Today, President Trump signed a presidential memorandum directing a range of actions against China in response to practices involving the unfair and harmful acquisition of U.S technology. This action paves the way for the government to impose tariffs of approximately $50 to $60 billion on imports from China. While the details of products potentially covered by the tariffs are set to be published this coming week, any companies doing business with China should take steps now to evaluate their position and options for moving forward.
Section 301 Background
These new tariffs come off the back of an investigation under Section 301 of the Trade Act of 1974, which was ordered by President Trump on August 14, 2017 and conducted by the Office of the U.S. Trade Representative (“USTR”). Under this statute, the President has wide discretion in determining whether and how to respond against a foreign country that violates trade agreements or engages in trade practices that are determined to be “unreasonable or discriminatory and that burden or restrict U.S. Commerce.” One of the tools at the President’s disposal includes the imposition of duties, fees, or other import restrictions on the goods or services of a foreign country for such time as deemed appropriate.
The investigation focused on China’s policies on foreign investment and violations of U.S intellectual property rights. Section 301 measures are aimed at protecting U.S exporters from unfair trade practices by foreign countries. The investigation found that China engaged in several practices related to technology transfer, intellectual property and innovation that it alleged were unreasonable and discriminatory to U.S. commerce.
Details of Today’s Announcement
Today’s memorandum announces that the USTR will propose a list of products from China that will become subject to duties of up to 25 percent ad valorem duties. The list of potentially affected products is expected to be lengthy: sources within the White House have suggested that the proposed product list may contain up to 1,300 products. The categories of products that are most likely to be affected include products in high-technology industries, specifically including aerospace, information and communication technology, and machinery. These categories may align with technology and industries that the USTR’s report alleges that China has wrongfully taken from the United States. Today’s announcement also instructs the USTR’s Office to confront China’s discriminatory trade practices through the Dispute Body of the World Trade Organization (WTO), and proposes investment restrictions against Chinese acquisition of sensitive U.S. technologies.
Petition/Notice and Comment Period
The list of affected products will be published no later than 15 days from today’s announcement, and will be followed by a minimum 30-day public comment period. This comment period will allow potentially affected importers and other parties an opportunity to argue against duties imposed on their products imported from China. Once the public comment period concludes and the final list of products subject to the tariff is established, the additional duties are scheduled to come into effect within 60 days afterwards.
Retaliation From China and Uncertainty for U.S. Importers
It is expected that China may respond to today’s tariffs with reciprocal tariffs against U.S goods stoking fears of a potential trade war. Chinese officials had indicated prior to today’s announcement that the country will take “all necessary measures” to defend its interests, should new tariffs be imposed. Also, as of now, it is not clear whether importers affected by today’s tariffs will have the opportunity to petition the government for relief or exclusion from duties on a product-by-product basis, similar to the process that has been established for seeking product-based exclusions from the steel and aluminum tariffs announced earlier this month.
Closing Remarks
While we have yet to see what products are set to be included on the proposed list that the USTR’s office will publish in the coming days, we strongly urge all companies who import from China to evaluate their positions and consider the merits of getting involved in the public comment period once the list is published.
Should you have questions concerning the applicability of new tariffs on products from China, or if you wish to be placed on a watch list for future updates, please contact one of the Rock Trade Law professionals listed here.