The Office of the U.S. Trade Representative will ask for comments on whether the second set of tariff exclusions on Chinese imports on Section 301 List 1, set to expire March 25, should last another year, it said in a pre-publication notice on its website. The agency will start accepting comments on the extensions in docket number USTR-2019-0024 on Jan. 15. The comments are due by Feb. 15, it said. The USTR recently granted extensions to six exclusions, while letting 25 expire, from the first group of exclusions (see 1912190060).
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.
Modems manufactured in China and sent to Canada for programming and other processing are not transformed in Canada and should be considered a product of China, CBP said in a Nov. 26 ruling. The ruling was in response to a request from Electroline Equipment, which asked CBP about NAFTA treatment and the country of origin of the transponders. The transponders are subject to the Section 301 tariffs on goods from China because China is the country of origin, the agency said.
The volume of Section 301 List 4A tariff exclusion requests surpassed 1,000 on Dec. 19, 49 days after the Office of the U.S. Trade Representative opened the public docket to applications at noon on Halloween. Applicants that are granted exclusions can qualify for refunds of 15 percent tariffs retroactive to Sept. 1, when the duties took effect. List 4A tariffs remain in effect at 15 percent, but are expected to be rolled back by half after the U.S.-China phase one trade deal is signed sometime in January 2020. Under USTR rules, tariff exemptions are granted on all goods imported under a product classification, not just to the company making the exclusion request. Nine applications were filed through Dec. 19 to exempt goods imported under subheading 8517.62.00.90, more than for any consumer tech product with List 4A exposure. The subheading includes a broad swath of consumer tech goods, including smart speakers, Bluetooth headphones, fitness trackers and smartwatches. Virtually all List 4A exclusion requests filed by all companies through Nov. 29 were elevated to the status of a “stage 2 initial substantive review,” the docket shows. The final “stage 4” is when an exclusion request is granted and approved for publication in the Federal Register.
The Office of the U.S. Trade Representative will grant one-year extensions to only six exclusions from the first list of Section 301 tariffs on China that were due to expire Dec. 28, it said in a pre-publication copy of a notice posted to its website. The notice is silent on the other 25 exclusions issued alongside the six that were granted extensions, so those 25 now appear set to expire on Dec. 28.
The Customs Rulings Online Search System (CROSS) was updated with 162 rulings on Dec.18. The following headquarters rulings not involving carriers were modified on Dec. 18, according to CBP:
International Trade Today is providing readers with some of the top stories for Dec.9-13 in case they were missed.
There continues to be “a lot of moving parts” to the Section 301 tariffs on Chinese imports, Costco Chief Financial Officer Richard Galanti said on a fiscal Q1 call on Dec. 12. With the “current news” that the U.S. and China are close to a “Phase One” trade deal, “we will have to wait and see,” he said. U.S. and Chinese negotiators confirmed agreement Dec. 13 on the Phase One deal (see 1912130035) that includes rolling back the List 4A tariffs by half to 7.5 percent and suspending the List 4B duties that were to take effect Dec. 15. The Trump administration said it’s keeping the 25 percent tariffs in place on the first three tranches of goods.
With the announcement of a phase one deal, Flexport chief economist Phil Levy said the promise is for stability in tariff levels -- even if the large majority of goods facing Section 301 tariffs will retain the 25 percent hike. But, he noted in a Dec. 16 webinar, many times over the last eight months, “a deal was announced, and it didn't last. That should sort of serve as a precautionary tale.” Levy, like many observers, doesn't believe that a phase two deal, that could lead to rolling back more tariffs, is likely in the next year.
The Section 301 tariffs on goods from China that were set to take effect on Dec. 15 will not go forward because a phase one deal between the U.S. and China was reached, President Donald Trump said in a Dec. 13 tweet. "The Penalty Tariffs set for December 15th will not be charged because of the fact that we made the deal," he said.
With the last round of consumer goods imported from China spared, and a reduction in Section 301 tariffs on about $120 billion in goods that were first subject to additional tariffs Sept. 1, some business interests welcomed the de-escalation, but warned that the U.S. should stay focused on more significant economic reforms in China. The tariffs on List 4a, which are at 15 percent and apply to about 3,800 8-digit tariff lines, will go to 7.5 percent.