The International Trade Commission recently posted Revision 3 to the 2019 Harmonized Tariff Schedule. The new version includes changes necessary to implement the latest group of exemptions from Section 301 tariffs on certain products from China, as announced by the Office of the U.S. Trade Representative in a notice issued April 18 (see 1904170038). That includes the addition of new subheading 9903.88.07 for goods that qualify for the exemption, as well as new paragraph (j) of Note 20 to subchapter III of chapter 99, which lists goods covered by the new exemptions.
Section 301 Tariffs
Section 301 Tariffs are levied under the Trade Act of 1974 which grants the Office of the United States Trade Representative (USTR) authority to investigate and take action to protect U.S. rights from trade agreements and respond to foreign trade practices. Section 301 of the Trade Act of 1974 provides statutory means allowing the United States to impose sanctions on foreign countries violating U.S. trade agreements or engaging in acts that are “unjustifiable” or “unreasonable” and burdensome to U.S. commerce. Prior to 1995, the U.S. frequently used Section 301 to eliminate trade barriers and pressure other countries to open markets to U.S. goods.
The founding of the World Trade Organization in 1995 created an enforceable dispute settlement mechanism, reducing U.S. use of Section 301. The Trump Administration began using Section 301 in 2018 to unilaterally enforce tariffs on countries and industries it deemed unfair to U.S. industries. The Trump Administration adopted the policy shift to close what it deemed a persistent "trade gap" between the U.S. and foreign governments that it said disadvantaged U.S. firms. Additionally, it pointed to alleged weaknesses in the WTO trade dispute settlement process to justify many of its tariff actions—particularly against China. The administration also cited failures in previous trade agreements to enhance foreign market access for U.S. firms and workers.
The Trump Administration launched a Section 301 investigation into Chinese trade policies in August 2017. Following the investigation, President Trump ordered the USTR to take five tariff actions between 2018 and 2019. Almost three quarters of U.S. imports from China were subject to Section 301 tariffs, which ranged from 15% to 25%. The U.S. and China engaged in negotiations resulting in the “U.S.-China Phase One Trade Agreement”, signed in January 2020.
The Biden Administration took steps in 2021 to eliminate foreign policies subject to Section 301 investigations. The administration has extended and reinstated many of the tariffs enacted during the Trump administration but is conducting a review of all Section 301 actions against China.
International Trade Today is providing readers with some of the top stories for April 22-26 in case they were missed.
UPS, “like most other U.S. multinationals,” advocates for “fair and balanced trade,” CEO David Abney said on a Q1 earnings call April 25. The China-U.S. trade “uncertainty” is “prompting softer industry forecasts” in the Asia-Pacific region, he said. “We certainly encourage leaders of the two countries to find solutions that support increased two-way trade,” and also “assuring that many U.S. companies have access to export to China,” he said. Some UPS customers “have adjusted their supply chain” to mitigate the higher costs of the Section 301 tariffs and retaliatory Chinese duties, and to “adapt to changing trade dynamics,” he said. China economically “is still strong, maybe not as strong as in previous years,” he said. There are “a lot of developments” taking place in two-way trade between the U.S. and China, but also between “China and the rest of the world,” he said. That “sometimes gets lost in the China-U.S. discussions,” he said. “We think it gives us plenty of opportunities to focus and to apply our strategic imperatives” in e-commerce, he said. “We feel good about the economy for the rest of the year.”
Tool sets imported from China by the Apex Tool Group can be hit with multiple Section 301 tariffs, CBP said in an April 10 ruling. As was the case in a September 2018 ruling involving Apex (see 1810100040), the tool set is classified based on the article subject to the highest rate of duty under General Rule of Interpretation 1. CBP ruled that the tool sets are dutiable at a 38.9% rate.
Though the Trump administration postponed indefinitely raising the 10 percent Section 301 tariffs on Chinese goods to 25 percent, iRobot, even “at the 10 percent level,” anticipates incurring $20 million to $25 million in tariff costs for 2019, Chief Financial Officer Alison Dean said on a Q1 earnings call April 24. IRobot argued unsuccessfully last summer for removing duties on the finished vacuum cleaners it imports from China under the 8508.11.00 tariff line on grounds the duties would hurt the company and that robotic vacuums are not an “industrially significant technology in China.”
The Senate Finance Committee chairman said that both China and the U.S. will step down Section 301 tariffs and the retaliatory tariffs in phases, with each side lifting the tariff at roughly the same time if they believe the other side is complying with a trade deal in good faith. He said the reductions will probably be done in tranches. "Over how long a period of time, I don't know," Sen. Chuck Grassley, R-Iowa, told reporters on a call on April 24. "But there won't be a 100 percent reduction of tariffs on the day the agreement's signed."
CBP has assessed about $22.6 billion in duties under the major trade remedies started during the Trump administration as of April 10, a CBP spokeswoman said. That includes $15.3 billion in duties from the Section 301 tariffs on goods from China, she said. The first tranche of Section 301 tariffs took effect on July 6, 2018 (see 1807050033); the second took effect on Aug. 23, 2018 (see 1808070046); and the third, on Sept. 24, 2018 (see 1809240015). CBP also has assessed about $5 billion under the Section 232 tariffs on steel and $1.6 billion under tariffs on aluminum as of Oct. 16, 2018, the spokeswoman said. The Section 201 trade remedies on washing machines and solar cells (see 1801230052), imposed Jan. 23, 2018, account for $725 million in assessed tariffs, she said.
Americans for Free Trade -- along with 150 national and regional trade groups -- sent a letter to the White House April 22 saying that all tariffs should end with a China trade deal, and that the enforcement of that deal should "avoid any enforcement mechanism that would trigger future tariffs and result in long-term economic uncertainty." The letter also said that the exclusion process for Section 301 imports should continue, even if those tariffs end at the signing of the agreement. The groups, which include the National Customs Brokers & Forwarders Association of America, said, "American businesses and farmers bearing the burden of the trade war have been told repeatedly by your Administration that they must endure 'short-term pain for long-term gain.' They were promised that tariffs were merely a means to an end, and that all this damage would be worth it. A deal that fails to lift tariffs would represent a broken promise to these hardworking Americans. "
CBP on April 18 added the ability in ACE for importers to file entries with the third group of exclusions from Section 301 duties, it said in a CSMS message. Filers of imported products that were granted an exclusion should report the regular Chapter 84, 85 or 90 Harmonized Tariff Schedule number, as well as subheading 9903.88.07 for products subject to Section 301 duties on products from China but that have been granted an exclusion by the Office of the U.S. Trade Representative. “Do not submit the corresponding Chapter 99 HTS number for the Section 301 duties when HTS 9903.88.07 is submitted,” CBP said.
CBP created Harmonized System Update (HSU) 1906 on April 17, containing 414 Automated Broker Interface records and 85 Harmonized Tariff Schedule records, it said in a CSMS message. The update includes adjustments required by the Office of the U.S. Trade Representative's announcement of new exemptions from Section 301 tariffs on China (see 1904170038). Modifications required by the verification of the 2019 HTS are included as well.