Not to be outdone by the recent United States-Mexico-Canada Agreement breakthrough (for further details please see "USMCA takes giant step towards ratification"), December 2019 saw significant end-of-year developments on the Section 301 tariff front. US importers should take stock of these as they plan for 2020.
Section 301 of the Trade Act 1974 (19 USC § 2411) authorises the president to take retaliatory action if it is determined that a trade act, policy or practice of a foreign government is unreasonable or discriminatory and burdens or restricts US commerce. President Trump has exercised his authority since taking office to propose such retaliatory tariffs on China, the European Union and France.
Each case saw significant developments in December 2019. Just days before the List 4B tariffs on Chinese goods valued at nearly $180 billion annually were to become effective, the Trump administration suspended that action and halved tariffs on List 4A, which covers another $120 billion worth of goods. Both amendments were the result of a temporary truce in the US-China trade war and indicate progress in the ongoing negotiations of a trade deal with China. Meanwhile, the US Trade Representative (USTR) invited public input on revisiting current tariffs on $7.5 billion worth of European goods and on imposing new tariffs on $2.4 billion of worth French goods (for further details please see "USTR opens new front in trade wars with proposed France duties").
Phase One China deal staves off new tariffs and reduces current ones
On 13 December 2019 the USTR announced that it would indefinitely suspend the planned tariffs on List 4B goods subject to Section 301 duties. A 15% tariff on these Chinese imports was expected to take effect on 15 December 2019. Although not published until 18 December 2019, the Federal Register notice (84 FR 69447) makes clear that these List 4B tariffs are suspended retroactively to the 15 December 2019 effective date.
The suspension came as a week of intense negotiations culminated in a "historic and enforceable" Phase One agreement with China that will address many of the areas that spurred the trade stand-off, such as intellectual property, technology transfer, agriculture, financial services, currency, trade expansion and dispute resolution.
In addition to suspending the List 4B tariffs, the administration agreed to halve List 4A tariffs, which took effect on 1 September 2019, in the "near future". However, the USTR has given no indication as to when this reduction from 15% to 7.5% will take place. The product exclusion request process for List 4A is unchanged and remains open until 31 January 2020.(1)
The 25% tariff on products of Lists 1 to 3 is unaffected by the recent actions, and the USTR has indicated that there has been no offer to reduce or eliminate those tariffs as part of the ongoing negotiations with China. However, on 17 December 2019 the USTR published a new round of exclusions from List 3 (84 FR 69012) for nine full 10-digit Harmonised Tariff Schedule codes and 35 product categories, including certain fish meat, auto parts, bicycles, freeze-dried fruit, calculators, chairs and lighting products. All List 3 exclusions are effective from 24 September 2018 (the date on which the tariff took effect) until 7 August 2020. However, of those exclusion requests decided, only 3.62% have been granted. In addition, the USTR has extended six List 1 exclusions until 28 December 2020 and issued technical amendments to certain previously granted exclusions from List 1 (84 FR 69016) and List 2 (84 FR 69011).
USTR reviewing current EU tariffs in aircraft dispute
US importers could be facing more and steeper tariffs as a result of the US-EU large civil aircraft dispute. After a World Trade Organisation (WTO) panel ruled that the European Union failed to withdraw subsidies to its large civil aircraft industry that the WTO had already held to violate US rights, the USTR announced on 12 December 2019 that it would be reviewing the action taken imposing retaliatory duties on EU goods (84 FR 67992).
In July 2019 the USTR released a broad list of products on which it proposed to impose a 100% tariff. In October 2019, after public comment and hearings and a WTO finding that EU subsidies totalled $7.5 billion annually, the USTR reduced the number of subject products accordingly and imposed a rate of 10% or 25% on various imports from EU members.
The USTR is now reconsidering and seeking comment again on whether and at what duty rate products from the full July 2019 list should be included. Comments should address whether including a specific product would:
- be appropriate to enforce US WTO rights or obtain the elimination of the European Union's WTO-inconsistent measures or be likely to result in the European Union implementing the WTO recommendations or a mutually satisfactory solution; and
- cause disproportionate economic harm to US interests, including small or medium-sized businesses and consumers.
Comments are due by 13 January 2020. There is no indication that the interagency Section 301 Committee intends to hold public hearings again. In addition, because the USTR has thus far declined to offer an exclusion process for the EU tariffs, this comment period might be an interested party's only chance to request removal from the current tariffs.
On 13 December 2019 (84 FR 68286) the USTR explained that, after successful negotiations, it will spare the European Union from tariffs relating to trade in American beef first considered during the Obama administration.
USTR to hold hearings on retaliation against French digital tax
In December 2019 the USTR issued a report on its investigation into the new French digital services tax, which found that the tax discriminates against and burdens US companies that engage in online activities such as data collection and web advertising (for further details please see "USTR opens new front in trade wars with proposed France duties"). The USTR published (84 FR 66956) an initial list of $2.4 billion of goods in 63 tariff subheadings – covering yoghurt, whey protein concentrates, butter, several varieties of cheese and cheese substitutes, sparkling wine, various beauty products, handbags and porcelain products, among other things – on which it is proposing additional duties of up to 100%.
The interagency Section 301 Committee held a public hearing on 7 January 2020, seeking comment and testimony as to whether the action is appropriate.
Endnotes
(1) Further details are available here.
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