USTR to Resuscitate Section 301 Exclusions

Oct. 4, 2021
By: Meaghan E. Vander Schaaf

U.S. Trade Representative Katherine Tai has announced that the United States will restart the exclusion process for U.S. companies seeking exemptions from tariffs on Chinese products. This point, critical to many importers, was part of a broader speech she gave to lay out the Biden administration's China trade approach.

The Section 301 duties were originally imposed to address findings that China unfairly treated U.S. companies in terms of technology transfer, intellectual property, and innovation policies. The Section 301 duties were imposed on a wide range of goods imported from China. However, the Trump Administration created and maintained an exclusion process by which United States importers could avoid Section 301 duties. These exclusions applied on a tariff provision basis to all importers entering goods described in the exclusion. As such, the Section 301 exclusions were critical for companies unable to source articles from countries other than China. Unfortunately for importers, nearly all the exclusions expired on December 31, 2020.

Consequently, it is welcome news to importers that Tai announced that the USTR will open a "targeted" process to revive exclusions for certain Chinese imports from punitive U.S. tariffs, with additional exclusion processes possible in the future. The details for this process have not yet been released, however, to the extent they are similar to the original Section 301 exclusions, attorneys at Barnes, Richardson & Colburn, LLP have significant experience applying for, and receiving exclusions. Please do not hesitate to contact us.
 

New Year, New HTS-you-S.

Oct. 5, 2021
By: Lois E. Wetzel

On January 1, 2022, the Harmonized Tariff Schedule of the United States (HTSUS) will be getting a make-over. The facelift to the domestic tariff nomenclature has been in the works since 2019 and is the culmination of several routine, broadscale reviews.

As background, the foundation of the HTSUS is the global Harmonized System (HS). The HS uses six-digit codes to classify products circulating in international trade. All signatories to the Harmonized System Convention, including the U.S., use the six-digit codes set by the WCO. However, signatories are permitted to further define products beyond the six-digit code. For example, the U.S. extends classification codes to the eight- and ten-digit. Extensions or additions to the HS that are specific to a signatory country form that country’s domestic harmonized system, for the U.S., the HTSUS.

The WCO, which is comprised of 183 customs administrations worldwide, administers and maintains the HS. Every five years, the WCO reviews the entirety of the HS to ensure it stays up to date with technological developments and changes to patterns in international trade. The WCO completed its latest review in 2019, approving some 350 amendments to the HS, which will enter into force on January 1, 2022.

Under the 1988 Omnibus Trade and Competitiveness Act, the U.S. International Trade Commission (USITC) is tasked with continually reviewing the HTSUS and keeping it up to date, making modifications as it considers necessary or appropriate consistent with five statutory objectives, which include conforming the HTSUS to any amendments in the HS.

Accordingly, the USITC instituted the investigation to modify the HTSUS shortly after the WCO released its proposed amendments to the HS in summer 2019. In November 2020, the USITC issued notice of proposed recommendations and requested agency and public comment. 85 Fed. Reg. 73824 (Nov. 17, 2020). As required by the 1988 Act, in May 2021, the USITC released to the President a detailed report containing its recommendations for amendments to the HTSUS along with all agency and public comments submitted. If the President determines that the recommended modifications are in conformity with U.S. obligations under the Convention and do not run counter to the national economic interest, then the President, via the U.S. Trade Representative, must submit the USITC report to congressional committees. After a 60-day layover period from submittal, the modifications may be proclaimed, i.e., officially take effect. We do not anticipate any interruption in the procedural formalities and expect the HTSUS will be updated accordingly on January 1, 2022.

Notable changes to the HTSUS to take effect at the beginning of 2022 include a new heading for electronic waste along with subheadings for specific categories of e-waste, new subheadings for smartphones and accompanying Chapter Notes to define the scope of smartphones in this context, and new provisions for tobacco and nicotine-based products like vapes.

Importers and brokers should be aware of the changes so as to ensure that the appropriate classification is being reported to U.S. Customs. For any questions on changes to the HTSUS or classification of merchandise under U.S. law, please contact an attorney at Barnes, Richardson & Colburn.
 

China and Taiwan Vying for CPTPP Membership

Oct. 5, 2021
By: Michael N. Coopersmith

On September 16, 2021, China submitted a formal application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a trade pact typically viewed as one designed to counter China’s influence in the Asia Pacific region. Several days later Taiwan followed suit, formally applying for admission to the agreement on September 27, 2021. In recent days the United Kingdom entered into discussions with CPTPP members, expressing its desire to formally join the pact.

Applications by China and Taiwan create a potential dilemma for the current CPTPP countries. Under existing CPTPP rules any one member of the agreement retains veto power over the admission of any new member(s). Neither China nor Taiwan would be likely to consent to membership of the other. Therefore, a delicate scenario exists in which if all current CPTPP members agree both China and Taiwan should join the pact, both will likely need to do so simultaneously.

While in theory nothing is stopping CPTPP members from admitting both Taiwan and China to the pact simultaneously, there are potential roadblocks. For instance, the size of the Chinese economy as well as several notable structural differences between the economy of China and that of many existing members could make admission a challenge for both China and the existing CPTPP countries. Existing CPTPP members have already began to express uncertainty regarding China’s inclusion. During his first day in office, newly elected Japanese Prime Minister Fumio Kishida expressed skepticism about China’s potential acceptance into the agreement. During a press conference Mr. Kishida emphasized the agreement’s tough free trade requirements, later stating that existing member states must consider whether China can ultimately meet the “high standards” required by the trade pact, later stating that it is “unclear” if China will be able to do so.

While Japan has expressed skepticism regarding China’s accession into the pact, a particularly stiff challenge to China may ultimately come from Australia. While trade relations between Beijing and Canberra have seemingly hit an all-time low, with Beijing now imposing substantial tariffs on Australian barley and wine as well as implementing trade barriers against a variety of Australian products such as timber, lobster, and coal, geopolitical tensions between the two nations have been particularly turbulent of late. Following a September 15, 2021, announcement that Australia would be entering into a new trilateral security pact between Australia, the UK, and the US, dubbed “AUKUS”, Beijing responded by accusing the three nations of possessing a “cold war mentality,” later declaring that Australian soldiers were likely to be the “first to die” in a Chinese “counterattack” should it be provoked.

The 11 current members of the CPTPP are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. Although the agreement is the spiritual successor to the Trans-Pacific Partnership (TPP), a trade deal largely negotiated by the US, despite the recent flurry of applications to the pact at this point the US remains on the outside looking in.

If you have any questions regarding the CPTPP do not hesitate to contact an attorney at Barnes, Richardson & Colburn LLP.