Tariffs Take Effect on $200 Billion Worth of Chinese Imports; China Retaliates
As Section 301 tariffs took effect Monday on $200 billion worth of Chinese imports, including duties the tech industry fought unsuccessfully to defeat on printed circuit assemblies, networking equipment and other goods, CTA fell silent about what it might do about the duties that it said a week ago “run afoul” of the 1974 Trade Act (see 1809180020). With China retaliating Monday with tariffs of its own on $60 billion worth of U.S. goods, observers were watching to see if President Donald Trump makes good on his threat to “immediately pursue” a fourth tranche of tariffs on $267 billion worth of additional Chinese imports as a countermeasure.
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CTA has no “comments to add about our objections” to the tariffs and “concerns about the legal process,” emailed Vice President-International Trade Sage Chandler about a possible court challenge. The Trump administration exceeded its Trade Act authority by unlawfully using a Section 301 investigation as the grounds for launching retaliatory tariffs against China, argued CTA in Sept. 6 comments that Chandler co-signed with President Gary Shapiro. CTA also worries that the administration “is not taking its obligation to carefully consider public comments seriously,” as the Administrative Procedure Act requires, it said.
As recent earnings calls from Micron Technology and Voxx attested, tech companies that now accept tariffs as a fact of life are increasingly turning their sights toward mitigation strategies that lower their exposure. Sourcing from countries of origin other than China remains an option for some, but many tech companies testified at last month’s Section 301 hearings they have no practical alternative but to continue importing Chinese components.
“Product-specific” exclusion requests are another mitigation option, emailed David Cohen, customs law expert with Sandler, Travis & Rosenberg. The Office of the U.S. Trade Representative put procedures in place for seeking exclusions on the first two rounds of tariffs that took effect July 6 and Aug. 23. If granted, the exemptions would be in force for one year, retroactive to the dates the tariffs became effective, said Cohen: “No decisions have been made on the thousands of requests that have been filed so far.”
Other mitigation strategies, according to Cohen: (1) “Reclassification” of goods “if there is a more appropriate classification applicable” that’s not subject to tariffs; (2) “Tariff/origin engineering,” or “tinkering with the production process to result in a country of origin other than China”; (3) “First sale valuation.” This option “does NOT avoid the tariffs, but lessens their impact by legally structuring transactions to take advantage of an earlier sale for customs appraisement”; (4) Using a foreign trade zone or bonded warehouse as “a deferral mechanism”; (5) “Duty drawback,” seeking import-duty refunds on goods once they are exported; (6) Using a “de minimis” provision in the customs laws “that permit small value shipments under certain circumstances to enter duty-free.”
Cohen cautions that in “pursuing these options companies should engage recognized Customs experts to make certain these options are viable and compliant,” he told us. “We are counseling clients daily on all of these options in order to try and mitigate the impact of the Section 301 duties and encourage importers to reach out to explore which may be applicable to their circumstances.”