Just ahead of a new round of tariffs scheduled to take effect December 15, the Trump administration announced a “Phase One” deal on December 13 that will suspend indefinitely those tariffs and reduce the rate for the list that went into place on September 1 (List 4A).  The text of the agreement has not yet been released; the U.S. and China are expected to sign it in early January.

Based on the latest information available, the deal includes new commitments covered by specific chapters on Intellectual Property; Technology Transfer; Agriculture; Financial Services; Currency; Expanding Trade; and Dispute Settlement.  A fact sheet summarizing the agreement is available here.  As part of the Expanding Trade section, China has committed to purchasing over the next two years an additional $200 billion of U.S. manufactured goods, agricultural products, energy products, and services, compared to a 2017 baseline.

In addition to canceling the December 15 tariffs, the United States agreed not to move forward with a previously discussed 5% increase to the tariff rate for Tranches 1-3, meaning that the tariff rate on the $250 billion covered by the first three lists will remain at 25%.  For Tranche 4A, the grouping that went into effect on September 1 at a 15% rate, the U.S. will cut that rate in half to 7.5%.  As a reminder, most apparel and home furnishing products are on Tranche 4A, while textile fibers, yarns and fabrics are part of Tranche 3.   It is unclear precisely when the decreased rate for 4A will take effect, although press reports indicate it will be 30 days after the agreement is signed.  Further, no firm plans have been announced yet as to when the U.S. and China will launch the second phase of the talks or what the scope will be.

As we review this Phase One agreement, it is important that the administration strike the proper balance of maintaining its leverage with China by keeping duties on finished product until a final strong and enforceable deal with China is completed.  We look forward to reviewing and analyzing the deal in more detail. See NCTO’s official press release here.

Further, an exclusion process for the Tranche 4A list is currently underway and will extend through January 31.  The online portal is available here, with exclusion requests being posted on a rolling basis.  Included below are further details for engaging in this process should your company wish to submit an exclusion request and/or respond to requests submitted by others that may overlap with your production capabilities or that of your customers.

Submitting a Tranche 4A Exclusion Request 

To submit an exclusion request, Requestors must first create an account.  See the $300 Billion Trade Action (List 4) webpage for more information on filing a request for an exclusion, submitting a response to a request, or replying to a response.  Exclusion requests must be submitted by January 31, 2019.

Viewing and Responding to Tranche 4A Exclusion Requests

The list of Tranche 4A exclusion requests posted to the public portal is available here and can be sorted by HTS number to better identify products of interest.  Interested parties do not need to register for an account to view a request or file a response to a request.  Responses and replies will be publicly viewable and should not contain Business Confidential Information.

After a request for exclusion of a particular product is posted to the portal, interested persons have 14 days to respond to the request to express support or opposition.  To file a response, first click on the associated “Exclusion Request ID” to view the public details of the request, then click the “Submit a New Response” button.

Requestors then have 7 days after a response is posted to file a reply.  If a response is filed, USTR indicates that the original Requestor will receive a notification email.  Requestors may file a reply by following the link in the notification email or by logging into their account and viewing the relevant response.

We strongly encourage members to review and continually monthly the exclusion portal through January 31, noting the 14-day window for any responses.  Please let NCTO know if you file a response.