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Trump Tariffs: US-China Trade Tariffs

The new China-US tariffs: enough to strike fear into the hearts of importers large and small. Whether you’ve already been hit with a tariff or are biting your nails waiting for the next list to come out, we’re here to help clear up confusion and offer tips for saving wherever possible.

Dylan Sommer

We were thrilled to host Chris Reynolds, CEO and co-founder of INLT, one of the customs brokers on our marketplace, for a webinar addressing the current tariff ecosystem, how it impacts importers, and how to contend with the rapid changes.

Below we’ve summarized his explanations of your most pressing China-US tariff issues.

Lists of US Tariffs on China

The new China-US trade tariffs, also called the Trump Tariffs, are officially called Section 301 Duties.

The first Section 301 list was published on July 6th. Tariff List 1 assessed a 25% duty rate on $34 billion dollars worth of goods being imported from China.

Shortly thereafter, on August 23rd, 2018, Tariff List 2 followed, assessing a 25% duty on an additional $16 billion dollars worth of goods from China.

Finally, Tariff List 3 was published on September 24th, 2018. It covered $200 billion dollars worth of products from China, making it the most all-encompassing list of the three. The rate started at 10% but jumped to 25% on May 10th, 2019.

On May 17th, 2019, the US Trade Representatives published a prospective Tariff List 4, and invited feedback from business owners on how it would affect margins and financial decisions. As of yet, this tariff list has not been put into effect.

Chinese Products Subject to US Tariffs

Tariff Lists 1, 2and 3 cover 6,864 eight-digit HTS subheadings– so many, in fact, that it’s easier to talk about what’s not affected by these tariffs. Some chemicals, pharmaceuticals, footwear, and apparel are among the products most widely exempt from these lists.

If List 4 were to go into effect, only 452 eight-digit HTS subheadings would not be covered. That’s about 4% of the 11,000 eight-digit subheadings in the tariffs schedule. While chemicals, pharmaceuticals, and other medical devices would remain exempt, List 4 would have the biggest impact on footwear and apparel importers, whose rates are already among the highest.

How to tell if your product is subject to duties

There are a few ways to find out if your product is subject to duties:

  • Ask your customs broker
  • Use INLT’s quick lookup tool
  • Go to the International Trade Commission website and check the tariffs schedule. Locate your tariff number and you’ll find a description, followed by the duty rate in the column to the right. Affixed to that duty rate, you may see a small footnote– either 1, 2, or 3– which indicates a product that’s subject to these tariffs.

China Tariff Lists Exemptions

Exclusions to the US tariffs on China are available for a limited group of products.

Criteria for exclusions are as follows:

  1. The product is not available from a source outside of China
  2. Additional duties would cause severe economic harm to the requester or other US interests
  3. The product is not strategically important or related to Chinese industrial programs, such as Made In China 2025

These criteria are subjective, and the burden of proof is on the importer to make a strong case for exemption.

Trump Tariffs: How Do I apply for an Exclusion?

The process to apply for Trump Tariff exclusion is as follows: once a list opens for exclusion requests, business owners generally have 90 days to file a request for an exclusion. After that, the public has 14 days to file a response.

For example, a domestic industry could respond to an exclusion request by saying they support the 25% and what this importer is saying is wrong. Then, the importer has seven days to reply to their response.

Exclusions for list one have been published, and those for list two are currently under consideration. For List 3, the time to request an exclusion has not opened yet.

Section 301 Exclusion: Updates, Effective Date & Exclusion List

  • Once an exclusion is granted, it applies to everybody. So small importers who don’t apply for an exclusion themselves can benefit from an exclusion requested by enterprise-level peers
  • Exclusions are retroactive to the date of original implementation. So for List 1, you can recover section 301 duties that were paid all the way back to July 6th, 2018.
  • So far, exclusions have predominantly included turbines, rotors, pumps, impellers, and heat exchangers, although the reasons why are unclear. A list of exclusions is available on the INLT website.

How likely am I to get an exclusion?

For List 1, 985 exemptions were granted, while 4,500 others were denied, and 3,300 have been tentatively approved– far more denials than exemptions. However, if the 3,300 tentatively approved exclusions are eventually approved, it’s about a 45% success rate.

Other ways you can save on duties

  1. Section 301 duties are recoverable via the drawback program. That means for goods that are re-exported or destroyed due to not satisfying quality standards, you can file drawback and get 99% of your duties back, including section 301 duties.
  2. Check out the Miscellaneous Tariffs Bill, which offers duty suspensions and reductions for certain products. It does not offer exemptions to section 301, but provides relief from normal duty rates of somewhere between 3% and 32% in some cases.

Watch the Interview

Check out the full webinar below!

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