US Trade

Section 232 global safeguard tariffs on steel and aluminium (effective since 23 March)

Section 301 tariffs (List 1): 818 tariff lines (effective since 6 July)

Section 301 tariffs (List 2): 279 tariff lines (effective since 23 Aug)

Section 301 tariffs (List 3): 5,745 tariff lines (effective since 24 Sept)

Proposed Measures and Ongoing investigations

Section 232 on automobiles & auto parts

Section 232 on uranium

The US on 6 July began collecting additional tariffs of 25% on US$34 billion worth of imports from Mainland China spanning 818 tariff lines. A large percentage of these goods are from Harmonized System (HS) Chapters 84, 85, 87, 88 and 90 – such as engines and motors; construction, drilling and agricultural machinery; machines for working minerals, glass, rubber or plastic; rail locomotives and rolling stock; motor vehicles and motorcycles; helicopters and aircraft; and testing, measuring and diagnostic instruments and devices.

For further information, please check List 1

On 21 Dec 2018, USTR announced the first batch of products to be excluded from the additional 25% duty imposed under Section 301 which affects about US$34 billion worth of imports from Mainland China. The exclusions, covering 984 separate requests, are retroactive to 6 July 2018 and remain in place until 28 December 2019. Please check here for details.

Additional tariffs of 25% have been charged on a second list of goods since 23 Aug. The second list comprises 279 tariff lines with a total import value of about US$16 billion. Many of these products are classified in HS Chapters 39, 84 and 85, but various products in Chapters 27, 34, 38, 70, 73, 76, 86, 87, 89 and 90 are also included. Affected goods include plastics and plastic products; industrial machinery; machinery for working stone, ceramics, concrete, wood, hard rubber, plastic and glass; cargo containers; tractors; and optical fibres.

For further information, please check List 2

Tariffs of 10% have been applied on a third list of goods, with effect from 24 Sept. The third list comprises 5,745 tariff lines with an import value of about US$200 billion. Starting from 1 Jan 2019, levy will increase to 25%**. Affected products include, among others, various travel goods of HS code heading 4202; leather products of heading 4203; plastic products of Chapter 39; tyres of heading 4011; textile products of Chapters 50 through 60; headwear of Chapter 65; furniture of heading 9403; lamps of heading 9405; certain printed-circuit assemblies classified under Harmonized Tariff Schedule of the US (HTSUS) 8473.30.11; and machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus, classified under HTSUS 8517.62.00. However, the proposed list does not include any apparel products (Chapters 61 and 62), footwear products (Chapter 64), or toys and games (Chapter 95).

This list reflects a revision from an original list proposed in July. The revision involves the full or partial removal of 297 tariff lines resulting from a United States Trade Representative (USTR) decision made after a public comment period. Items removed include certain consumer electronics products such as smart watches and Bluetooth devices; certain chemical inputs for manufactured goods, textiles and agriculture; certain health and safety products such as bicycle helmets, and child safety furniture such as car seats and playpens.

For further information, please check List 3

**In early December, China and the United States agreed to suspend the latest round of tariffs for 90 days to allow for trade talks.

As the city is a separate customs territory from the mainland, Hong Kong-origin products, like those of many other trading partners of the US, will be subject to the global safeguard measures (that is, 201 tariff-rate quotas and 232 tariffs) but not the 301 tariffs. Having said that, as a re-export and trans-shipment hub, the city’s re-exports to the US originating from the mainland and relevant trade services could be affected by the 301 tariffs. Hong Kong manufacturers producing in the mainland for the US market are likely to be affected.

The global economy could see increasing uncertainty and slower growth in 2019. Considering that there have been some positive developments recently, including progress made in the Sino-US trade negotiations and Hong Kong exporters’ proactive efforts to find ways to offset the impact of the trade friction, the HKTDC is cautiously optimistic about the prospects for Hong Kong’s export performance, expecting the city’s exports to increase 5% in value and 3% in volume in 2019.

If you are a trader (such as a distributor, importer or exporter), your mainland-origin or US-origin products could be subject to additional tariffs, which could result in reduced orders or lower profit margins.

If you are a services provider involved in shipping affected mainland-origin/US-origin products to the US/mainland, you will probably see a decline in business, as the tariffs will discourage relevant Sino-US trade, as well as a change in business patterns with regions such as Association of Southeast Asian Nations members and India becoming alternative sourcing or manufacturing destinations. Western Europe and Japan, along with other emerging markets in the Middle East, Africa and Latin America, will become new, expanded markets.

