Aug 26, 2019

TOC LOGISTICS INTERNATIONAL INC. would like to provide the following update regarding Chinese-origin products:

On Friday morning August 23rd, news broke that the Beijing decided to impose an additional 5% – 10% duty on approximately $75 billion in US exports to China. The news couldn’t have been worse for companies in the automotive and seafood sectors. US manufactured autos and auto parts, beginning December 15th, would be subject to an additional 25% – up from the 5% now in place. Seafood exporters face a 10% increase that takes effect on September 1st – from 25% to 35% in just under a week.

The President took to Twitter to simultaneously express his displeasure and outrage, advising that he would have a response by the afternoon. After meeting through the day with Treasury Secretary Mnuchin, chief economist Peter Navarro and USTR Robert Lighthizer, late in the day he broke the news which was shortly thereafter matched by language on the USTR’s website.

In summary, here is the action that is proposed and, we surmise, will be published in the Federal Register this week:

  • Lists 1, 2 and 3 comprising $250 billion in imports and were already subject to additional Section 301 duties of 25%. Those three lists are increasing by 5% from the current rate of duty of 25% and on October 1st will be 30%.
  • List 4, which was supposed to be subject to an additional 10% beginning September 1st per the President’s August 1st tweet was split into lists 4A and 4B in an announcement by the USTR mid-month with effective dates of September 1st and December 15th. List 4 has been increased by 5% from the current 10% to now 15%, still with the same effective dates of 9/1 and 12/15.

We are left to ponder the next steps by both the US and China. Both countries have domestic issues at home which are delaying or hampering their efforts to find a solution. For the US, a slowing economy and the 2020 election are leading to political decisions that are designed first and foremost to bolster the President’s popularity as the elections draw nearer. For China, the 70th anniversary of the People’s Republic comes in October and the continuing demonstrations in Hong Kong also weigh on their policy decisions.

While the short- and long-term prognostication business has proven to be nigh-impossible as this saga continues, we are comfortable in offering the following guidance to US importers and exporters.

For importers – the issue of Customs bond sufficiency in the wake of increasingly larger Section 301 duty deposits weighs heavily. Examine your supply chain and HTS numbers to identify goods of Chinese origin and assume it will get worse before it gets better. Determine if an increase to your bond amount is needed on your terms, versus on CBP’s terms.

For exporters – the continuing increase in duties to products of US origin entering China, coupled with the potential EU retribution in the Airbus dispute give a reason to diversify global client bases. We encourage exporters to visit for resources and help identifying markets. TOC stands ready with our network of airlines, ocean lines and overseas partners to ensure your US-made goods get to those markets where they will face fewer tariff and non-tariff barriers to entry.

Thank you for allowing TOC Logistics to serve you.


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