With the announcement of a phase one deal, Flexport chief economist Phil Levy said the promise is for stability in tariff levels -- even if the large majority of goods facing Section 301 tariffs will retain the 25 percent hike. But, he noted in a Dec. 16 webinar, many times over the last eight months, “a deal was announced, and it didn't last. That should sort of serve as a precautionary tale.” Levy, like many observers, doesn't believe that a phase two deal, that could lead to rolling back more tariffs, is likely in the next year.
Exports to China
With the last round of consumer goods imported from China spared, and a reduction in Section 301 tariffs on about $120 billion in goods that were first subject to additional tariffs Sept. 1, some business interests welcomed the de-escalation, but warned that the U.S. should stay focused on more significant economic reforms in China. The tariffs on List 4a, which are at 15 percent and apply to about 3,800 8-digit tariff lines, will go to 7.5 percent.
BOSTON -- If the Commerce Department follows through on plans to expand the limits of the Export Administration Regulations to further control foreign shipments to Huawei, it will have a “dramatic” impact on international supply chains, said Kevin Wolf, a trade lawyer with Akin Gump and Commerce’s former assistant secretary for export administration. The measures, which Commerce confirmed it was considering earlier this month (see 1912100033), include expanding the Direct Product Rule and broadening the de minimis rule to make more foreign-made goods subject to the EAR.
China recently announced plans to increase penalties for violations of intellectual property rights, according to a Dec. 12 report from the Hong Kong Trade Development Council, an issue at the center of the U.S.-China trade deal negotiations. China will raise its penalty from “three times the actual damages incurred” to “five times the actual damage,” the HKTDC said. The announcement is part of a China initiative to improve intellectual property rights protections in two phases by 2025, the report said.
The government of Canada issued the following trade-related notices as of Dec. 13 (note that some may also be given separate headlines):
China’s “advance classification advisory service” for samples of imports will start Dec. 20, according to a Dec. 13 report from the Hong Kong Trade Development Council. The measure will help companies gain a “preliminary ruling” on the classification of commodities for both imports and exports, the report said. To use the service, Chinese importers are required to apply to their local customs office when importing goods that have completed safety and quality assessments “via pre-shipment inspection,” or when importing samples of goods imported at a later date, the HKTDC said.
President Donald Trump tweeted Dec. 12 that U.S. and China negotiators are “Getting VERY close to a BIG DEAL with China. They want it, and so do we!” However, Trump has said before that the two sides were very close -- including two months ago -- and nothing came of it. Numerous media outlets reported Dec. 12 that administration officials said an agreement in principle has been reached between China and the U.S., but no announcement had been made by press time. Several media outlets reported that the U.S. was willing to cancel tariffs set to take effect Dec. 15 and cut existing Section 301 tariffs by half, and an adviser to the president said Trump would cut tariffs, but did not say by how much. An announcement is expected on Dec. 13.
The European Commission will double the tariffs on tableware from more than 30 companies in China that were found to have helped other Chinese companies avoid the existing antidumping duties on tableware, it said in a news release. “The investigation has confirmed that Chinese companies are evading anti-dumping duties of around 36% by channelling their ceramic exports through other companies that were subject to lower anti-dumping duties of around 18%,” it said. As a result, those companies will also be subject to the higher duty rate. The new rate will apply from March 21, 2019, and the EC will collect about €15 million ($16.7 million equivalent) in retroactive duties, it said. “This is the Commission’s largest anti-circumvention investigation to date,” the EC said. “It involved very significant resources, with 20 Commission investigators carrying out on spot verifications at 50 Chinese companies.”
The Chinese “irreversibly accelerated” their Made in China 2025 industrial program since the summer, taking a sharp protectionist turn as the U.S.-China trade war persisted with no negotiated breakthrough, Photronics CEO Peter Kirlin said on a fiscal Q4 call Dec. 11. “They ain't turning back,” said Kirlin, whose company drew more than half its Q4 revenue from the photomasks it supplied Chinese panel makers, produced at Photronics factories throughout Asia, including in Xiamen and Hefei, China.
The State Department announced sanctions on three Iranian entities linked to weapons proliferation and eight entities involved in weapons smuggling from Iran to Yemen, the agency said Dec. 11. The announcement targets the Islamic Republic of Iran Shipping Lines (IRISL), its China-based subsidiary, E-Sail Shipping Company, and the Iranian airline Mahan Air. The Treasury’s Office of Foreign Assets Control previously sanctioned E-Sail in 2018, Mahan Air in 2011 and IRISL in 2008.