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09 August 2018 US announces imposition date of 23 August for 25% tariffs on $16b of Chinese goods; China proposes retaliatory tariffs on more than 5,000 US products On 7 August 2018, the United States Trade Representative (USTR) published the final tariff list targeting 279 imported products from China (List 2) as well as the date for implementation, 23 August 2018.1 List 2 was previously announced in June and initially covered 284 tariff lines valued at approximately US$16b2 of the Harmonized Tariff Schedule of the United States (HTSUS). Following a public comment period, only five HTSUS subheadings were removed from the USTR's final list, as follows:
Chinese products notably targeted by the second wave of tariffs focus on HTSUS Chapter 39 (plastics and articles thereof), followed by Chapters 84 (machinery and mechanical appliances) and 85 (electrical machinery and equipment).3 The USTR is expected to announce a process for requesting product exclusions from List 2 in the near future, and will likely follow the exclusion request procedures announced on 6 July for List 1 items subjected to 25% duty as of 6 July.4 China has already responded with countermeasures to the actions previously taken and in anticipation of the List 2 formalization date now in place. Additional tariffs on a commensurate amount of $16b of US goods will be imposed on 23 August and the initial list of tariff lines previously announced in China's June draft has been expanded from 114 to 333 tariff lines.5 While the total value of US imports impacted by the punitive tariffs remains unchanged, the revised list notably removes US crude oil and now includes new types of products such as fish meal; paper, wood and metal scrap/waste; and various types of bicycles and cars, among other products.6 The final list published by the USTR is the second of three lists of additional duties resulting from the US dispute with China over its acts, policies and practices related to technology transfer, intellectual property, and innovation. The third and largest list, covering $200b of imports and 6,031 tariff lines from China (List 3), is still within a notice and comment period and expected to be implemented in mid-October.7 In addition to considering an increase to the List 3 rate of duty from 10% to 25% ad valorem, the USTR recently extended the date for filing written comments from 17 August to 6 September and the deadline for filing requests to appear at the public hearing from 27 July to 13 August.8 On 3 August 2018, China announced a list of 5,207 product lines covering $60b of commerce with the US which would be subject to 5%, 10%, 20% or 25% additional tariffs.9 China has not yet finalized the list, but is expected to implement the tariffs simultaneously with US actions on List 3. The additional duties primarily target the following types of US products.
With punitive duties now implemented or proposed by the US on over 7,000 tariff line items covering $250b of imported products from China and conversely on approximately 6,000 tariff line items covering $110b of imported US products into China, and more expected in the future, it is imperative that businesses consider mitigating strategies such as changes to sourcing, tariff engineering and customs valuation planning. Detailed actions for businesses can be found in previous EY Global Tax Alerts such as USTR proposes tariffs on $200b in additional Chinese goods, following $34b of tariffs made effective 6 July 2018, dated 11 July 2018. 1 "USTR Issues Tariffs on Chinese Products in Response to Unfair Trade Practices," USTR Press Release, 7 August 2018. See https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/august/ustr-finalizes-second-tranche. 3 The complete list is available at: https://ustr.gov/sites/default/files/enforcement/301Investigations/Final%20Second%20Tranche.pdf. 4 "Procedures to Consider Requests for Exclusion of Particular Products from the Determination of Action Pursuant to Section 301: China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation," USTR Notice of Action, 6 July 2018. 5 "Announcement of the Customs Tariff Commission of the State Council on Adding Tariffs to Imported Goods Originating from the United States of About US$16 Billion," Ministry of Finance of the People's Republic of China Policy Release, 8 August 2018, available at: http://gss.mof.gov.cn/zhengwuxinxi/zhengcefabu/201808/t20180808_2983770.html. 6 The complete list is available at: http://gss.mof.gov.cn/zhengwuxinxi/zhengcefabu/201808/P020180808696052416638.pdf. 7 For background, see EY Global Tax Alerts, US to raise tariffs to 25% on $200b worth of Chinese origin goods; comment period extended to 5 September, dated 2 August 2018, and USTR proposes tariffs on $200b in additional Chinese goods, following $34b of tariffs made effective 6 July 2018, dated 11 July 2018. 8 "Extension of Public Comment Period Concerning Proposed Modification of Action Pursuant to Section 301: China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation," USTR Federal Register Notice, 7 August 2018. See https://www.federalregister.gov/documents/2018/08/07/2018-16919/extension-of-public-comment-period-concerning-proposed-modification-of-action-pursuant-to-section?utm_campaign=subscription%20mailing%20list&utm_source=federalregister.gov&utm_medium=email. 9 "Announcement of the Customs Tariff Commission of the State Council on the Tariffs on Certain Imported Goods (Second Batch) Originating in the United States," Ministry of Finance of the People's Republic of China Policy Release, 3 August 2018, available at: http://gss.mof.gov.cn/zhengwuxinxi/zhengcefabu/201808/t20180803_2980950.html. Document ID: 2018-5961 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
