The Office of the United States Trade Representative (USTR) has finalized and released its second list of Harmonized Tariff Schedule (HTS) subheadings totaling approximately $16 billion worth of imports from China that will be subject to a 25 percent retaliatory tariff as part of the U.S. government’s ongoing Section 301 investigation and response to China’s intellectual property and forced technology transfer practices. This second list supplements the first list that went into effect on July 6, 2018, which totaled approximately $34 billion of imports from China. Combined, the two lists now cover approximately $50 billion worth of Chinese imports.

The second list contains 279 of the original 284 HTS tariff lines that were on a proposed HTS subheading list released on June 15, 2018. U.S. Customs and Border Protection will begin to collect the additional duties on these imports on August 23.

The Department of Commerce has announced the initiation of a Section 232 investigation into whether the present quantity and circumstances of uranium ore and product imports into the United States threaten to impair national security. The decision was in response to a petition filed by two U.S. uranium mining companies and consultations with industry stakeholders, members of Congress, the Department of Defense, Department of Energy and other interested parties. Commerce Secretary Wilbur Ross has sent a letter to Secretary of Defense James Mattis informing him of the initiation of the investigation.

According to Commerce, these were the key considerations for initiating the investigation:

  • Uranium powers 99 U.S. commercial nuclear reactors, which produce 20 percent of the electricity for the U.S. electric grid, a key element to U.S. critical infrastructure.
  • Uranium is a required component of the U.S. nuclear arsenal and is used to power the U.S. Navy’s fleet of nuclear submarines and aircraft carriers.
  • U.S. uranium production had been 49 percent of U.S. requirements in 1987. Today, U.S. uranium production has dropped to only five percent of U.S. requirements.
  • Three U.S. companies with mining operations have been idled in recent years.
  • The two U.S. companies that requested the Section 232 investigation account for over half of all uranium mined in the United States, have laid off over half their workforce over the last two years, and now operate at reduced capacity.
  • Shuttered mines would take years to reopen under current environmental permitting regulations.

Background: On January 17, 2018, two U.S. uranium mining companies, UR-Energy and Energy Fuels, filed a petition requesting that Commerce initiate a Section 232 investigation into imports of uranium ore and products. For additional details on the petition, please see our Trump and Trade Update dated January 17, 2018.

On July 13, 2018, the Department of Commerce’s Bureau of Industry and Security issued an order terminating the April 15, 2018 Denial Order against Zhongxing Telecommunications Equipment Corporation and ZTE Kangxun Telecommunications Ltd. (collectively, ZTE). The order confirms that ZTE paid the $1 billion penalty and complied with the requirement of depositing $400 million in a U.S. bank escrow account. This $1.4 billion amount was in addition to the $892 million in penalties ZTE paid under its earlier settlement agreement for U.S. export law violations that occurred when it supplied telecommunications equipment to North Korea and Iran.

In a brief statement, Commerce Secretary Wilbur Ross stated, “While we lifted the ban on ZTE, the Department will remain vigilant as we closely monitor ZTE’s actions to ensure compliance with all U.S. laws and regulations … Three interlocking elements – a suspended denial order, the $400 million in escrow, and a compliance team selected by and answerable to the Department – will allow the Department to protect U.S. national security.”

What a week for U.S.-China trade relations! On July 6, the United States began imposing 25 percent tariffs on approximately $34 billion worth of Chinese products imported into the United States. China then retaliated by imposing tariffs of its own on $34 billion worth of U.S. exports to China, which the United States called “inappropriate” and prompted the United States to announce plans to impose a 25 percent tariff on another $16 billion of Chinese goods. Next, the Office of the U.S. Trade Representative (USTR) indicated that it did not like China’s reaction and was considering imposing a 10 percent tariff on an additional $200 billion of imports from China.

To recap:

  1. U.S. Customs and Border Protection is now imposing a 25 percent tariff on numerous goods from China;
  2. the USTR is reviewing a supplemental list of Harmonized Tariff Schedule categories to possibly implement a 25 percent tariff on $16 billion worth of Chinese goods – a hearing on these categories will be held July 24-25; and
  3. the process for submitting comments and participating in another public hearing in late August regarding the proposed 10 percent tariff on the $200 billion worth of Chinese goods has just been announced.

If that weren’t enough, in testimony before the House Financial Services Committee on Thursday, July 12, Treasury Secretary Stephen Mnuchin was harshly questioned on the administration’s wisdom and strategy concerning these tariffs. Mnuchin denied that the United States is in a trade war with anyone, despite the views of other key trading partners. China’s Ministry of Commerce, for example, in its strongest statement yet, stated that the United States is “not only launching a trade war with China, but also with the whole world, dragging the world economy into danger” and becoming “an enemy to all.”

