United States: US Prepares To Hit All Chinese Imports With Tariffs, As China Retaliates And Launches A Product Exclusion Process

On May 13, 2019, the Office of the United States Trade Representative ("USTR") released a draft Federal Register notice beginning the process to subject virtually all remaining imports from China (the so-called "Tranche IV") to tariffs pursuant to Section 301 of the Trade Act of 1974.1 This announcement follows closely on the heels of an announcement by USTR that tariffs on approximately $200 billion worth of imports from China (the so-called "Tranche III") would increase from 10 to 25 percent.2 The US government has clarified that Chinese products that were exported to the United States prior to May 10, 2019, are not subject to the increase from 10 to 25 percent as long as they are entered for "consumption" prior to June 1.3  

The May 13 draft notice requests comments on a proposed 25 percent ad valorem duty on additional imports from China, 3,805 products that are collectively valued at approximately $300 billion.4 A list of the products, organized by tariff subheadings, was included in an annex to USTR's notice.5 As expected, the list is comprehensive and includes consumer items such as smartphones, computers and textiles, as well as industrial products such as iron and steel pipes. However, imports of pharmaceuticals, certain pharmaceutical inputs, certain medical devices, rare earth materials and critical minerals are not included in the annex.6

The draft notice provides details on the deadlines for submitting comments on the proposed tariffs and the schedule for public hearings. Specifically, the deadline for submitting requests to appear at the public hearing, along with a summary of expected testimony, is June 10, 2019.7 The deadline for submitting written comments is June 17, 2019, when the Section 301 Committee will also convene the public hearing on the proposed tariffs.8 Any post-hearing rebuttal comments must be submitted seven days after the last day of the public hearing.9

China's Response to Tranche III

For its part, China responded to the US increase in tariffs on Tranche III by announcing on May 13, 2019, an increase in the tariffs applicable to three of the four lists that make up China's version of Tranche III countermeasures.10 Specifically, the tariff applicable to (a) List 1 of China's Tranche III will increase from 10 to 25 percent;11 (b) List 2 of China's Tranche III will increase from 10 to 20 percent;12 and (c) List 3 of China's Tranche III will increase from 5 to 10 percent.13 The tariff imposed on US goods appearing on China's List 4 will remain for the time being at 5 percent.14 All tariff increases by China will take effect June 1, 2019.

List 1 of China's Tranche III consists of 2,493 tariff codes, covering, inter alia, sheep, horse meat, honey, starch, sugar, mango juice, lime, liquefied natural gas, calcium, sodium sulfate, toluene, methanol, glutamic acid, urea, perfume, lip cosmetics, ophthalmic cosmetics, laser printers and tablets. List 2 of China Tranche III consists of 1,078 tariff codes, covering, inter alia, linseed, vodka, mineral water, toothpaste, plastic toilet seats and covers, toilet paper, rivets, springs, thermal printers, shredders and bearings. List 3 of China Tranche III consists of 974 items, covering, inter alia, frozen sweet corn, roasted peanuts, sodium acetate, first aid kits, electrical blankets, vehicle rearview mirrors, fire extinguishers, painting robots and diapers. List 4 maintained by China consists of 595 tariff codes, covering, inter alia, magnesium chloride, xylitol, ether, fireworks, firecrackers, solar water heaters, parts for oil or gas drilling machines, 3D printers, stethoscopes and dentures.

China's Launch of a Product Exclusion Process

Amid all the talk of tariffs and retaliation, the Customs Tariff Commission of China's State Council announced on May 13, 2019, that the country will soon launch a product exclusion process related to its Section 301 countermeasures. US products covered by China Tranches I - III are eligible for exclusion as long as there is no revocation or suspension in place. Products for which China's countermeasures (e.g., tariffs) have been revoked or suspended (e.g., certain automobiles and auto parts) are not eligible.15

For products on China Tranches I16 and II,17 the Ministry of Finance will start accepting applications for exclusion on June 3, 2019, with a deadline of July 5. For products on China Tranche III, the process will start on September 2, 2019, with a deadline of October 18.

Escalating Trade Tensions

The tariff increases announced by the United States and China, together with the release of the proposed US Tranche IV, reflect an escalation of trade tensions between the two countries. Meanwhile, both countries have granted a grace period for their respective tariff increases. As noted previously, the United States exempts Chinese products that were exported prior to May 10, 2019, and entered (or withdrawn) for consumption prior to June 1 from its tariff increase. China's tariff increases will not take effect until June 1. In addition, whether the United States will actually impose Section 301 tariffs on additional Chinese imports (i.e., those on US Tranche IV) remains a question. President Trump indicated on the same day of the May 13 draft notice that he has yet to make a final decision on that issue. Based on the timeline discussed above, the earliest that US Tranche IV could go into effect would be June 24, 2019, which leaves open the possibility that the two sides could come to an agreement beforehand.

