-summary corrections to receive refunds for goods that were exported from China before May 10, 2019.

USTR will soon thereafter publish a separate Federal Register notice outlining a product exclusion process similar to those already in place for the initial $34 billion (“List 1”) and $16 billion (“List 2”) of Chinese imports currently subject to 25 percent duties.

Additionally, on May 5, 2019, the President announced that the administration would impose 25 percent duties on the remaining $325 billion in U.S. imports from China (“List 4”). It is currently unclear if there will be a product exclusion process for imports subject to additional duties under List 4. These additional duties would effectively cover the entirety of U.S. imports from China, possibly including a large amount of raw materials, including steel and aluminum products currently excluded from List 1 duties but subject to additional duties under Section 232.

The proposed tariffs will be in addition to any existing customs duties and antidumping and countervailing duties.

Companies currently paying 10 percent duties on List 3 products should begin taking steps to identify opportunities to file exclusion requests on eligible products to mitigate their tariff burden. Furthermore, companies should determine whether they import any Chinese goods not already covered under List 1 through List 3 and consider commenting on the USTR proposal for List 4, and take other steps to protect their interests.

For further information, contact Douglas J. Heffner, Nate B. Bolin, James L. Sawyer, Kathleen M. Murphy, William R. Rucker, Richard P. Ferrin, Nicolas Guzman, or any other member of the Customs and International Trade Team.

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