The Section 301 Trade Measures - In Plain English

The Section 301 Trade Measures - In Plain English
 
In August 2017, the President asked for an investigation into certain practices by China regarding the alleged theft of U.S. intellectual property.  On March 22, 2018, the investigation concluded that China’s practices target and harm U.S. companies.  To pressure China to stop, the President proposed an additional duty of 25 percent on 1,333 tariff lines representing $50 billion worth of imports.  This means that a product valued at $100 is assessed an additional charge of $25 at the U.S. border. The money collected is deposited in the U.S. Treasury. 
 
An interagency committee held hearings and accepted written comments on whether to implement the additional tariff.  They considered whether imposing duties on the imports would (1) help eliminate China’s practices or (2) harm U.S. small- or medium-size businesses and consumers.  515 tariff lines of the proposed 1,333 were removed, and the final list represents a total of $34 billion worth of imports.  Because the President proposed a tariff affecting $50 billion, a second list of 284 tariff lines representing $16 billion was proposed.  When the first list (List 1) went into effect on July 6, China retaliated against $34 billion of imports from the United States.  This prompted the President to propose an additional tariff of 10 percent on $200 billion worth of imports from China.  The tariff was increased to 25 percent to match the tariffs affecting Lists 1 and 2.  In the interim, 5 lines were removed from List 2.  Here is where we are (as of September 5, 2018):
 

• List 1 is $34 billion.  Additional 25% duties.  Became effective July 6.
  
• List 2 is $16 billion.  Additional 25% duties.  Became effective August 23.
  
• List 3 is $200 billion.  The administration proposed 10% additional duties; this was increased to 25% duties.  The deadline for making requests to appear and testify was August 13.  Roughly 300 persons requested the opportunity to be heard, making this perhaps the largest-ever U.S. trade hearing.  The hearing started August 20 and lasted 6 days.  46 panels of 5 to 8 per panel were heard.  Written comments are due September 6.  Although there is no deadline on when the list will be finalized, best guess is that it will be published in October 2018.
  
• Exclusion.  Companies affected by List 1 can file an exclusion request before October 9.  If granted, products will be excluded from the additional 25% duty, the exclusion is retroactive to July 6, and it remains effective for one year.  The details for exclusions from Lists 2 and 3 have yet to be published but are expected to closely follow the requirements set out for List 1.

 
Venable is actively advising clients affected by Lists 1, 2, and 3, and we have helped clients argue successfully to remove certain tariff lines from these lists.  As supply chains and costs of production are shifting under the weight of this increasingly expensive trade war, we stand ready to assist and advise on the impact affecting corporate sourcing, M&A, FDI, and other core business decisions.  We are also following closely other issues impacting business, such as the 232 Steel and Aluminum tariffs, NAFTA 2.0, and the revamp of the Committee on Foreign Investment in the United States (CFUIS) rules.  We would be happy to assist you or field an introductory call to explain – in plain English – what is happening and how it affects your business.

Alex Koff, Partner

Venable
President Emeritus of the MD/ DC District Export Council and Policy Committee Chair