Prospects for a trade deal between the two countries remain uncertain. According to Larry Kudlow (director of the US National Economic Council), China has invited US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin for additional talks in Beijing, but neither government has confirmed a date for those talks.18 President Trump has stated that he will meet with China's President Xi at the G20 Summit from June 28 to 29 in Osaka, Japan.19  

Takeaways for Business

Interested parties should continue to closely monitor developments in this matter and take timely actions to avail themselves of duty avoidance opportunities offered by either side, including participation in the US public comment and/or the Chinese product exclusion process. Additionally, parties that are exploring potential changes to their Chinese production supply chain should carefully consider the complex US customs rules and judicial precedent that govern this area of the law.

Footnote

1 19 U.S.C. §§ 2411-2420 (collectively, "Section 301").

2 Mayer Brown Legal Update, US Tariff Increase on $200 Billion Chinese Imports Kicks In Today, available at https://www.mayerbrown.com/en/perspectives-events/publications/2019/05/us-tariff-increase-on-$200-billion-chinese-imports-kicks-in-today ("Mayer Brown May 10 Legal Update").

3 Our May 10 Legal Update explained that "in order to retain the 10 percent rate in this situation, importers will need to follow certain special filing procedures yet to be announced." US Customs and Border Production ("CBP") has issued instructions for the special filing procedures. CBP, CSMS #19-000238, UPDATE- Section 301 (Tranche 3) Duties as of May 10, 2019, available athttps://csms.cbp.gov/viewmssg.asp?Recid=24229&page=&srch_argv=19-000238&srchtype=all&btype=&sortby=&sby=.

4 USTR, Request for Comments Concerning Proposed Modification of Action Pursuant to Section 301: China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, available at https://ustr.gov/sites/default/files/enforcement/301Investigations/May_2019_Proposed_Modification.pdf ("May 13 Draft Notice").

5 May 13 Draft Notice at 7.

6 May 13 Draft Notice at 3.

7 May 13 Draft Notice at 1.

8 Id.

9 Id.

10 http://gss.mof.gov.cn/zhengwuxinxi/zhengcefabu/201905/t20190513_3256788.html.

11 List 1 of China Tranche III may be found here: http://gss.mof.gov.cn/zhengwuxinxi/zhengcefabu/201905/P020190513719203602248.pdf.

12 List 2 of China Tranche III may be found here: http://gss.mof.gov.cn/zhengwuxinxi/zhengcefabu/201905/P020190513719204287788.pdf.

13 List 3 of China Tranche III may be found here: http://gss.mof.gov.cn/zhengwuxinxi/zhengcefabu/201905/P020190513719204715521.pdf.

14 List 4 of China Tranche III may be found here: http://gss.mof.gov.cn/zhengwuxinxi/zhengcefabu/201905/P020190513719205123756.pdf.

15 http://gss.mof.gov.cn/zhengwuxinxi/zhengcefabu/201905/t20190513_3256786.html; http://gss.mof.gov.cn/zhengwuxinxi/zhengcefabu/201905/P020190513722406861547.pdf.

16 China Tranche I may be found here: http://gss.mof.gov.cn/zhengwuxinxi/zhengcefabu/201806/P020180616034361843828.pdf.

17 China Tranche II may be found here: http://gss.mof.gov.cn/zhengwuxinxi/zhengcefabu/201808/P020180808696052416638.pdf.

18 Wall Street Journal, China Invites U.S. Negotiators to Continue Trade Talks, White House Economics Adviser Says (May 12, 2019), available at https://www.wsj.com/articles/china-invites-u-s-negotiators-to-continue-trade-talks-white-house-economics-adviser-says-11557684021?utm_campaign=Marketing_Cloud&utm_medium=email&utm_source=Standalone+-+China+announces+tariff+retaliation+and+exclusion+process+-+May+13& utm_content=https%3a%2f%2fwww.wsj.com%2farticles%2fchina-invites-u-s-negotiators-to-continue-trade-talks-white-house-economics-adviser-says-11557684021.

19 Wall Street Journal, Trade Fight Escalates as China Hits U.S. With Higher Tariffs (May 13, 2019), available at https://www.wsj.com/articles/china-to-raise-tariffs-on-certain-u-s-imports-11557750380?mod=hp_lead_pos2&utm_campaign=Marketing_Cloud&utm_medium=email&utm_source=Standalone+-+China+announces+tariff+retaliation+and+exclusion+process+-+May+13& utm_content=https%3a%2f%2fwww.wsj.com%2farticles%2fchina-to-raise-tariffs-on-certain-u-s-imports-11557750380%3fmod%3dhp_lead_pos2.

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2019. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions