Just when you may have thought that the ongoing trade issues between the US and China might be moving toward at least partial resolution, with a tentative deal almost ready for signature, that deal is suddenly off. Instead, the third round of US “additional duty” tariffs on specified types of Chinese goods, which had been at 10% since late 2018, were increased to 25% effective May 10, on just two days’ notice.
News media reports stated that, after major elements of a preliminary agreement had reportedly been accepted by both US and Chinese negotiators at the end of April, the Chinese government unilaterally removed about a dozen key US points from the Chinese version, and insisted that the US accept those changes without further argument. President Trump and the US negotiating team refused to accept the Chinese demands.
On May 8, the Office of the US Trade Representative issued a public statement, announcing the “additional duty” rate increase for the specified commodities. That statement also advised that the USTR would establish a process for interested persons to request that particular products within a tariff classification be excluded from the “additional duties”.
This process seems likely to function much like the exclusion requests previously allowed last year, for specific types of items affected by the first and second rounds of US “additional duty” tariffs on Chinese products.
This development does not affect the existing “additional duty” rates on any of:
specified types of steel imports from all countries except Argentina, Australia, South Korea, and Brazil (25% “additional duty” rate, except from Turkey, which is 50%)
specified types of aluminum imports from all countries except Argentina and Australia (10% “additional duty” rate)
specified types of Chinese goods included in the first two lists of China-specific “additional duty” tariffs (which remain at 25%, in additional to any applicable general tariff rates)
The first group of these "additional duty" tariffs on products of China (and only China) became effective July 6, 2018, and included (among quite a few other types of goods) many types of machinery, including components and accessories. This first group of "additional duty" tariffs is identified (in the US version of the Harmonized Tariff System) by the HTS number 9903.88.01, and the "additional duty" rate on all affected types of goods is 25%. As the "additional duty" terminology implies, this is in addition to any other tariffs that would normally apply.
The second group of "additional duty" tariffs on additional specified products of China became effective August 23, 2018, and is identified by the HTS number 9903.88.02. The "additional duty" rate for this group is also 25%.
The third group of "additional duty" tariffs on still more specified products of China was effective September 24, 2018, originally set at 10%, and is identified by the HTS numbers 9903.88.03 or 9903.88.04. This is the set of “additional duty” tariffs that has now increased from 10% to 25%.
Initially, response from the Chinese government has been muted, and neither side has made any major announcements about the further actions either may take. So, until at least one side is willing to make significant commitments – and formally agree to keep them – the current US “additional duty” rates on specified products of China seem likely to remain in place.
Meanwhile, many observers expect China to soon add additional trade restrictions, including increased duty rates, on numerous types of US products, in response to this most recent US action. Depending on which types of US goods are targeted, and what the specific duty rate increases and other trade restrictions are, many US exporters seem likely to be impacted by these types of Chinese actions.
Also, many US importers of goods affected by any of these groups of "additional duty" tariffs on products of China continue to find their operations significantly impacted by the required "additional duty" payments, and remain distinctly unhappy about the situation. However, their comments on this topic do not yet seem to have persuaded the current Administration to modify its position on these "additional duty" tariffs, or related trade issues.
So, for the moment at least, US-China trade negotiations are expected to continue to at least some degree, with no clear or obvious end date. This is still very much a “to be continued…” situation.
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.