Who could have seen this coming? The Office of the United States Trade Representative has issued notice that the tariff rate on “Round 3” products will have their tariff rate increased from 10 percent to 25 percent effective on May 10, 2019. The 10 percent tariff went into effect on September 24, 2018. Originally scheduled to rise to 25 percent on January 1, 2019, the date for doing so was deferred twice. This latest step is billed as a response to the reported stalemate in negotiations to resolve the U.S.-China intellectual property and technology transfer dispute.
The Round 3 duty rate increase may prove more disruptive than those of Rounds 1 and 2, given the higher value of trade covered. While it’s scant comfort, the Federal Register notice provides two ways to mitigate its effect.
First, while the tariff increase is effective with “respect to goods (i) entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on May 10, 2019,” it applies only to such goods that are “(ii) exported to the United States on or after May 10, 2019.” Thus, merchandise in transit before then will avoid the increase.
Second, USTR announced that it “will establish a process by which interested persons may request that particular products classified within an HTSUS subheading covered by the September 2018 action be excluded from the additional duties.” That process will be announced at a future date.
So, will upping the ante this way help move the negotiations toward a successful outcome? Some say yes, some say no, and I say expect the unexpected from the former reality TV show host.
UPDATE: So Now They’re Throwing in the Kitchen Sink
It looks like last week’s tariff increase was just the table-setter. USTR has announced plans to impose a 25 percent tariff on pretty much every Chinese product that’s not yet covered by Section 301 duties. The forthcoming Federal Register notice provides a “list of 3,805 full and partial [Harmonized Tariff Schedule] tariff subheadings”, accounting for trade estimated at $300 billion per year.
Before this takes place, USTR plans to hold a hearing under a very tight schedule:
June 10, 2019: Due date for filing requests to appear and a summary of expected testimony at the public hearing.
June 17, 2019: Due date for submission of written comments and hearing.
Seven days after the last day of the public hearing: Due date for submission of post-hearing rebuttal comments.
The agency is particularly interested in comments on these topics:
- The specific tariff subheadings to be subject to increased duties, including whether the subheadings listed in the Annex should be retained or removed, or whether subheadings not currently on the list should be added.
- The level of the increase, if any, in the rate of duty.
- The appropriate aggregate level of trade to be covered by additional duties.
And yes, porcelain and ceramic sinks, classified in HTS subheadings 6910.10 and 6910.90, are covered.
