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Client Alert – Section 301 China Tariffs Overview and Developments Impacting List 4

Overview:  The Section 301 Tariffs imposed under the Trade Act of 1974 on an increasing number of imports from China have been a part of the international trade environment for more than 1 year, resulting in a challenging environment for importers of Chinese merchandise.  On August 1, 2019, President Trump announced the imposition of duties effective on September 1, 2019 at the rate of 10 % for List 4, representing approximately 300 Billion U.S. Dollars of Chinese imports annually.  Then on August 13, 2019, the United States Trade Representative (“USTR”) bifurcated List 4 into List 4A and List 4B, with an effective duty imposition date for List 4A of September 1, 2019 and a delayed implementation date for List 4B of December 15, 2019.  With this latest announcement, List 4 products join the list of previously announced Section 301 Tariffs:

 Effective DateAmount of Imports AffectedRate of Duty ImposedExclusion Process Submission TimelinesExtension of Exclusion
List 17-6-2018USD $34 Billion25%Closed 10-9-2018No decision
List 28-23-2018USD $16 Billion25%Closed 12-18-2018No decision
List 39-24-2018USD $200 Billion10% (increased to 25% on 5-10-19)Ongoing 6-30-2019 through 9-30-2019No decision

It is noteworthy that, while many of the exclusion request submissions for List 1 and List 2 have been processed and a decision announced, some requests remain outstanding.  From our experience of assisting our clients navigate the exclusion request process, petitions appear to be generally processed in the order received, subject of course to differences in review time on account of the degree of difficulty of the issues presented in a particular petition.  In addition, with List 3 exclusion requests, for the first time we are seeing USTR issue approvals prior to the filing deadline as opposed to months after the deadline as was the case with List 1 and List 2.  We, therefore, strongly advise to submit exclusion requests as early as possible, with the goal of being at the front of the queue, thereby increasing the chances of receiving a determination many months before later filed petitions.

List 4:   As before for List 1 through List 3, the exact scope, implementation dates and other details of List 4 have changed since the initial August 1, 2019 announcement by President Trump and, if past Section 301 tariff rollout details are illustrative, may continue to evolve over the next weeks or months.  For example, the USTR announced that some products may be removed from List 4 entirely, but did not provide further details other than indicating that the decision would be based on health, safety, national security and other unspecified factors.  China for its part does not appear to be backing down, adding further uncertainty.  On August 15, 2019, the Customs Tariff Commission of the State Council of China announced its resolve to take “necessary countermeasures,” stating that the imposition of the List 4 tariffs violated the consensus reached by “the two heads of state of China and the United States in Argentina and Osaka.” China did not provide any details concerning the nature of these threatened countermeasures.

The list of products included on the current versions of List 4A and List 4B are identified by their respective Harmonized Tariff Schedule #s (“HTS#”) and can be found at https://ustr.gov/about-us/policy-offices/press-office/press-releases/2019/august/ustr-announces-next-steps-proposed.  Items subject to the delayed implementation of the 10% duties include certain electronics, e.g. cellphones, laptops and video games, some clothing products and shoes, certain toys, certain food and kitchen items, some chemicals, fireworks and some baby products and sports equipment.  According to the USTR, there will be an individual product exclusion procedure established to petition for exclusions on a product-by-product basis, but the exact procedures and timeline have not been announced yet.

How Can an Importer Prepare for Filing an Exclusion Request for List 4?:  If the past is a reliable predictor of the future, it is likely that List 4 tariffs will be implemented in some form in the near future.  Since the list itself identifies products according to their respective HTS#, it is critical to confirm that the HTS# used by an importer is accurate and correct in accordance with US Customs classification guidelines.  Even if the HTS classification is accurate, it should be confirmed that the HTS# is used consistently on all imports.  This is a good time to review HTS classifications and conduct an audit of past use of HTS #s.  This exercise is critical for two basic reasons:  (1) accurate matching of products on List 4 and (2) preparing for the drafting of an exclusion request.  As part of the process of reviewing Section 301 exclusion requests, US Customs will review whether the product is accurately classified.  Even if the petition accurately identifies the HTS#, if an approval is granted, it is granted for the applicable HTS#.  If diverging HTS#s have been used on US Customs entry paperwork, prior to claiming a refund, the diverging HTS# must be corrected.  Such corrections are time-consuming, but more important is that any post entry corrections may well attract the attention of US Customs to further review the importer and/or merit consideration of a prior disclosure.  Our advice is to prepare now to avoid as much as possible HTS classification issues during the Section 301 exclusion request preparation.  The International Business Practice at Cohen stands ready to assist in this process.

If you have any questions about any of the above information, or wish to discuss a particular matter, please feel free to speak with any member of our International Business Practice by calling us at 412-297-4900, or by visiting https://www.cohenlaw.com/practices/international-business. To receive future client alerts, please send an e-mail to bulletins@cohenlaw.com.

This information is accurate at the time of distribution and is subject to changes made by the administration. We will provide updates as they occur.

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