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07 June 2019
Mirroring President Donald Trump's recent threats – which came just days after the Section 301 tariff on List 3 products was increased from 10% to 25% following a breakdown in trade negotiations between the United States and China – the administration has released a fourth list of Chinese-origin products that will be subject to additional duties. For these tariffs to become effective, the Office of the United States Trade Representative (USTR) will need to publish a final notice after a public comment period and hearing.
The United States and China have been engaged in protracted negotiations over the Chinese government's acts, policies and practices relating to technology transfers, intellectual property and innovation that the Trump administration has found to be unreasonable and burdensome for US commerce.
To date, the president has used his authority under Section 301 of the Trade Act 1974 three times to levy a 25% retaliatory tariff on 6,830 subheading categories of imported Chinese high-tech and consumer goods valued at $250 billion per year. Although List 3, alone valued at $200 billion, had originally been set an additional duty rate of 10%, this was increased to 25%, as of 12:01am on 10 May 2019, further straining the bilateral talks.
After China allegedly "retreated from specific commitments made in previous rounds" and increased its own tariffs against US goods, the USTR officially proposed a fourth list of goods valued at nearly $300 billion. This 135-page List 4 would comprise 3,805 categories of goods, including mobile phones and other electronic devices, agricultural products such as cheese, toys, apparel, home goods, shoes, sporting goods, chemicals and child safety seats.
If this proposal is accepted, all Chinese imports (excluding certain pharmaceuticals, medical products, rare earth metals and minerals) will be subject to a 25% extra levy.
Before List 4 can take effect, the proposal will undergo a public comment period and hearing similar to those for Lists 1 through 3. The dates are as follows:
The USTR has requested that comments focus on:
Trump has indicated his desire to meet with Chinese President Xi Jinping at a G20 summit in Osaka, Japan in late June 2019, which may affect the implementation of List 4. However, if the negotiations do not progress, the USTR could publish the final version of List 4 as soon as July 2019, with an effective date shortly thereafter (if the process moves as fast as it did during the implementation of earlier tariffs).
A combined list of the products covered by Section 301 Lists 1, 2, 3, and 4 is available here.
Meanwhile, the USTR published its fourth notice of product exclusions for List 1. The excluded goods (mostly machinery) include outboard motor engines for boats, certain forklifts, ATM circuit boards and pressure valves. It is still unknown whether a process for importers to request an exclusion for specific products will accompany List 4 as it did for Lists 1 and 2. The USTR confirmed that List 3 will have an exclusion process only after the duty rate is increased from 10% to 25%.
Further, following an updated Cargo Systems Messaging Service message, the USTR published a notice in the Federal Register stipulating that List 3 goods which were already in transit from China before 10 May 2019 and entered prior to 1 June 2019 will be subject to the 10% duty rate rather than the higher 25% rate. Goods which were exported and entered the United States on or after 10 May will be subject to the 25% rate, as will all goods which entered the United States on or after 1 June, regardless of their export date.
For further information on this topic please contact David R Hamill, Teresa Polino, David Salkeld or Russell A Semmel at Arent Fox LLP by telephone (+1 202 857 6000) or email (firstname.lastname@example.org, email@example.com, firstname.lastname@example.org or email@example.com). The Arent Fox LLP website can be accessed at www.arentfox.com.
Leah Scarpelli, associate, and Antonio J Rivera, associate, also assisted in the preparation of this article.
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