List 4 Tariffs Must Include ‘Broader,’ ‘Rolling,’  Transparent Exclusion Process, Says CTA

CTA “urges the administration to quickly implement a broader and more effective exclusion process for List 4,” than it did for Lists 1 and 2, it said. “Unlike the product exclusion process for the first two tranches of tariffs,” which required applicants to submit requests by a hard deadline, “circumstances warrant” installing a process for List 4 that works “on a rolling basis,” it said.

“Imposing an end date runs counter to the administration’s policies to encourage American innovation and product development,” said CTA. A rolling process would “minimize the burden” on companies and the administration “because importers will likely be able to provide more specificity in their requests, having had the benefit of time to assess the impact of the tariffs on their business,” it said.

The administration should “establish and publish clear criteria and weighting methodologies by which it will evaluate the List 4 product exclusion requests,” said CTA, addressing a common complaint among trade experts that the exclusion processes have lacked transparency (see 1905090018). Administration staff “reviewing product exclusion requests should apply these criteria in a way that ensures consistency and procedural fairness prior to final determinations being made,” said CTA. Companies deserve “a comprehensive and timely explanation” of the exclusion decision “based on these criteria,” it said.

There are many things the administration "is trying to do” to make the tariffs “as painless" as possible, including accepting exclusion requests, U.S. Trade Representative Robert Lighthizer told a Senate Finance Committee hearing Tuesday (see 1906180029). Lighthizer answered "yes" when Sen. Margaret Wood Hassan, D-N.H., asked him if he would commit to a List 4 exclusion process if those tariffs were put into effect.

The proposed List 4 tariffs run afoul of the 1974 Trade Act, said CTA, repeating some of the same language it used in its Sept. 6 comments questioning the legality of the List 3 tariffs (see 1809070032). It attached those comments to the Monday submission, and said many members "are already feeling the harm done by the arbitrary third tranche of tariffs." Many of CTA's arguments are contained in a court complaint CTA hired outside counsel to draft last fall but never acted on (see 1810290019).

Neither the statute's Sections 301 nor 307 "authorizes the additional $300 billion in List 4 tariffs," said CTA. The administration's May 17 notice proposing List 4 "bases the proposed action on reasons post-dating the Section 301 investigation," rather than "on the original Section 301 investigatory findings, as the statute requires," it said. The "modification" powers granted to the administration under Section 307 don't authorize it to "impose brand new penalties that result in a more than ten-fold increase over those imposed following the original investigation," it said.

The List 4 tariffs "will increase prices for consumers on both cutting-edge electronics and mainstream, every-day products," said CTA. It commissioned a new Trade Partnership study that found smartphone prices would rise “across the board” if 25 percent tariffs took effect on goods imported from China under the Harmonized Tariff Schedule’s 8517.12.00 subheading.

About three of four smartphones imported to the U.S. come from China, and those would rise in cost by 22 percent, said the study. Tariffs also would generate a 14 percent cost increase in phones shipped to the U.S. from all countries of origin, it said. The average phone would rise about $70 in retail price, it said. U.S. consumers will be “forced to reduce overall purchases by 28 percent,” it said.

Tariffs on Chinese laptops and tablets imported to the U.S. under HTS 8471.30.01 would raise pricing by 19 percent across the board, including 21 percent on Chinese goods, said the study. It estimates the retail price of the average laptop would rise by $120.

Producers in Vietnam would be “the biggest winner” from U.S. tariffs on Chinese laptops and tablets, American consumers the biggest losers, said the study. “Export revenues for Vietnamese manufacturers would grow by about $220 million,” it said. U.S. consumers, “on the other hand, would pay more for these products,” it said. “Higher costs from tariffs imposes on consumers an additional cost of $8.2 billion more for laptops and tablets.”

Tariffs on videogame consoles imported from China would seriously harm U.S. consumers, said Microsoft, Nintendo and Sony Interactive Entertainment in rare joint comments by the rivals for the removing HTS 9504.50.00 goods from List 4. In 2018, more than 96 percent of the consoles imported to the U.S. came from China, they said: “It would cause significant supply chain disruption to shift sourcing entirely to the United States or a third country, and it would increase costs -- even beyond the cost of the proposed tariffs -- on products that are already manufactured under tight margin conditions.”

The proposed List 4 tariffs on semiconductors and the broader information technology industry “will harm America’s tech companies, and are an ill-equipped tool” to curb China’s “problematic” trade practices, said the Semiconductor Industry Association. The administration’s previous tariffs “encompass nearly the entire semiconductor supply chain,” said SIA. The proposed List 4 tariffs “now threaten virtually all information technology products -- and purchasers of semiconductors -- including key consumer products,” it said.

IT firms “make up a significant sector of the U.S. economy, and any slowdown in this sector will have a ripple effect through a broad range of other industries, greatly impacting U.S. economic growth,” said SIA. “There is no scenario in which tariffs on IT products is positive for the U.S. economy.”

LG Display America plans to import $15 million worth of monitors and components and LCD TV panel modules this year from China classified under the HTS 8528.52.00 and 9013.80.90 subheadings for its U.S. repair services it, said. Imposing 25 percent duties on TV panels to be repaired or replaced at the subsidiary’s Carlsbad, California, service center “will directly and negatively impact” the company and its U.S. workers, it said.

Canon USA wants the digital cameras it imports from China under the HTS 8525.80.40 subheading removed from List 4, it said. It sources the cameras from a Canon factory in China that's “not ultimately Chinese-owned,” it said. Canon USA is “not able” to source the cameras in the U.S., nor are there “feasible alternative sources of supply outside of China,” it said.