Section 301 Tariffs – Recent Developments

The following is an update from Frank Samolis, a partner in our Washington DC office, and Rory Murphy, an associate in our Washington DC office.  Frank is co-chair of our International Trade Practice and he advises clients on a wide range of international trade matters.  Rory is a member of our Public Policy International Practice who focuses on providing US public policy guidance. 

In the past few months, the United States has rolled out three lists of Section 301 tariffs that it has imposed, or will soon impose, on products being imported from China.  For each list there has been, or will soon be, both a public comment period – during which companies could ask for specific tariff lines to be removed from the proposed list of tariffs – followed by a product exclusion process – during which companies can ask that specific products imported under an effected tariff line to be excluded from the higher duty rates.

In the past 24 hours, there have been three significant developments:

  • The Trump Administration finalized List 3 of the Section 301 tariffs.  Approximately 300 of the proposed 6,300 List 3 tariff lines were removed as a result of public comments.  From September 24-December 31, 2018, products on List 3 will face an additional 10 percent duty.  Starting on January 1, the additional tariffs on these products will increase to 25 percent.
  • This morning, China announced it would retaliate against the United States’ most recent action by imposing 5 or 10 percent tariffs on approximately 5,200 U.S. products worth $60 billion.
  • The Office of the U.S. Trade Representative (“USTR”) announced a product exclusion process for List 2 of the Trump Administration’s Section 301 tariffs via the Federal Register.  Similar to the product exclusion process for List 1, requesters are encouraged to file using a yet-to-be-released form from USTR and asked to address whether (1) the product is available only from China, (2) the increased duties would cause severe economic harm to the requester or other US interests, and (3) the product is strategically important or related to “Made in China 2025” or other Chinese industrial programs.  If an exclusion is granted under this process, it would apply retroactively to August 23.  The product exclusion requests will be due December 18.

Finally, there are reports that China may cancel high-level bilateral meetings tentatively planned for later this month.

For your convenience, all of the upcoming deadlines are listed below.

List

Exclusion Process

Public Comment Period

  • List 1 (818 Tariff lines/$34 billion worth of Chinese products)
  • Product exclusion process open through October 9, 2018
  • Public comment period is closed.  Tariffs imposed as of July 6.
  • List 2 (284 tariff lines/$16 billion worth of Chinese products)
  • Product exclusion process open through December 18, 2018
  • Public comment period is closed. Tariffs imposed August 23.
  • List 3 (approximately 6,000 tariff lines/$200 billion worth of Chinese products)
  • Product exclusion expected, but not announced.
  • Public comment period closed.  Tariffs to be imposed September 24.

 

Force Majeure in a Tight Labor Market

2018 has produced a tight labor market for many manufacturers.  Particularly in the electronics, aerospace, and trucking/automotive sectors, skilled laborers are becoming increasingly difficult to find.  As a consequence, many manufacturers are finding themselves in a position where they are unable to perform contracts that have any degree of complexity without a level of scrap and/or corrective action that renders the contract uneconomical – because they don’t have skilled workers capable of shepherding these difficult contracts to performance.  And products that have manufacturing difficulties may not be apparent to the eye:  Truck panels or circuit boards that appear no different from standard-issue products may involve tight tolerances and specifications that only become apparent when the resulting products fail to perform as intended or fail to meet applicable specifications.

Solving the problem of insufficient skilled manufacturing workers on a policy level will involve time, coordination, and careful strategy.  American education institutions need to stay in close communication with industry, to know what skills the modern manufacturing worker needs to have.  Economic incentives have to be right to retain the most skilled workers.  And technology has to adequately support the manufacturing workforce to produce robust products.  But, in the short and medium term, is there anything that manufacturers can do to cope with these difficulties caused by labor shortages? Continue Reading

Cross-post from the frESH Blog – Food Labeling Issues and Trends: Lessons from Recent Allergen Recalls

Our colleague, Nicola Smith, recently published an article covering “Food Labeling Issues and Trends in Europe: Lessons for US and European Practitioners from Recent Allergen Recalls”, which is now available for download here.  Click below to read more about further examples of recalls due to safety or allergen information.  The continuing trend of recalls for allergens and other reasons are a reminder to operators which distribute foods or other products across jurisdictions that it is worth ensuring that recall protocols and procedures cover global supplies properly.

Food Labeling Issues and Trends: Lessons from Recent Allergen Recalls

Cross-post from the frESH Blog – Brexit: will there be a potential supply chain disruption for the chemicals sector?

