Today, Friday, Aug. 7, 2020, marks the expiration of the List 3 exclusion period as it relates to the tariffs on goods imported from China. Michael Weems, VP/Government Engagement for the American Lighting Association (ALA) sent out an update to the organization’s members, reminding them of today’s deadline as many ALA members have expressed support for allowing the exclusions to be extended. According to Weems, the Office of the United States Trade Representative (USTR) “has shown a willingness to extend the exclusion period, but no final notification has been published in the Federal Register.”
A RECAP: The List 3 exclusion began when USTR placed an additional 10-percent tariff on roughly $200 billion worth of goods coming from China on Sept. 24, 2018. After much back and forth between the two nations, the USTR increased the additional tariff amount to 25 percent in May 2019. Weems explains that the USTR then established the process to apply for exclusions on June 24, 2019, and began issuing exclusions on Aug. 7, 2019. To date, USTR has issued a total of 16 exclusion lists.
The global pandemic of 2020 has led to an extension to the exclusion periods for products on Lists 1 and 2. According to Weems, the USTR is currently considering two different opportunities to extend the List 3 exclusions. Both would extend exclusions for an additional 12 months. Weems explains, the first covers the exclusions issued as part of the first 11 published lists, exclusions granted through March 26, 2020, and the second covers the next three lists, through May 28, 2020. He adds that USTR has issued additional lists now through July 10, 2020.
What should manufacturers expect if the USTR does not act before the exclusion period expires? The ALA believes the most likely scenario is that U.S. Customs and Border Protection will collect the tariff duty on any import brought in after the expiration date, and any action taken by USTR will be made retroactively, with importers able to file for a refund of paid duties.
There is a caution flag: if an extension is granted, it would not be a blanket extension of all issued exclusions, Weems states. The extended exclusions would be on a case by case basis.
Weems adds that the ALA will alert its members when USTR releases the decision on extending the exclusion period for List 3 or any other information concerning tariffs.
Is there any hope that the tariffs will go away in upcoming months? Weems answers, “The President and his trade team have already acknowledged that the relationship between the U.S. and China has deteriorated to the point that no additional trade negotiations will be taking place for the remainder of the year – essentially through the end of his presidency or his first term.”
The outcome of the election might change things, but the situation is completely fluid. While Democratic Party nominee Joe Biden has appeared to not approve wholeheartedly of President Trump’s handling of the tariff war with China, he has not announced a concrete plan to change course.
When asked what the future might hold, Weems expresses concern over potential new disruptions. “New tariffs, strain on the economy, travel restrictions, failure to respond to global health crises, the list goes on,” he notes. “For companies that import products from China, I remain hopeful that the status quo, while not ideal, holds until cooler heads prevail.”
Will we see any government incentives to bring manufacturing back to U.S. shores? Weems states, “For over 30 years companies have cultivated lasting relationships with their Chinese partners, establishing reliable sources of materials and components needed for the lighting industry to thrive. Yet, manufacturers are acutely aware of the impact tariffs and the turbulent relationship between the U.S. and China are having on their businesses. As a result, many are looking elsewhere to responsibly manufacture product. The current administration does not have a plan to on-shore manufacturing and given the current economic and political landscape one is not likely to materialize. With any luck, that will change once we return to some sense of normalcy. In the meantime, all efforts are rightfully focused on preserving existing jobs or gaining back those lost as a result of COVID-19.”