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China Retaliates with Its Own Tariffs

Round 3 of U.S. Tariffs and Retaliation by China

On September 17, 2018, the United States Trade Representative (USTR) finalized a third round of Chinese imports subject to additional duties under Section 301 of the Trade Act of 1974 (Section 301 Tariffs). Specifically, the USTR published a list of 5,745 subheadings of the Harmonized Tariff Schedule of the United States (HTSUS) that, effective September 24, 2018, will be subject to an additional 10% duty under the Section 301 Tariffs. The additional duty for these 5,745 subheadings increases to 25% on January 1, 2019. We note that USTR fully or partially removed 297 tariff lines from the originally proposed list for the third round of tariffs. Included among the products removed from the proposed list are certain consumer electronics products such as smart watches and Bluetooth devices; certain chemical inputs for manufactured goods, textiles and agriculture; health and safety products such as bicycle helmets, and child safety furniture such as car seats and playpens. The finalized third round follows USTR’s first round of 818 subheadings and second round of 284 subheadings, both of which are subject to a 25% additional duty under the Section 301 Tariffs.

In response to the USTR's action on the third round, China retaliated with its own increased tariffs, also effective September 24, 2018, on a list of products covering $60 billion in U.S. exports, at additional duty rates of 5% to 10%. This adds to China's retaliatory tariffs already in place on approximately $50 billion in U.S. exports.

A quick reference chart regarding the U.S. tariffs and relevant dates is provided below.

Section 301 Quick Reference Chart
  Covered Products Additional
Tariff Rate
Status Relevant Dates
First
Round
818 HTSUS
subheadings
25% Final
  • Effective July 6, 2018
  • Product exclusion requests due October 9, 2018
Second
Round
284 HTSUS
subheadings
25% Final
  • Effective August 23, 2018
  • Product exclusion requests due December 18, 2018
Third
Round
5,745 HTSUS
subheadings
10% until
12/31/2018

25% starting
1/1/2019
Final
  • Effective September 24, 2018
  • Increase to 25% effective January 1, 2019


Exclusion Process for Round 2 of Section 301 Tariffs

The USTR also published procedures and guidance detailing how companies can request exclusions from the second round of Section 301 Tariffs. USTR established similar product exclusion procedures for the first round of Section 301 Tariffs, responding to concerns that the additional duties will harm U.S. businesses, especially in circumstances where a particular product can be sourced only from China.

The second-round product exclusion procedures follow, with slight modifications, the first-round procedures. Notably, USTR will consider exclusion requests from any interested person, including trade associations, which may submit requests on behalf of their members. An exclusion request can contain any information or data the requester considers relevant, but it must, at a minimum, address each of the following factors:
  • Whether the specific product is available only from China;
  • Whether the additional duties on the specific product cause severe economic harm to the requester or to other U.S. interests; and
  • Whether the specific product is strategically important or related to the "Made in China 2025" program.

Requests for exclusions must be made on a product-by-product basis (i.e., one request per product). Each request must (1) specifically identify a particular product, including how the product is distinguishable from other products in the relevant 8-digit HTSUS subheading; (2) include supporting data regarding quantity and value of imports for the past three years; and (3) provide the rationale for the requested exclusion (i.e., address the exclusion factors noted above).

In addition to the requirements above which mirror the first-round exclusion procedures, product exclusion requests for the second round of the Section 301 Tariffs must also include the following information: for imports sold as final products, requesters must provide the percentage of their total gross sales in 2017 that sales of the Chinese-origin product accounted for; and for imports used in the production of final products, requesters must provide the percentage of the total cost of producing the final product(s) that the Chinese-origin input accounts for, and the percentage of their total gross sales in 2017 that sales of the final product(s) accounted for. Product exclusion requests for the first round of Section 301 Tariffs must be submitted to USTR by October 9, 2018, and exclusion requests for the second round of Section 301 Tariffs must be submitted by December 18, 2018.

The USTR procedures also detail the process and deadlines for other interested parties responding to requests for exclusions and for requesters replying to any such responses.

Any approved exclusion request will be retroactively effective to the date of imposition (July 6, 2018 for the first round; August 23, 2018 for the second round) and will remain effective for one year after the date that USTR publishes the exclusion in the Federal Register.

At this time, USTR has not released product exclusion request procedures for the third round of Section 301 Tariffs.

Please contact Venable's International Trade and Logistics Group if you have questions about the Section 301 Tariffs, or if your business or association would like to request an exclusion for affected Chinese imports or submit comments to any filed requests.