August 7, 2018

Dear Valued Customer:

USTR Posts Second List of Section 301 Tariffs of 25% on Chinese Imports Effective August 23

The Office of the United States Trade Representative (USTR) today released a list of approximately $16 billion worth of imports from China that will be subject to a 25 percent additional tariff as part of the U.S. response to China’s unfair trade practices related to the forced transfer of American technology and intellectual property.  This second tranche of additional tariffs under Section 301 follows the first tranche of tariffs on approximately $34 billion of imports from China, which went into effect on July 6.

The list contains 279 of the original 284 tariff lines that were on a proposed list announced on June 15.  Changes to the proposed list were made after USTR and the interagency Section 301 Committee sought and received written comments and testimony during a two-day public hearing last month. Customs and Border Protection will begin to collect the additional duties on the Chinese imports on August 23.

In March 2018, USTR released the findings of its exhaustive Section 301 investigation that found China’s acts, policies and practices related to technology transfer, intellectual property and innovation are unreasonable and discriminatory and burden U.S. commerce.

Specifically, the Section 301 investigation revealed:

• China uses joint venture requirements, foreign investment restrictions, and administrative review and licensing processes to require or pressure technology transfer from U.S. companies.
• China deprives U.S. companies of the ability to set market-based terms in licensing and other technology-related negotiations.
• China directs and unfairly facilitates the systematic investment in, and acquisition of, U.S. companies and assets to generate large-scale technology transfer.
• China conducts and supports cyber intrusions into U.S. commercial computer networks to gain unauthorized access to commercially valuable business information.

A formal notice of the $16 billion tariff action will be published shortly in the Federal Register.  As in the case of the first tranche of additional tariffs, the notice will announce a process by which interested persons may request the exclusion of particular products covered by a tariff line subject to the additional duties.

Background:  The USTR had previously listed two separate sets of Section 301 tariffs. The first set contained 818 lines covering approximately $34 billion worth of imports from China subject to an additional duty of 25 percent effective July 6, 2018. Today’s announcement covers the second set of Section 301 tariffs on an additional $16 billion worth of Chinese imports beginning August 23, for a combined total of about $50 billion worth of Chinese imports. In addition to these two sets, on July 10, the USTR released a third set of a proposed list of 6,031 tariff lines subject to an additional 10% tariff against about $200 billion worth of Chinese goods. Trump was reported as directing the USTR to consider an increase from 10% to 25% in additional duties for the third set. A decision on the third set of tariffs is expected to be made sometime after August 30. For more detailed information, please see our previous newsletter dated July 10.

If your firm imports any products classifiable under the second list subject to 25% Section 301 duties, we recommend that for any shipments arriving into the first U.S. port of unlading on or before August 22, Customs entries should be pre-filed if possible with a request for an Elected Entry Date of the actual date of arrival of the vessel in order to secure the current lower tariff rate.

For shipments arriving on or after August 23, your options may include (a) payment of the 25% additional duties, (b) immediate re-exportation under bond or transfer the merchandise in-bond to Canada or Mexico instead of filing a consumption entry in the USA, or (c) place the merchandise in a bonded warehouse or Foreign Trade Zone in privileged foreign status. Unlike Section 232 duties against steel and aluminum, U.S. Customs and Border Protection has confirmed that duty drawback will be allowed for eligible Section 301 duties.

Thank you for your attention and cooperation. If you have any questions, please contact your nearest JJB representative.

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