As reported in a Trump and Trade Update dated June 8, 2018, the Department of Commerce reached a superseding settlement agreement with Zhongxing Telecommunications Equipment Corporation of Shenzhen, China (ZTE Corporation) and ZTE Kangxun Telecommunications Ltd. of Hi-New Shenzhen, China (ZTE Kangxun) (collectively, ZTE) to remove the Department of Commerce’s Bureau of Industry and Security (BIS) denial order imposed as a result of ZTE’s violations of its March 2017 settlement agreement. BIS has now published the superseding settlement agreement.

Even with this superseding agreement, the denial order on ZTE currently remains in place until the company fulfills all the necessary obligations under the agreement (i.e., replace its entire board of directors and senior leadership team; allow BIS to select compliance officials for monitoring purposes; and pay a $1 billion fine and $400 million for an escrow account that the United States will use for any future violations). On July 2, 2018, however, BIS issued a general authorization for all persons to conduct limited business with ZTE from July 2, 2018 to August 1, 2018, including (1) activities with ZTE necessary to maintain and continue operation of existing networks and equipment, (2) activities to provide service and support to existing ZTE phones, (3) disclosure to ZTE of information regarding security vulnerabilities in items owned or controlled by ZTE and (4) authorization to make and receive payments to or from ZTE for these allowable authorizations. This limited general authorization does not relieve U.S. persons from obtaining any necessary export licenses from BIS but is intended to provide clarification and relief to continue these limited transactions with ZTE while the terms of the settlement agreement are fulfilled.

Regarding the establishment of an escrow account to hold the $400 million in suspended fines, BIS confirmed on July 11, 2018, that it has signed the escrow agreement with ZTE and that a notice will be issued lifting the denial order once the deposit has been made. In its announcement, Commerce reiterated that the denial order “remains in full force and effect” until further notice is provided.

As reported in a prior post, the United States on July 6, 2018 began imposing 25 percent tariffs on approximately $34 billion worth of Chinese products imported into the United States. This was the result of the Office of the U.S. Trade Representative (USTR) undertaking a Section 301 investigation into “China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation.” Shortly after these tariffs were implemented, China retaliated by imposing tariffs on $34 billion worth of U.S. exports to China. In response, U.S. Trade Representative Robert Lighthizer announced yesterday, July 10, 2018, “As a result of China’s retaliation and failure to change its practices, the President has ordered USTR to begin the process of imposing tariffs of 10 percent on an additional $200 billion of Chinese imports.” He added, “For over a year, the Trump Administration has patiently urged China to stop its unfair practices, open its market, and engage in true market competition. We have been very clear and detailed regarding the specific changes China should undertake. Unfortunately, China has not changed its behavior – behavior that puts the future of the U.S. economy at risk. Rather than address our legitimate concerns, China has begun to retaliate against U.S. products. There is no justification for such action.”

While the USTR is also in the process of considering a 25 percent tariff on another list of Chinese products worth $16 billion (see Trump and Trade Updates of June 18, 2018 and June 20, 2018), the agency will now begin a third round of review to consider the imposition of the 10 percent tariff on an additional $200 billion worth of imports of China. While a formal notice will be published in the Federal Register in the near future, a pre-publication version of the notice and the proposed list of 6,031 Harmonized Tariff Schedule (HTS) categories is available here. In selecting these proposed HTS categories, USTR staff took account of likely impacts on U.S. consumers and involved the removal of subheadings identified by analysts as likely to cause disruptions to the U.S. economy, as well as tariff lines subject to legal or administrative constraints. The list captures a wide range of products, including food, chemicals, pesticides, minerals, fabrics, construction materials, handbags, luggage, car parts, appliances, machines, televisions, items made from steel and aluminum, batteries, semiconductor assemblies and furniture.

In the notice, the USTR is seeking public comments on its proposed action against China of an additional 10 percent ad valorem duty on products of China with an annual trade value of approximately $200 billion. The USTR’s Section 301 Committee will hold a public hearing on this matter from August 20-23, 2018. Requests to appear and testify at the hearing are due by July 27, 2018. Any desired pre-hearing submission is also due on this date. The deadline for filing any written comments is August 17, 2018; and the deadline for filing any post-hearing rebuttal comments is August 30, 2018. The docket number for this proceeding is USTR-2018-0026. The request to appear at the hearing and all related submissions must be made through the Federal eRulemaking Portal.

China’s Ministry of Commerce has stated that this latest action by the Trump administration is “totally unacceptable” and indicated that it would impose further countermeasures and take all appropriate actions at the World Trade Organization.

