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China Trade War Update – Mexico Tariffs – Venezuela Sanctions – India Removed from GSP

U.S.-China Trade War Update

On May 31, the Office of the U.S. Trade Representative announced that it will extend the amount of time List 3 goods imported from China have to enter the U.S. before they become subject to the 25% tariff increase.  Originally, the covered products, which were exported from China before May 10, had to arrive in the U.S. before June 1 to qualify for the 10% tariff.  As many companies who had goods on the water when the increased tariffs were announced were left at a disadvantage, the USTR has extended the entry date to June 15.

On Saturday, China began collecting higher tariffs on $60 billion worth of U.S. products.  The tariffs, announced on May 13, apply additional duties of 10% to 25% on $60 billion worth of American exports.

Unreliable Entity List

In response to the Trump Administration’s decision to blacklist 70 Chinese companies, including the telecom giant Huawei, China’s Ministry of Commerce announced on Friday that it is working on an “unreliable entity list” of foreign entities and individuals deemed to have damaged Chinese firms.  The Ministry said it would soon detail action and identify:  1) violators of market rules and contractual obligations, 2) parties that had taken discriminatory measures, such as boycotts against Chinese business interests, and 3) parties who pose threats to national security.

A day later, China announced an investigation into FedEx for the “wrongful delivery of packages”, after Huawei accused the logistics company of diverting its packages from China to FedEx’s headquarters in Memphis, TN.  Beijing claims that FedEx’s actions “severely harmed [the] clients’ legitimate rights and interests and violated China’s delivery industry regulations.”

Rare Earth Elements

As tensions rise between the two countries, China’s President Xi Jinping has hinted at using rare earth elements as political leverage in negotiations with the Trump Administration.  Chinese mines and processing facilities provide most of the world’s supply of the 17 rare earth elements, which play a vital role in several industries, including consumer electronics, semiconductors, electric cars, wind turbines, medical tools and military hardware.  The U.S. government has deemed rare earths critical to America’s economy and national security and, as such, were exempted from the tariffs it imposed on Chinese goods.

G-20 Summit

The trade war shows no signs of letting up any time soon.  President Trump is scheduled to meet with President Jinping at the G-20 Summit in Japan at the end of June, but there are no indications that the groundwork for a successful meeting is being laid.  In recent weeks, both the Trump Administration and Chinese officials have dug in their heels and are a showing no signs of backing down.

More List 1 Goods Excluded from Section 301 Tariffs

On Monday, the USTR announced more Section 301 List 1 tariff exclusions on 89 additional product types, including medical equipment, certain oil pumps, forklifts, garage door openers and ball bearings.  The exclusions will be will be retroactive to July 6, 2018, and extend through June 4, 2020.

Exclusions take the form of one 10-digit HTS subheading, HTS 8537.10.8000 (touch-sensitive data input devices (touch screens) without display capabilities), and 88 specially prepared product descriptions.  Importers should review the list of affected goods and apply for refunds on any tariffs paid since July 6, 2018.  To view the full list, click here.

Entry guidance and implementation instructions will be issued by CBP.

Proposed List 4 Hearings

Meanwhile, the USTR will begin hearings on June 17 on their proposal to impose additional tariffs of up to 25% on almost all of the remaining goods from China.  The proposed List 4 amounts to $300 billion worth of Chinese goods and includes shoes, apparel, phones and a range of other consumer products.

 

Trump Says U.S. will Hit Mexico with Tariffs on All Imports

The White House announced a 5% tariff will be imposed on all imports from Mexico beginning on June 10.  Trump said that the tariff is meant to address a “border crisis” that has resulted in America being “invaded by hundreds of thousands of people.”

If Mexico doesn’t halt the flow of undocumented migrants and the crisis continues, tariffs will be progressively raised as follows:

Date Tariff Increase
July 1 10%
August 1 15%
September 1 20%
October 1 25%

Rates will remain at 25% until “the illegal migration crisis is alleviated through effective actions taken by Mexico.”  While the White House has been vague about what actions would be sufficient to cancel or postpone the tariffs, acting White House Chief of Staff Mick Mulvaney said they “will judge success by the number of people crossing the border.”

