“Knowledge is Power.”

– Sir Francis Bacon

 

If Sir Francis’ wisdom always held true, Shapiro would benevolently rule all the world’s creatures, great and small, since we possess over a century of hard-won knowledge and expertise in Customs and international trade compliance. Fortunately for you, we are not power hungry – only hungry enough to empower you with the solid knowledge and powerful perspectives you need to prosper and grow during the first real trade war in generations.

Ask yourself:

  • In what ways are your company and the competition being affected by the imposition of additional tariffs under Section 301?
  • How will these additional costs and hurdles cut into your bottom line profitability?
  • How can an importer respond to these tariffs? What are my options?

What better time than now to leverage Shapiro’s vast knowledge and experience as you attempt to digest the complexities and uncertainties surrounding the imposition of significant additional tariffs, which will undoubtedly complicate and likely obstruct your pathway to healthy profits?

The Section 301 Tariffs: A Timeline

As you are aware, on July 6, 2018, with the trade war between the U.S. and China looming, the United States Trade Representative (USTR) imposed an additional 25% duties on $34 billion of certain Chinese imports that contain “industrially significant technologies.” The finalized list of the 818 products subjected to the new tariffs, referred to as “List One”, can be found by clicking here.

On June 15, 2018, the USTR announced a second list (“List Two”), which included 284 additional subheadings – worth $16 billion – subjected to 25% additional tariffs. The final list of products affected by List Two can be found here; the additional 25% duties for this list went into effect on August 23, 2018.

On July 10th, a third list encompassing 6,031 items subjected to 10% additional duties and valued at $200 billion was released. The comment period for this list ended September 6, 2018. A finalized list of 5,745 lines of products subjected to these tariffs can be found here. Duties of 10% went into effect on September 28, 2018.

In December 2018, President Trump had announced that Section 301 List 3 tariffs, which were set to increase from 10% to 25% effective January 1, 2019, would remain at 10% for an additional 90 days, as a result of fruitful talks with Chinese President Xi Jingping at the G20 summit in Buenos Aires. The USTR then posted a preliminary copy of a report that granted 22 HTS subheadings either complete or partial exclusion from 25% tariffs on December 21, 2018.

President Trump later announced another postponement of increased duties on List 3 tariffs on February 24th, just days before the 90-days were due to expire, as a result of positive and successful talks between China and the U.S. in regard to trade relations. The President reported his intention to plan a summit “to conclude an agreement” on U.S. soil in the weeks following his announcement.

As tensions between the U.S. and China appeared to be dissipating, the USTR continued to evaluate and process List 1 and List 2 importer exclusion filing requests. Upon further investigation, 33 HTS subheadings joined the list of excluded products on March 20, 2019.

A third round of product exclusions was released on April 15, 2019, highlighting an additional 21 specially prepared product descriptions, which covered 348 separate exclusion requests, now subject to partial exclusion from Section 301 tariffs. On May 8th, the USTR released the fourth round of List 1 product exclusions, which contained 40 HTS codes either partially or completely excluded. As of June 3rd, another 89 HTS subheadings were partially or fully excluded. (More information on the HTS subheadings excluded thus far is provided in the Section 301 Reference Chart – U.S. Tariffs).

On May 5th, just days before Chinese officials were set to arrive in the US to continue trade negotiations, President Trump elicited a tweet proclaiming a planned increase in Section 301 List 3 tariffs from 10% to 25% effective 12:01 am on May 10th (based on date of export). Furthermore, the USTR announced that goods shipped prior to May 10th that fall under List 3 will NOT be subjected to the additional 15% in duties if they arrive before June 15th.

The President also threatened a future “List 4” that would tax the remaining $325 billion worth of Chinese goods that have yet to be taxed at a rate of 25%. USTR published the new list containing “essentially all products not currently covered” by any of the three existing Section 301 tariff lists to be evaluated for future tariffs on May 14th. Officials asked for public commentary on approximately 3,805 HTS subheadings, totaling $300 billion in Chinese imports, being considered for additional 25% duties to be submitted by June 10th, 2019.

