Section 301 Tariff Increase Notice Says Exclusion Process Coming

The Office of the U.S. Trade Representative notice on the increase in Section 301 tariffs for the third tranche of goods from China (see 1905080004) mentions that a new exclusion process will be coming for that group of products. The notice, which said that the tariffs will go from 10 percent to 25 percent for the third list of goods from China at 12:01 a.m. on May 10, also seems to indicate some differences from previous tariff implementation instructions on the timing.

USTR Robert Lighthizer ordered the rate hike at Trump’s direction, “in light of the lack of progress” in negotiations with the Chinese on a trade deal since March, the notice said. “In the most recent negotiations” last week in Beijing, “China has chosen to retreat from specific commitments agreed to in earlier rounds” of talks, it said. The details of a newly created List 3 exclusion process will be spelled out in a separate notice, the USTR said. Lighthizer had held out against an exclusion process for as long as the List 3 tariffs stayed at 10 percent, but recently said he would install one (see 1905020030).

Customs lawyer Ted Murphy with Baker & McKenzie interpreted the notice as "some wiggle room on the effective date for the duty increase," he blogged May 8. Unlike previous Section 301 notices, the annex "includes two separate conditions for the increase in duties to take effect," Murphy said. "As a result, it appears that in order for the 25% duty rate to apply, the imported merchandise must be entered for consumption after 12:01 am ET Friday morning AND have been exported to the United States on or after Friday, May 10th. So, an entry of merchandise included on List 3 exported from China prior to May 10th would not be subject to the 25% duty rate even if it was entered after 12:01 am Friday (it would still be subject to the 10% rate)."

Though that “will likely be a welcome accommodation to companies with shipments on the water, it may lead to some confusion at the border,” Murphy said. He presumes CBP “will issue further guidance on the type of proof needed to demonstrate that a given shipment was exported to the United States before May 10,” such as bills of lading, he said. CBP didn’t comment.

The administration “is only hurting American businesses, farmers and consumers by raising tariffs to 25 percent,” National Retail Federation spokesperson Bethany Aronhalt emailed. “Instead of doubling down on this flawed strategy, the administration should be working with our allies to put pressure on China to change its unfair trade practices. Tariffs are taxes on Americans, period.”

The Telecommunications Industry Association is “greatly concerned” the administration “has announced the imposition of an additional tax on imports to take effect with little advance notice,” said Cinnamon Rogers, senior vice president-government affairs. “The 25 percent duty as described will impact products essential to the functioning of our country's telecommunications networks, ultimately resulting in significant new costs for American consumers.”