Companies on Third Section 301 Tariff List Anxiously Await G-20 Outcome

A former Office of the U.S. Trade Representative deputy predicted that the president of China and President Donald Trump would meet in the middle at the G-20 in Argentina, neither resolving the problems between the two countries nor declaring an impasse. He did not sound as confident that some kind of progress would be enough to halt the escalation in tariffs. "I think the signals from both countries are [that] they know this is an opportunity," Robert Holleyman said, as he opened a Nov. 28 Tariff Town Hall sponsored by tuna canneries. "I hope this gets us out of the current morass."

The American Headwear Alliance, which represents 11 companies that import hats and caps, found its tariff burden more than doubled when its products were placed in the third tranche of Section 301 targets. Alliance founder James Day said tariffs had been 7.5 percent; now are 17.5 percent; and, if nothing changes, will go to 32.5 percent in January. "Movement of manufacturing is not as simple as moving to another factory," Day said, though companies are trying to look for alternatives to their Chinese suppliers.

David Melbourne, senior vice president of marketing for Bumble Bee Seafoods, agreed. Bumble Bee is hit with 10 percent tariffs on products in the Harmonized Tariff Schedule heading 1604.14.40, which it says is commoditized and therefore must be processed in the cheapest possible location. The processed tuna loins are then canned in California. In its public comment, Bumble Bee did not want to reveal what proportion of its California cannery's production is Chinese imports, but Melbourne said that if the tariff goes to 25 percent, it will cost the company $20 million in the first year.

The tuna industry is split on how the USTR should treat tuna. Bumble Bee wants HTS 1604.14.10, 1604.14.22 and 1604.14.30 to stay on the list, so that it is at a price advantage to foreign competitors. StarKist, which operates larger canneries in Samoa than Bumble Bee does in California, wants 1604.14.40 to be taxed, because it will then have a cost advantage over those who import China-processed tuna.

Melbourne said he will argue for an exclusion for 1604.14.40 if exclusions are set up for the third list. "I think we have a compelling case," he said. "We're not IP, we're not technology." And, he said, government scientists recommend that people eat more seafood, and canned tuna is the most economical way to do so.

The business representatives said they cannot get access to White House advisers on trade or to the U.S. trade representative, so they can only lobby Congress and hope that those members put enough pressure on the administration to get changes in policy. Melbourne said he hopes Department of Agriculture staffers could have influence behind the scenes.

Another panelist, former Rep. Charles Boustany, a spokesman for Tariffs Hurt the Heartland, criticized the broad tariff approach of the Trump administration, and said, "none of this has had an effect on China's behavior." He said a pause in escalation for the third tranche is "really the best we can hope for." He said he's quite worried not much will come out of the meeting between the two presidents, and he said the kind of structural changes the U.S. is seeking are "a long game. It's not going to happen between now and the next election. It may take the rest of this century."