The Trade War Wages On
As has been repeatedly mentioned in the general press, President Trump tweeted on August 1st that the U.S. “will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country.” There are lots of questions about what that short message actually means, and right now, no answers. So far, there is no official notice from the U.S. Trade Representative (USTR) for publication in the Federal Register. There is nothing new posted on the USTR website. We know the President said he picked September 1st because there are goods on the water, but we do not know whether September 1st is the date by which the goods must arrive in the U.S., or must be exported from China. Will the products on List 4 change from those originally published? Whatever goods are on the final version of List 4, will at least some of the products be listed to the 10-digit level? Right now, all products are listed to the eight-digit level, but the descriptions assigned to those classifications, in some cases, do not include all the products encompassed by the very different products classified under that eight-digit number. This is typically the case due to either the type of good or its constituent material.
Given past history, we can only speculate, but until we see the official notice, we just do not know. So, first, if you can, get your goods imported no later than August 31st. For anyone whose goods are arriving in late August, make sure your customs broker selects the correct entry date (assuming the definition for date of import does not change), and then cross your fingers! There is just no telling how chaotic things will get.
Trade counsel have all spent time sharing the same basic list of recommendations for how companies can deal with these tariffs. There is one more point to add to that oft-discussed list. This option falls into the “better late than never” category – make sure your force majeure contract clause includes as grounds for cancellation the imposition of significant additional duties, taxes and/or assessments – and pick a percentage that defines “significant” (5%? 10%?) so there is little room to argue later. The Trump tariffs certainly should fall into this category, but given the plethora of antidumping and countervailing duty cases being brought against goods made in China and the percentages which result, imposition of those duties, too, should be grounds for cancellation.
The other thing to watch for is what additional retaliatory measures the Chinese impose. They cannot go tit-for-tat and impose tariffs on the same quantity and value of goods, but we do know there are delays galore with permits, licenses and the like, and a myriad of inspections being required on imported goods which have come out of the blue, to name the two most common complaints being heard from American exporters, at least from those whose goods are still being exported to China. What else will happen?