List 3 Section 301 Chinese Tariffs Will Stay at 10% Indefinitely, Says USTR Notice
The duty rate of the third tranche of Section 301 tariffs on Chinese goods “will remain at 10 percent" indefinitely, said a prepublication Federal Register “modification” notice released after hours Thursday by the Office of the U.S. Trade Representative. It officially prevented the rate hike to 25 percent from taking effect at 12:01 a.m. EST Saturday.
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At President Donald Trump's "discretion,” the USTR “determined that it no longer is appropriate” to hike the tariffs, “in light of progress in discussions with China” on a new trade accord, said the notice. Trump tweeted his decision Feb. 24 to delay raising the tariffs for the second time since December (see 1902250001).
That the tariffs won't rise to 25 percent is the “good news." emailed trade expert David Cohen with Sandler Travis Thursday. But with the duties staying at 10 percent indefinitely, the "not so good news is that there is no end-date so that is of no help to aid in planning purposes” for importers sourcing goods from China, said Cohen. The USTR, at Trump's direction, last postponed increasing the tariffs for 90 days to give U.S. and Chinese negotiators time to work out a comprehensive trade deal (see 1812140045).
Americans for Free Trade, representing more than 150 trade associations in various industries, urged Trump Wednesday to publish an FR notice "immediately confirming and detailing" the decision postponing the tariff hike. Doing so would "provide certainty to the business community, making clear to all stakeholders that tariffs do not automatically increase on March 2," it said.
The group, which advocates for the ultimate elimination of all Section 301 tariffs on Chinese goods, hailed Thursday’s introduction of bipartisan legislation in the House and Senate that would mandate an exclusion process for the List 3 tariffs, over the apparent resistance of USTR Robert Lighthizer. “Tariffs are taxes, and Americans are footing the bill for the $200 billion in goods currently being taxed without an exclusion process,” said the group. The legislation would provide “much-needed tax relief for American manufacturers, retailers, and businesses of all sizes,” it said.
"A fair and transparent exclusion process for the latest round of China tariffs is long overdue," said Rep. Jackie Walorski, R-Ind., one of the legislation’s sponsors. "It is clear USTR does not intend to meet the deadline imposed by Congress to establish one,” as was written into the spending bill enacted Feb. 15 to avert a second government shutdown (see 1902170001), she said, “As a result, this bipartisan bill is necessary to provide much-needed relief to the American businesses and consumers paying the cost of these import taxes.”
The spending bill provision instructed the USTR to begin a third-tranche exclusion process and report his progress to Congress by March 17. “We’re almost halfway to that deadline,” said Walorski, when questioning Lighthizer at a House Ways and Means Committee hearing Wednesday: “Do you expect to meet that 30-day deadline?” Lighthizer was noncommittal, responding that the exclusion-process mandate was in “a report from the Appropriations Committee.” Said the USTR: “I understand that there are people in Congress who want us to have an exclusion process. It's something that we're looking at."
The legislation's requirement for an exclusion process would apply to the List 3 tariffs, plus any future Section 301 duties imposed on Chinese imports. Exempted from tariffs, said the text, would be any List 3 goods “not commercially available” outside China, or not produced outside China ”at a cost-competitive price at commercial scale,” as the International Trade Commission would define that.
Hundreds of tech companies, including many startups, testified at public hearings or in written comments last summer about their inability to shift China sourcing to alternate countries of origin or to do so at costs that were not prohibitively high (see 1808210047). Lighthizer spoke repeatedly last year, and did so again in the case of iRobot at the Ways and Means hearing Wednesday (see 1902270047), how he regards the tariffs as tools to encourage companies to shift sourcing away from China or bring more manufacturing to the U.S.
The legislation would bar the imposition of tariffs if they're found to "increase consumer prices for day-to-day items consumed by low- or middle-income families,” using as its guide the consumer price index for urban consumers published at the Bureau of Labor Statistics. The CPI's Handbook of Methods would be the reference point for identifying everyday products in the analysis of any pricing impact, said the bill. The handbook's 12-page Appendix 1 in Chapter 17, as referenced in the legislation, lists hundreds of everyday consumer items, including TVs and audio equipment under products for "recreation" and phones, computers and other information technology goods under "communication" gear.
Under the legislation, no duties could be collected on any List 3 goods until the USTR sets up the exclusion process in consultation with the ITC. If Lighthizer decides after all to begin a List 3 exclusion process as the spending bill instructed him to, the new legislation would supersede the spending bill, which directed him only to model the List 3 exemptions after those in rounds one and two. Neither of those exclusion processes has provisions for exempting tariffs on goods that would raise consumer prices or for protecting companies that can't source goods from outside China.