On July 6, 2018, the United States implemented retaliatory tariffs of 25 percent on U.S. imports of approximately 800 Chinese products covering an estimated trade value of $34 billion in 2018. Pursuant to its Section 301 investigation into “China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation,” the Office of the U.S. Trade Representative (USTR) announced its determination to implement the tariffs in a June 20, 2018 Federal Register notice (see Annex B of the notice for the full list of covered HTSUS Codes). The USTR indicated that products under these HTSUS codes “contain products identified as benefitting from China’s industrial policies, including the ‘Made in China 2025’ program.”

With these tariffs in place, the USTR announced on Friday that it is instituting a request process for U.S. parties to seek the exclusion of any product subject to this additional duty. In a notice to be published in the Federal Register, the USTR provided the criteria and detailed guidance for any product exclusion request application. The USTR will consider “whether a product is available from a source outside of China, whether the additional duties would cause severe economic harm to the requestor or other U.S. interests, and whether the particular product is strategically important or related to Chinese industrial programs including ‘Made in China 2025.’” Each request must specifically identify a particular product, and provide supporting data and the rationale for the proposed exclusion. The USTR will not consider product requests using criteria that cannot be made available to the public. Each request will be evaluated on a case-by-case basis.

Parties interested in this Section 301 product exclusion process should be aware of the following dates and features of the process:

  • The public will have 90 days to file a request for a product exclusion; the request period will end October 9, 2018.
  • After a request is posted on under Docket USTR-2018-0025, the public will have 14 days to file responses to the request for product exclusion. After the close of the 14-day response period, interested parties will have an additional seven days to reply to any responses received in support of or opposition to the request.
  • Exclusions will be effective for one year upon the publication of an affirmative exclusion determination in the Federal Register, and will apply retroactively to July 6, 2018.

Once Docket USTR-2018-0025 is activated, the USTR will post a request form in the “Supporting Documents” section. While the form is not required, the USTR strongly recommends that interested parties use the form to submit exclusion requests.

Because exclusions will be made on a product basis, a particular exclusion will apply to all imports of the product, regardless of whether the importer filed a request. U.S. Customs and Border Protection will apply the tariff exclusions based on the product.

According to President Donald Trump, “We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S.”

Recent U.S.-China trade activity strongly suggests otherwise: The analysts at have been working hard to stay abreast of the daily trade salvos between the United States and China and to keep clients updated on the brewing conflict between the two global economic giants. As we reach the halfway point of 2017, we offer our readers a presentation on the U.S.-China trade dispute. Enjoy!

As part of the Trump administration’s continuing efforts under Section 301 to pressure the People’s Republic of China (PRC) to change its intellectual property and forced technology transfer practices, the Office of the U.S. Trade Representative announced in the Federal Register today (1) which PRC products will be subject to a Section 301 25 percent tariff starting July 6 (Annex B), (2) which additional PRC products will undergo review to determine if they should be subject to the 25 percent tariff (Annex C) and (3) the review process for the additional PRC products.

The product lists in Annexes B and C were released last week. Today’s notice revealed for the first time the review process for the products listed in Annex C. Interested parties have until June 29 to file requests to appear at the July 24 public hearing; requests must include a summary of the expected testimony and may be accompanied by a pre-hearing submission. Parties filing written comments on the U.S. government’s proposed action must submit them by July 23, and post-hearing rebuttal comments are due by July 31. The hearing, which will start at 9:30 a.m. in the U.S. International Trade Commission’s main hearing room, will be limited to issues involving products listed in Annex C only. The notice did not address a product exclusion request process for the products listed in Annex B that will be subject to the 25 percent tariff on July 6, but indicated that a separate notice will be issued concerning that process.

Last Friday, the Trump administration released the list of imported products from the People’s Republic of China (PRC) that will be subject to an additional 25 percent tariff. The retaliatory tariffs are the result of (1) the U.S. government’s Section 301 investigation and report that assessed the PRC government’s intellectual property and technology transfer practices affecting U.S. companies and (2) the PRC government’s reluctance to address these U.S. government concerns so far. Tariffs on these products are scheduled to go into effect July 6.

The Section 301 investigation process, which included a public notice and comment period and hearing, reduced the first set of product lines under consideration from 1,333 U.S. Harmonized Tariff Schedule (HTS) line items to 818, worth approximately $34 billion in U.S. imports from China. In its Friday announcement, the Office of the U.S. Trade Representative also announced that an additional 284 HTS line items worth $16 billion in U.S. imports from China may be subject to the 25 percent tariff and would undergo further scrutiny as part of a public notice and comment process, including a public hearing. The second set of HTS line items includes, among others, products benefiting from PRC industrial policies, including the “Made in China 2025” program, which is an industrial strategy aimed to shift China’s economy into higher value-added manufacturing sectors, such as robotics, aerospace and energy-saving vehicles.