UPDATE: President Trump and the President of China met over the weekend and discussed a truce regarding the tariffs that are set to increase January 1 from 10% to 25%. According to the BBC, the US statement on the truce says the US tariffs on Chinese goods will remain unchanged for 90 days, but warns: “If at the end of this period of time, the parties are unable to reach an agreement, the 10 percent tariffs will be raised to 25 percent.”
According to Peter Friedmann of the Pacific Coast Council of Customs Brokers and Freight Forwarders Assoc, (the PCCC) the truce “delays perhaps indefinitely implementation of the feared “List 4”, the “everything else list” (everything we import from China that has not yet been hit by tariffs), which would include footwear, apparel, consumer electronics, etc. So, at least for now, List 4 is off the table.
There are some things you should know and start planning for now in case the tariff increase does happen. Read on to find out more. Feel free to cross your fingers that it actually doesn’t.
China Duty Update: Cease fire! Tariff increases delayed 90 days.
The planned tariff increase for Jan 1, 2019 is currently on a 90 day hold. We still recommend that importers whose wares are sourced from China, even if purchased or routed through other countries, still prepare in case the List 3 tariffs of Section 301 do increase from a 10% to 25% rate.
What products are affected by tariffs?
Currently, nearly every product manufactured in China will be included within the scope of Section 301 tariffs. List 1, found here, details products that as of July 6th of 2018 initiated additional duties equal to 25%. List 2, found here, added more products which took effect on August 23rd of this year. Those products were also assessed at the 25% additional rate.
List 3, found here, was made effective on September 24th, but only at the rate of 10% above the standard dutiable rate. The 10% tariff was designed to ease US markets into the new environment but was also planned to increase to 25% on January 1st of 2019. It is this date that is now on hold due to the 90 day truce mentioned above.
For planning purposes, the 25% additional duty should be included when evaluating the supply chain for any product that was manufactured or produced from China.
What other importation functions are also affected?
Beyond the immediate increase in duties payable to US Customs & Border Protection, the resultant duties will also spill over into bonding requirements. For more information about continuous bond limit increases: please review our prior blog post: Higher Bonds Due to Tariff-Hit US Imports. If importers are electing to use single entry/ single transaction bonds, the coverage requirements will directly reflect the Section 301 increase in the issuance premium.
Any options to avoid additional duties?
Importers must account and respond to the changing Customs environment, but so too is US Customs & Border Protection. Customs is monitoring for misrepresentations in either the country of origin or the HTS codes that are associated with the Section 301 products. Don’t amend these information elements unless it is an accurate representation of your product. Do look into new suppliers. While the three lists mark additional duties for Chinese products, any other country would not fall within that purview.
It is difficult to predict whether the tariffs will increase or not. It is recommended to plan for both scenarios. Do you still have questions? We can help. Contact Gallagher Transport for more information or guidance concerning continuous bond increases.