Squire Patton Boggs attorney Anita Lloyd provided details to The UK in a Changing Europe about the potential effects of Brexit on chemical regulation.  Due to the way that REACH works on a whole supply-chain basis, when the UK leaves the EU, there could be significant disruption to cross-border supply chains and the many billions of pounds’ worth of trade in chemicals, unless measures can be agreed with the EU.  Read more here on the complexities surrounding the EU REACH Regulation and the legal challenges posed by Brexit, particularly in a no-deal scenario.

How Do You, Your Suppliers and Customers Fare as Trade Tensions Escalate?

It has been a tumultuous year for trade.

Nearly all steel and aluminum imported into the US now face additional 25% and 10% tariffs, respectively, after the Trump Administration determined such imports threatened US national security. An additional 25% tariff will be added to a growing list of products from China, following a US investigation into China’s intellectual property practices and policies. The US also launched a Section 232 investigation on auto imports, the results of which could be released as early as September. The EU and other US trading partners are responding with retaliatory tariffs, which will increase the costs of importing US products on almost 2,000 tariff lines.

While the real economic pain of these tariffs may not be felt until the fourth quarter, they have already disrupted global supply chains and added to the cost of doing business. The countries involved in and products affected by the current trade tensions are changing at a rapid pace. Recognizing the difficulties companies face in tracking current developments and potential increased costs throughout their supply chains, the trade experts of Squire Patton Boggs have been advising companies globally on impacted tariff lines and processes available to comment on and challenge these tariffs in the US and certain foreign markets, including how to apply for product exclusions.

Find out how your products, suppliers, and customers fare in the trade war by downloading Squire Patton Boggs’ Tariff Book.

Guest Post: Another Purchasing Cartel on the European Commission’s Radar – Lessons for Compliance

The following is a guest post from Oliver H. Geiss, a partner in our Brussels and Frankfurt offices, and Tatiana Siakka, an associate in our London and Brussels offices. Oliver focuses his practice on competition law in the European Union and Germany, and Tatiana is a competition law specialist with wide-ranging experience in both contentious and non-contentious matters. 

For a long time purchasing cartels have been a relatively rare phenomenon in competition law enforcement. As a result, they may have received little attention from companies implementing compliance training programs. In the past couple of years, however, the Commission has become increasingly active in investigating and fining such cartels, notably in the battery recycling and ethylene purchasing sectors.

This month the European Commission announced another investigation into a suspected purchasing cartel.   The authority confirmed that it has carried out a series of dawn raids at the premises of companies that purchase styrene monomer – a chemical used as a base material for a number of chemical products.

The Commission’s latest investigation is a reminder that colluding to fix purchasing prices is just as unlawful as conspiring to fix sales prices. It also highlights that purchasing and procurement teams – often overlooked when it comes to compliance training – are equally exposed to antitrust risk as sales teams.

It is therefore of paramount importance for companies to ensure that their purchasing employees receive adequate competition law training in order to be able to identify the relevant antitrust risks and act in compliance with EU rules on restrictive business practices. The three companies involved in the battery recycling purchasing cartel were fined a total of €68 million (currently under appeal), highlighting what is potentially at stake for failing to do so.

VAT Tax Expert Warns of Potential Supply Chain Hurdles For UAE

A Value Added Tax (VAT) was introduced in the UAE on January 1, 2018.  Although there do not appear to have been significant impacts on regional supply chains thus far, our colleague, Jeremy Cape, explains why there may be complications coming later this year from the introduction of VAT in the UAE.

The article can by accessed here.

New Consumer Product Recall Code of Practice: What You Need to Know

The UK Government’s newly formed Office for Product Safety & Standards (OPSS) has introduced the first government-backed Code of Practice (the Code) for product safety recalls – PAS7100.  The Code aims to provide producers and distributors with clearer guidance on how to prepare for and deal with product safety issues, and we would advise producers and manufacturers to review their product recall arrangements in line with PAS7100.  Our colleagues Rob Elvin, Nicola A. Smith, Gary Lewis and Laura Clare discuss what you need to know here.

Webinar: Global Perspectives – What Is Keeping Manufacturers Awake at Night?

We are holding a webinar with our sector experts from the US, Germany and the UK to address some of the key concerns and issues facing manufacturers across the globe, including trade barriers, GDPR, immigration, intellectual property enforcement, pensions, and environmental matters.

Continue Reading

Cross-post from The Trade Practitioner Blog: President Trump Ends US Participation in the JCPOA

On May 8, President Trump announced that the US is withdrawing from the Joint Comprehensive Plan of Action (JCPOA) entered among the P5+1 countries (the US, China, France, Germany, Russia and the UK), the European Union and Iran in July 2015. In our publication, we provide an overview of upcoming changes to US sanctions policy toward Iran and how they could impact business operations worldwide.

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