China Additional Duties, Part 3

TCB Blog China Addl Duties pt 3.jpg

It’s still quiet on the China “additional duties” front . . . at least for the moment.

After the proposed fourth list of China origin products to be subject to 25% “additional duty” tariff rates was published in the Federal Register on May 17, the current US Administration proceeded with the formal “notice and comment” process, including a public hearing in mid-June.  This process provided opportunities for importers (and other interested parties) to suggest additions or deletions to the preliminary list of products.

Based on the actual timelines for the formal “notice and comment” process for each of the first three lists of China origin products subjected to “additional duty” tariff rates, many observers had speculated that the “additional duty” tariff rate for the fourth list (including any changes from the preliminary list) could be implemented as early as the first part of July.  Thus far, that has not happened.

Instead, at the recent “Group of 20” nations meeting in Japan, the Administration indicated that the US would postpone further action while US – China trade talks continue.  Part of the basis for this shift in position has been the US expectation that China would commit to buying more American agricultural products, especially soybeans and wheat.  However, no actual increases in these types of purchases have been announced yet. 

Also, recent changes in the makeup of the Chinese trade negotiating team have hinted at a possible shift to a more “hard-line” set of negotiating positions.  Meanwhile, the US negotiating team has released very few details about prospective “next steps” in those negotiations, and has not yet confirmed dates for the expected next round of them, in Beijing.

So, the current “conventional wisdom” seems to be that:

  • The US – China trade talks will continue, but there is little expectation of significant results during at least the next several weeks.

  • If China does actually commit to buying significantly more US agricultural products, and appears to be following through on such a commitment, the US is likely to hold off on implementing “additional duty” tariff rates for the fourth group of Chinese products – at least for the moment.

  • If China does not appear to be following through on any major commitments, or is not willing to accept (or perhaps compromise on) any of the major US negotiating positions, the US could impose the new “additional duty” tariffs on the fourth group of China origin products at any time, with as little as one or two days’ notice.

What does this mean for US importers? 

  • Many will be faced with trade-offs such as “Do we pay more to ship this item by air, to get it here and cleared through Customs before a 25% additional duty tariff on this product becomes effective? Or do we pay the lower rate to ship by ocean, and accept the higher risk that the additional duty rate will be imposed before the product gets to the US?”

  • Continued efforts to find alternate sources of products, especially for items with relatively low profit margins, and low consumer retail price elasticity.

  • Adjusting inventory levels, based on expectations of whether / when a 25% “additional duty” tariff is placed on specific items.

If there is a “bottom line” to all of this, it is probably that:

  • the level of uncertainty remains high,

  • very little significant new information has been publicly available during the last few weeks, to support any kind of serious long-term planning, and

  • significant developments might occur at any moment . . . or not.

Transmark Customs Brokers continues to actively monitor this issue, and we are happy to share our perspective with current and prospective clients, at any time.