We anticipate this action will impose additional tariffs on top of existing duty rates and include goods covered under NAFTA.  We expect a Federal Register notice will be released prior to initiation of these tariffs, which will provide additional details to clarify the scope of the action.

Meetings with a senior Mexican delegation will be held this week in Washington.

 

New Restrictions on Exports to Venezuela

The Bureau of Industry and Security (BIS) has issued a final rule, effective May 24, which imposes heightened restrictions on exports, reexports and in-country transfers to Venezuela.  This final rule makes changes to the Export Administration Regulations (EAR) to reflect current national security concerns, such as the recent introduction of foreign military personnel and equipment into Venezuela, and to protect U.S. national security.

Under the new final rule, the following restrictions will be imposed:

  • Venezuela is removed from Country Group B, which gives “favorable treatment” for exports of certain national security-controlled items. This change means that Venezuela is now ineligible for the following export license exceptions:
    • Shipments of limited value (LVS)
    • Shipments to Country Group B countries (GBS)
    • Technology and software under restriction (TSR)
  • Venezuela has been added to Country Group D:1, which lists countries of national security concern. Under this designation, shippers must follow the national security licensing policy and shipments must be approved by BIS.  BIS will only approve the shipments if it determines that products are for civilian use only or would not make a significant contribution to Venezuela’s military that would be detrimental to U.S. national security.  This change imposes:
    • Restrictions on the export, reexport and in-country transfer of microprocessors to military end uses and end-users
    • Restrictions on certain exports to aircraft and vessels registered to Venezuela or in Venezuelan ports
    • Expanded licensing requirements for the reexport of foreign-produced, U.S.-origin technology and software products
  • Venezuela is added to Country Group D:2-4, which lists countries of nuclear, chemical and biological weapons and missile technology concern. This designation limits or restricts the use of the following license exceptions:
    • Temporary imports, exports, reexports and in-country transfers (TMP)
    • Servicing and replacement of parts and equipment (RPL)
    • Gift parcels and humanitarian donations (GFT)
    • Baggage (BAG)
    • Aircraft and vessels (AVS)
    • Additional permissive reexports (APR)
    • Encryption, commodities, software and technology (ENC)

Any Venezuela-bound export, reexport, or in-country transferred shipment that was on dock for loading, laden aboard an exporting carrier, or en-route aboard a carrier on or before May 24 may continue to use the Country Group B designation if delivery is made before midnight on June 24.  Shipments arriving after June 24 will require a license in accordance with this final rule.

 

India Removed from GSP

President Trump has issued a proclamation to terminate India’s status as a beneficiary of the Generalized System of Preferences (GSP) effective June 5.  As a result, thousands of goods from India will not be eligible for GSP’s duty-free treatment.  The proclamation also removes India from the list of developing WTO member countries who are exempt from the Section 201 safeguard tariffs, which were imposed in January 2018 on crystalline silicon photovoltaic cells and large residential washing machines.

“I have determined that India has not assured the United States that India will provide equitable and reasonable access to its markets,” Trump announced.  “Accordingly, it is appropriate to terminate India’s designation as a beneficiary developing country.”

The Office of the U.S Trade Representative has previously stated that India has implemented numerous trade barriers that “create serious negative effects on U.S. commerce, including higher import tariffs on electronic products, which conflict with India’s commitments under the World Trade Organization’s Information Technology Agreement, tougher rules on e-commerce markets, and forcing foreign businesses to store their data in India.

In 2017, India was the largest user of GSP with $5.7 billion in shipments.

 

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Sources:

 

  • Sandler, Travis & Rosenberg (STR) Trade Report
  • National Customs Brokers & Forwarders Association of America, Inc. (NCBFAA)
  • Reuters
  • South China Morning Post
  • CNN Business
  • New York Times
  • American Shipper

 

 

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