On August 23, 2018, the United States began to impose an additional 25 percent tariff on a second list of products imported from China ("U.S. List 2"). By way of background, in August 2017, the Office of the US Trade Representative ("USTR") initiated an investigation into Chinese trade and industrial policies that allegedly harm US intellectual property under Section 301 of the Trade Act of 1974. On March 22, 2018, USTR issued the substantive findings of this investigation in an official report. That same day, President Trump signaled his intention to impose new tariffs on Chinese imports, together with other measures.1 Since then, USTR has finalized two lists of products imported from China that will be subject to an additional 25 percent tariff. The additional 25 percent tariff took effect regarding Chinese imports on the first list ("U.S. List 1") on July 6, 2018.2 U.S. List 3, potentially affecting $200 billion worth of Chinese imports, is undergoing public comment.3 All three lists are based on HTS codes provided in the US tariff schedule.
USTR followed the same process for U.S. Lists 1 and 2—that is, it (1) announced a proposed product list, (2) invited public comment and (3) issued a final list of products subject to tariffs.4 The public comment process consisted generally of the following steps: (1) filing requests to appear and a summary of expected testimony at the public hearing, (2) filing pre-hearing written comments, (3) appearing at the public hearing and (4) filing post-hearing rebuttal comments.
Eventually, only five out of the original 284 tariff items were removed from U.S. List 2, due to public comments. These fives items are: (1) 3913.10.00, alginic acid, and its salts and esters, in primary forms; (2) 8465.96.00, splitting, slicing or paring machines for working wood, cork, bone, hard rubber, hard plastics or similar hard materials; (3) 8609.00.00, containers specially designed and equipped for carriage by one or more modes of transport; (4) 8905.90.10, floating docks; and (5) 9027.90.20, microtomes. (Mayer Brown represented clients in the shipping container industry that benefited from the final decision by USTR.)
In the case of all tariffs imposed pursuant to the Section 301 proceeding, USTR provides US stakeholders with another opportunity to be exempt from the Section 301 tariff—a product exclusion process for excluding specific products within an HTS code.5 The product exclusion process for U.S. List 2 will be announced by USTR soon.6
2 Notice of Action and Request for Public Comment Concerning Proposed Determination of Action Pursuant to Section 301: China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 28710 (June 20, 2018) (containing final U.S. List 1); Notice of Action Pursuant to Section 301: China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 40823 (August 16, 2018) (containing final U.S. List 2).
3 https://www.mayerbrown.com/China-Responds-to-US-Tariff-Increase-with-New-Tariffs-08-06-2018. The key step of a public hearing concluded on August 27, 2018.
4 USTR has taken the first two steps with respect to U.S. List 3 (https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/august/public-hearings-proposed-section-301). A final product list is highly anticipated but not absolutely certain at this point.
5 The procedures for seeking product exclusions from U.S. List 1 have been published (https://www.federalregister.gov/documents/2018/07/11/2018-14820/procedures-to-consider-requests-for-exclusion-of-particular-products-from-the-determination-of). A product exclusion process will be available for U.S. List 2 (https://www.federalregister.gov/documents/2018/08/16/2018-17709/notice-of-action-pursuant-to-section-301-chinas-acts-policies-and-practices-related-to-technology).
6 Notice of Action Pursuant to Section 301: China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 40823 (August 16, 2018) (containing final U.S. List 2).