On August 16, 2018, the Office of the US Trade Representative (USTR) published in the Federal Register a notice of action pursuant to section 301 regarding China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation and has determined that appropriate action in this investigation includes the imposition of an additional ad valorem duty of 25 percent on products from China classified in the subheadings of the Harmonized Tariff Schedule of the United States (HTSUS) set out in Annex A of the notice. USTR has further determined to establish a process by which US stakeholders may request that particular products classified within a covered tariff subheading in Annex A be excluded from these additional duties. The additional duties set out in Annex A to this notice are effective with respect to products that are entered for consumption, or withdrawn from warehouse for consumption, on or after August 23, 2018.

The notice of action adds a new a new subheading 9903.88.02 and revises subchapter III to add a new US Note 20(c)  that makes goods listed in the new 20(d) subject to the additional 25% duty, and sets forth the rules for the exceptions that apply. Of note is the revised treatment of goods subject to chapter 98. The additional duties imposed by heading 9903.88.02 do not apply to goods for which entry is properly claimed under a provision of chapter 98 of the HTSUS, except for goods entered under subheadings 9802.00.40, 9802.00.50, and 9802.00.60, and heading 9802.00.80. For subheadings 9802.00.40, 9802.00.50, and 9802.00.60, the additional duties apply to the value of repairs, alterations, or processing performed abroad, as described in the applicable subheading. For heading 9802.00.80, the  additional duties apply to the value of the article less the cost or value of such products of the United States, as described in heading 9802.00.80. Under the original action that went into effect on July 9, the rates of duty imposed by heading 9903.88.01 did not apply to any products for which entry was properly claimed under a heading or subheading in chapter 98. However, that is also being changed.

U.S. note 20(a) to subchapter Ill of chapter 99 of the HTSUS which applies to the first group of Chinese goods subject to the 25% duty, is modified:

  • by deleting: “Products of China that are classified in the subheadings enumerated in U.S. note 20(b) to subchapter Ill and that are eligible for special tariff treatment under general note 3(c)(i) to the HTSUS”; and
  • by inserting in lieu thereof: “Products of China that are classified in the subheadings enumerated in U.S. note 20(b) to subchapter Ill and that are eligible for special tariff treatment under general note 3(c)(i) to the tariff schedule, or that are eligible for temporary duty exemptions or reductions under subchapter II to chapter 99,”.
  • by deleting: “The rates of duty imposed by heading 9903.88.01 shall not apply to products for which entry is properly claimed under a heading or subheading in chapter 98.”; and
  • by inserting in lieu thereof: “The additional duties imposed by heading 9903.88.01 do not apply to goods for which entry is properly claimed under a provision of chapter 98 of the HTSUS, except for goods entered subheadings 9802.00.40, 9802.00.50, and 9802.00.60, and heading 9802.00.80. For subheadings 9802.00.40, 9802.00.50, and 9802.00.60, the additional duties apply to the value of repairs, alterations, or processing performed abroad, as described in the applicable subheading. For heading 9802.00.80, the additional duties apply to the value of the article less the cost or value of such products of the United States, as described in heading 9802.00.80.”

Any product listed in Annex A to the notice, except any product that is eligible for admission under ‘domestic status’ as defined in 19 C.F.R. 146.43, which is subject to the additional duty imposed by this determination, and is admitted into a US foreign trade zone on or after 12:01 a.m. Eastern daylight time on August 23, 2018, only may be admitted as ‘privileged foreign status’ as defined in 19 C.F.R. 146.41. Such products will be subject upon entry for consumption to any ad valorem rates of duty or quantitative limitations related to the classification under the applicable HTSUS subheading.