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A Game of Chess Well-Played or a Game of Chicken? Significant Import Tariff Increases by the United States and China

Posted By Administration, Thursday, April 12, 2018
Updated: Thursday, April 12, 2018


by Melissa Proctor, Miller Proctor Law PLLC


In early March, as has been widely reported throughout the media and industry organizations, the Trump Administration imposed additional tariffs on certain steel and aluminum products imported into the United States for national security reasons because of the investigation conducted by the Commerce Department's Bureau of Industry and Security (BIS) under Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. Ch. 7). Also making news as of late is the March 22nd announcement that the United States would further increase tariff rates on additional goods imported from China under Section 301 of the Trade Act of 1974 (9 U.S.C. § 2411). These international trade punches and counterpunches appear to be accelerating between the United States and China continue to accelerate rapidly. The following is intended to provide a detailed summary for manufacturers, suppliers, retailers and consumers of all the "need-to-know" developments in these fast-moving areas.

Increased Tariffs on Aluminum and Steel (Section 232 Investigation):

  • Section 232 of the Trade Expansion Act of 1962 gives the Executive Branch the ability to conduct investigations to determine the effects of imports on U.S. national security. In January 2018, the BIS delivered Section 232 reports on steel and aluminum to the President concluding that the quantities and circumstances of steel and aluminum imports threaten to impair national security.1 Specifically, the reports found that U.S. steel imports quadrupled U.S. exports of the same, and that aluminum imports had increased to 90% of the total demand for primary aluminum. Accordingly, the Commerce Department recommended that the President act to protect the long-term viability of the U.S. steel and aluminum industries. The President issued Proclamations on March 8, 2018, announcing the increase in import tariffs on certain aluminum and steel products.2
  • The increased tariffs apply to products originating in all countries – except for those countries that were specifically exempted. The new tariff rates went into effect on March 23, 2018.
  • The affected steel products include goods classified in HTSUS Subheading 7206.10 – 7216.50, 7216.99 – 7301.10, 7302.10, 7302.40 – 7302.90 and 7304.11 - 7306.90.
  • The affected aluminum products include: unwrought aluminum in HTSUS Heading 7601; aluminum bars, rods and profiles in Heading 7604; aluminum wire in Heading 7605; aluminum plate, sheet, strip and foil in Headings 7608 – 7609; and, aluminum castings and forgings in HTSUS Subheadings 7616.99.5160 and 7616.99.5170.
  • U.S. Customs and Border Protection issued instructions for the filing of entries that are subject to the increased tariffs on aluminum and steel products.3 U.S. importers are required to report the regular HTSUS classifications applicable to the imported steel products as well as HTSUS Subheading 9903.80.01. For aluminum products, U.S. importers must report the applicable HTSUS classifications of those goods as well as HTSUS Subheading 9903.85.01.
  • The following countries have been exempted from the additional tariffs on the covered steel and aluminum products: European Union member states; Argentina; Australia; Brazil; Canada; Mexico; and, South Korea.4
  • Aluminum and steel products determined not to be produced in the U.S. in a sufficient and reasonably available amount or in a satisfactory quality will be excluded from the increased tariffs upon request. Products may also be excluded based on national security issues. The BIS will accept public comments until May 18, 2018 on the process that will allow interested parties to request exclusions from the increased tariffs. Parties eligible to request such exclusions are individuals or entities that are suppliers of the covered products in the United States or that use them in the United States in construction and manufacturing operations. (Note that any individual or entity in the U.S. may also file objections to the requests for exclusions under the announced process.)5
  • On April 2, 2018, China increased import tariffs on 128 U.S. goods totaling approximately $3 billion in U.S. exports to China in retaliation against the additional tariffs imposed by the Trump Administration on steel and aluminum products. China imposed a 15% tariff on the following products: nuts; fresh and dried fruits; grape wine; denatured ethyl alcohol; ginseng roots; and, seamless tubes, pipes and hollow profiles of iron and steel. It also imposed a 25% tariff on aluminum waste and scrap, as well as pork.

