Very limited extension granted for products of Chinese origin subject to Section 301 List 3

On Aug. 7, 2020, the U.S. Trade Representative Office (USTR) issued the Notice of Product Exclusion Extensions: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation—the extension of certain exemptions related to certain products of Chinese origin on List 3 with an annual trade value of $200 billion as part of the action in the Section 301 investigation. Even though List 3 contains 1,035 products, the extension granted on Aug. 7, 2020 unfortunately covers only 266 products.

The product exclusion extensions announced in this notice will apply as of Aug. 7, 2020, and extend through Dec. 31, 2020. This means that effective Aug. 7, 2020, for the 266 products of Chinese origin on List 3 that have been granted the extension, they will continue to face 10% tariffs between Aug. 7, 2020 to Dec. 31, 2020. However, the remaining 769 products of Chinese origin for which extensions were not extended will now face 25% tariffs at the time of entry, effective Aug. 8, 2020.

This recent development is concerning, particularly given the current strained relationship between the U.S. and China. It is possible that this recent notice, when announced, was a strategy for the U.S. to put additional pressure on the China side of the trade talks as the U.S. and China trade talks were due to resume. Yet, with the U.S. and China having delayed their planned talks on reviewing the Phase 1 trade agreement, the impact is uncertain at this time.

Stakeholders should carefully examine the USTR notices to understand how  they may impact the stakeholder’s individual business and analyze its supply chain strategy. The USTR has announced that U.S. Customs and Border Protection will issue instructions on entry guidance and implementation.

For more information, contactSunny Yangor any member of Porter Wright’sInternational Business and Trade group.