Biden Administration Policy on China – More of the Same, At Least for Now
In a major disappointment for importers of goods from China who were hoping that the Biden administration would change the course of U.S. trade policy with China, United States Trade Representative (USTR) Katherine Tai in a speech delivered at the Center for Strategic and International Studies on October 4, 2021 indicated that the Section 301 ad valorem tariffs of 25% and 7.5% (depending on each item’s tariff code) will remain in place. Tai did indicate that the tariff exclusion process would be reimplemented but did not provide specific information or details as to when this would occur. The highly-anticipated address followed a lengthy internal policy review by the Administration, which was expected to shed light on the strategy for China moving forward.
In her address, Tai pointed to China’s continued state subsidization of key industries that has harmed workers in the U.S. and other countries in industries such as solar panels and its current focus on semiconductors as reasons for continuation of the tariffs. Further, China has failed to meet its commitments under the “Phase One” agreement it previously entered into with the former administration with regard to the purchase of U.S. agricultural products. The Biden administration will not pursue a phase two agreement because little optimism exists for further negotiations to try and change Chinese behavior on industry subsidization, which is the primary source of contention.
Tai would not state whether the U.S. has plans to initiate a second Section 301 investigation if China does not change its position regarding industrial subsidies. However, Tai said that Section 301 is a very important tool for trade enforcement. Tai said she intends to speak with her Chinese counterpart in the near future (presumably regarding structural issues with the Chinese economy, including government support for its domestic industries.)
The tariff exclusion process in 2019-2020 allowed U.S. importers the opportunity to remove certain products from the imposition of Section 301 tariffs if the product was not available from non-Chinese sources and the tariffs created an economic hardship. The exclusion requests were filed with USTR, which determined on a case-by-case basis whether to grant the exemptions. All previously-granted remaining exclusions expired on December 31, 2020. Although details have not yet been provided, the reimplemented exclusion process will likely be similar to the previous process. Importers should closely monitor announcements from USTR regarding the reimplementation of the exclusion process, including filing dates and deadlines for the exclusion petitions.
How BDO can help
BDO can assist importers with the preparation and filing of exclusion requests with the United States Trade Representative and, should the exclusion request be granted, file administrative protests for the refund of duties should the exclusions be effective retroactively. BDO can also review the tariff classifications for products to determine if a previous tariff exclusion was available and if any refunds can still be claimed based on the entry date of the merchandise.
Our services include:
- Tariff classification reviews
- FTA qualification
- Customs valuation and transfer pricing analysis
- Import and export compliance assessments
- Supply chain planning
- Customs rulings, protests and other administrative filings
- VAT registration
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