Proposed Increase in Tariffs on 1,300 Chinese Products (Section 301 Investigation):

  • Section 301 of the Trade Act of 1974 authorizes the Office of the United States Trade Representative (USTR) to investigate unreasonable and discriminatory trade practices. The USTR recently investigated China's practice of requiring U.S. companies to transfer their intellectual property rights (IPR) and technologies to Chinese companies in order to obtain business licenses and approval to invest in China. The USTR determined that these practices were indeed unreasonable and discriminatory, and effectively burden or restrict U.S. commerce.6
  • On April 3, 2018, per the Section 301 investigational findings, the USTR published a proposed list of 1,300 Chinese products that would be subjected to additional 25% tariffs.7 (Note that the proposed Section 301 tariff increases will be in addition to the increased duties assessed on aluminum and steel products from China.) These tariff increases have not yet taken effect.
  • The Chinese products targeted for the proposed increase in import duties under Section 301 include: chemicals and pharmaceutical products; certain rubber products; products of iron and non-alloy steel; airplanes and helicopters; aluminum; boats; electrical machinery; firearms; glass and microscopes; motor vehicles; tires and conveyor belts; and, TV image and sound recorders and reproducers.
  • Interested parties may submit written comments to the USTR on the proposed tariff increase by May 11, 2018, and a public hearing is scheduled to be held on May 22, 2018. Thereafter, the USTR will issue a final determination as to which products will be subject to the increased import duties and the deadline on which those increases will go into effect.
  • In retaliation, China proposed to impose an additional 25% tariff on more than 100 U.S. products, such as corn, cotton, sorghum, soybeans and wheat, beets, cranberries, orange juice, tobacco and whiskey. China has also proposed to target certain manufactured items for an additional 25% tariff as well (e.g., aircraft, automotive parts and components, chemicals, off-road vehicles, passenger cars, SUVs and plastics). In addition to the tariff increases, the U.S. has also proposed the imposition of restrictions on Chinese investment in the United States.

The U.S. tariff increases under Section 232, as well as China's retaliatory actions, are currently in effect, and U.S. importers should confirm that they are in full compliance with the new entry requirements applicable to covered products.

However, the tariff increases proposed by the United States and China relating to the Section 301 investigation have not yet gone into force. It is therefore critical for U.S. companies to review the products that may be subjected to the tariffs proposed by the United States and China and assess how these measures may impact of these measures on their international operations and supply chains. As with all things international trade-related, it is crucial for U.S. companies to stay up-to-date on any new developments to ensure that they have sufficient lead time to adapt to changes that will impact their international supply chains.

[1] https://www.bis.doc.gov/index.php/other-areas/office-of-technology-evaluation-ote/section-232-investigations
[2] https://www.whitehouse.gov/presidential-actions/presidential-proclamation-adjusting-imports-steel-united-states
https://www.whitehouse.gov/presidential-actions/presidential-proclamation-adjusting-imports-aluminum-united-states
[3] https://www.cbp.gov/trade/programs-administration/entry-summary/232-tariffs-aluminum-and-steel
[4] https://www.whitehouse.gov/briefings-statements/president-trump-approves-section-232-tariff-modifications
[5] https://www.commerce.gov/news/press-releases/2018/03/us-department-commerce-announces-steel-and-aluminum-tariff-exclusion
[6] https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/march/section-301-report-chinas-acts
https://ustr.gov/about-us/policy-offices/press-office/fact-sheets/2018/march/section-301-fact-sheet
[7] https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/april/under-section-301-action-ustr


Melissa Proctor is the founder of Miller Proctor Law PLLC, an international trade law firm located in Scottsdale, Arizona. For more than twenty years, she has advised companies on the full of array of international trade issues, including export controls, embargoes and economic sanctions, customs laws, anti-corruption compliance, and other agency requirements that impact the cross-border movement of goods, information and services. She may be reached at 480-447-8986 or melissa@millerproctorlaw.com.

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Tags:  China  Tariff 

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