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May 8, 2019

Ahead of Formal Notice, Flexport Found Tariff Hikes on Chinese Goods

Ahead of Formal Notice, Flexport Found Tariff Hikes on Chinese Goods

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Yesterday, Flexport customs experts spotted that -- without official notice from the U.S. Trade Representative -- the U.S. appeared to be following through with hiking tariffs on certain Chinese goods from 10% to 25%. As customs brokers went about the business of preparing Harmonized Tariff Schedule (HTS) entries for processing List 3 items via Customs and Border Protection (CBP), Flexport observed that entries including a 25% duty on shipments arriving May 10th or later were accepted. This seemed to have been caused by CBP preemptively increasing the duty on impacted items.

An HTS Code is an 8- to 10-digit product code that classifies imported goods and assigns tariffs. Thousands of unique numbers are used every day to determine how goods will be taxed and processed through Customs. For businesses large and small, that code can spell the difference between narrow and wide margins.

On May 6, United States Trade Representative (USTR) Robert Lighthizer told the press that the US planned to increase duty rates on imports subject to Tranche 3 of the China 301 Tariffs from 10% to 25% for shipments arriving into the U.S. on or after Friday, May 10. Since it is widely understood that a change such as this requires that an official notice be posted in the Federal Register -- something that did not occur -- many in the industry have been caught by surprise.

From Tweet to Tariff, For Real

As reported on this blog previously, there is an official process that must be executed before changes can be made to the HTS and related duty rates. However, what began as a Presidential tweet this past Sunday promising tariff increases appears to be coming to pass.

The confusion began on May 5, when President Trump threatened to increase the existing tariffs on Chinese goods. The move was meant to penalize China for trying to renegotiate a proposal that is currently on the table to halt the ongoing trade war. Politico reports, “After Friday, roughly half of the $505 billion that the U.S. imported from China would be subject to 25 percent tariffs. That will force American companies to either eat the added costs or be forced to pass it to their customers.” In addition, Trump also signaled he would impose a 25 percent duty on another $325 billion worth of merchandise from China, according to Politico.

Flexport will continue to monitor the situation. Check back here for updates.

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