 

Section 301 Reference Chart – U.S. Tariffs (Importers)

Here’s a quick snapshot of the details and important dates surrounding all of the U.S. tariffs:

Covered Products

 

Additional Tariff Rate

Status Relevant Dates
First Round

818 HTSUS

subheadings

25% Final
Second Round

284 HTSUS

subheadings

25% Final
  • Effective 8/23/18
  • Exclusion Filing Deadline 12/18/18

 

Third Round

 

Approximately 5745 HTSUS subheadings

 

25%

 

Final
  • 10% Effective 9/28/18
  • 25% Effective 5/10/19 (based on date of export)
  • Exclusion Filing Deadlines TBA
Fourth Round Approximately 3805 HTSUS subheadings 25% TBD

 

Yes, China has responded – with some tariffs of its own!

China’s response to all rounds of 301 tariffs imposed by the U.S. was swift, with President Xi Jinping approving tit-for-tat retaliatory tariffs. China’s response appears to target the populations they consider to be the Trump administration’s core supporters – U.S. farmers, ranchers and industrial workers.

Let’s take a closer look at the retaliatory tariffs and their targets:

List One Retaliation:

China imposed 25% tariffs on 545 U.S. products – totaling $34 billion. These tariffs went into effect on July 6, 2018 and specifically targeted soybeans, automobiles and various chemicals. A final list of all products affected by the list one retaliation can be found here.

List Two Retaliation:

In the wake of the United States’ announcement of List Two, China also implemented 25% tariffs on 333 goods – worth $16 billion. Tariffs went into effect on August 23, 2018; this time the focus was on coal, copper scrap, fuel, buses and medical equipment. A final list of all products affected by the list two retaliation can be found here.

List Three Retaliation:

In response to List Three, China issued tariffs of 5-10% on an additional 5,207 products, totaling $60 billion worth of goods. These tariffs went into effect on September 24, 2018 and targeted agricultural equipment, machinery, chemicals and textiles.

List Three included several retaliatory waves. A full breakdown of list three retaliations can be found by selecting phase onetwothree or four.

China paired these tariffs with published government documents that further express their bleak stance on the future of U.S.-China trade.

List Three Increase and Proposed List Four Retaliation:

China announced a new batch of retaliatory tariffs on 5,140 U.S. exports, totaling $60 billion, in response to the 15% increase (from 10 to 25%) in tariffs on List 3 products, as well as the proposition of a List 4.

Effective June 1st, 2019, an additional 25% tariff on 2,493 items, 20% tariff on 1,078 items, 10% tariff on 974 items will commence, as well as the continuation of a 5% tariff on 595 items.

 

Section 301 Reference Chart – Chinese Tariffs (Exporters)

Here’s a quick snapshot of the details and important dates surrounding the Chinese retaliatory measures:

Covered Products

 

Additional Tariff Rate

 Status Relevant Dates
First Round

 

545 products – soybeans, automobiles, various chemicals

 

25%

 

Final  

  • Effective 7/6/18

 

Second Round 333 products – coal, fuel, buses, medical equipment

25%

 

Final
  • Effective 8/23/18
Third Round

5,207 products – agricultural equipment, machinery, and textiles

 

5% – 10% Final  

  • Effective 9/28/18

 

Fourth Round 5,140 products – agricultural 5% – 25% Final
  • Effective 6/1/19

 

 

Carrier Response to Section 301

Several carriers have already announced Trans-Pacific blank sailings for June 2019. The OCEAN Alliance, including CMA (including APL), COSCO (including OOCL) and Evergreen, will remove approximately 25,000 TEU from its Trans-Pacific trade lane in June (this represents over 6% of total capacity).

Carriers previously announced a total of 35 blank sailings (22 West Coast bound services and 13 East Coast bound services) from February to early March in response to struggles with balancing supply and demand. The OCEAN Alliance then canceled an additional 10 sailings from March to April, bringing ocean transit reliability to a record low of 40%.

The decision to void sailings comes amid declining demand due to the low volume of Chinese imports resulting from Section 301 cargo front-loading, as well as the decrease in Eastbound Trans-Pacific spot rates from Asia to the West Coast.

According to Alphaliner, there will likely be additional void sailings announced in the coming weeks, as well as in the 4th quarter, as carriers remove ships from service ahead of the IMO’s January 1st low sulfur mandate.

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