U.S. Begins Collecting Section 301 Duties on Products of China Origin

July 6, 2018

By Robert M. Oberlies & Jessie Lu

United States and China cargo shipsThe U.S. government’s first tariffs on $34 billion of Chinese imports come into effect today. This follows the announcement last month by the Office of the United States Trade Representative (USTR) of two lists of products with China origin that will be subject to an additional 25 percent ad valorem duty under Section 301 of the Trade Act of 1974 (Section 301 Duties).

This first list covers 818 product lines, including capital equipment and semi-finished products. This represents a narrower list than the 1,333 product lines originally published in April, reflecting input from public comments and review. The tariff chapters covered by the first list include organic chemicals, pharmaceutical products, miscellaneous chemical products, iron and steel, articles of iron or steel, aluminum and articles thereof, miscellaneous articles of base metal, clocks and watches and parts thereof, arms and ammunition, parts and accessories thereof, furniture and prefabricated buildings.

A second list is still in draft form and remains subject to public comment, hearings and review. In its current form, the second list is applicable to an additional 284 product lines with an estimated import volume of $16 billion, covering an additional 13 U.S. tariff categories, including, among others, plastics and articles thereof, machinery and mechanical appliances and electrical machinery and equipment. The USTR’s public comment process on the second list is ongoing, and U.S. companies have until July 23 to submit written comments. The USTR will hold hearings on July 24 and then allow affected companies to submit post-hearing rebuttal comments until July 31. It is projected that the Section 301 Duties under the two lists will apply to approximately $50 billion of products with China origin.

In retaliation for the duties going into effect today, China announced its own tariffs on $34 billion of American imports, including cars, soybeans and lobsters, beginning on July 6 following the U.S. tariffs.

We are assisting clients in assessing the impact of the Section 301 Duties on their business and industry and evaluating their options to mitigate the impact, including:

  • Reviewing their supply chain to determine China origin products impacted and conducting customs classification review to ensure accurate classification of products imported;
  • Evaluating alternative sourcing structures and options;
  • Capturing cost increases of products directly or indirectly affected by the Section 301 Duties and reflecting the increase in pricing and commercial terms;
  • Submitting comments to USTR to request exclusions from tariff lists and making use of other remedies afforded under USTR procedures for affected U.S. stakeholders; and
  • Assessing impact of Chinese tariffs on U.S. goods and companies in response.

We are closely monitoring developments and will provide updates on significant changes.

This client alert is published by Fredrikson & Byron and does not constitute legal or professional advice. Please consult a Fredrikson attorney if you have questions.