1. Obtain a company-specific or product-specific exclusion

   Section 232 tariffs on steel and aluminium – Product-based Exclusion Requests

   Steel, Aluminium

   Section 301 tariffs - Request for Product Exclusion Process

2. Consider another potential product classification

3. Use manufacturing relocation to shift the product’s official origin

4. Use a US foreign-trade zone or bonded warehouse to defer/delay paying duties

5. Apply duty reduction programmes such as the “first sale rule” to lower the price on which tariffs are appraised

For further information about the above strategies, please:

• Read these articles: Overcoming Tariff Barriers, Surviving the Sino-US Trade Dispute: Recommended Strategies, Products Win US Tariff Exemption, Made in China Moves to Indonesia
• View this video: Seminar on Surviving the Sino-US Trade Dispute: Recommended Strategies and Past Case Studies (Cantonese and English)

In response to the US 232 tariffs, Beijing imposed additional tariffs on 2 April on a total of 128 US products with a combined import value of about US$3 billion. The first tranche of affected products, which is subject to a 15% tariff, covers seven categories and 120 tariff lines involving US$977 million in US exports to the mainland. These include wine, fresh fruit, dried fruit and nut products, ginseng, seamless steel pipe and modified ethanol. The second tranche of affected products, subject to a 25% tariff, covers eight tariff lines involving some US$2 billion in US exports to the mainland. These include pork and processed products as well as recycled aluminium.

In view of the US 301 tariffs, Beijing imposed on 6 July a reciprocal 25% tariff on a total of 545 US products which are also worth some US$34 billion, including a broad range of agricultural and food products (such as soybeans, sorghum, rice and dairy products) as well as raw cotton and automobiles. China subsequently expanded that list by adding another 333 products worth US$16 billion, including various chemical and energy products, plastics and articles thereof, certain rubber and certain medical equipment, effective from 23 Aug.

On 3 Aug, Beijing unveiled further plans to impose additional tariffs ranging from 5% to 25% on 5,207  items worth US$60 billion from the US, in response to US President Donald Trump’s 1 Aug directive to the USTR to consider raising the tariffs proposed on 10 July from 10% to 25%. On 18 Sept, Beijing announced it would institute these new tariffs from 24 Sept, but at revised rates of 5% for 1,636 items and 10% for 3,571 items.

Trade and Industry Department (TID) (工業貿易署)

1. The TID provides several funding schemes Hong Kong companies can consider:
   SME Export Marketing Fund (EMF)
   Dedicated Fund on Branding, Upgrading and Domestic Sales (the BUD fund)
2. The TID has set up a one-stop service platform (Tel: 2398 5405; Email: acr_reg@tid.gov.hk) on the latest developments of the United States trade issue.

Export Credit Insurance Corp (HKECIC) (香港出口信用保險局)

The HKECIC has announced special enhanced measures to support Hong Kong exporters, especially small and medium-sized enterprises (SMEs), amid the trade issue and rising credit risks.

Details on the HKECIC’s stepped-up free buyer credit assessment service and free additional pre-shipment cover

Credit check for Hong Kong SMEs

Hong Kong Mortgage Corporation Limited (香港按揭證券有限公司)

The HKMC Insurance Limited has announced additional support measures to further alleviate the financial burden of local enterprises and assist them to obtain financing from lending institutions. These measures were enhanced in November 2018.

SME Financing Guarantee Fee Calculator

1. Provide information and training to help you make informed decisions and plan ahead:

   The HKTDC has launched a new series of seminars to give SMEs advice and insights so they can embrace the challenge. Information on upcoming seminars will be available here.

2. Organise our own – or participate in – leading industry events worldwide to help you explore new market opportunities and establish fresh contacts:

   Product promotion events in emerging markets

   Promotion opportunities in developed markets (excluding the US)

   Upcoming business missions

   Business missions consist of meetings, visits and networking opportunities in specific markets, based on specified industry(ies). You will meet not only potential partners and clients, but also members of the local chambers and government representatives.

3. Enhance business matching at trade fairs and missions to increase business opportunities

   Each year, the HKTDC organises more than 30 world-class trade fairs in Hong Kong, attended by over 750,000 international buyers from some 200 countries and regions. Hong Kong manufacturers and exporters are encouraged to take advantage of various HKTDC exhibitions to diversify their markets and meet new potential customers. Together with the HKTDC Online Marketplace and HKTDC Business Matching, a service that draws on the Council’s more than 50 years of experience in matching Hong Kong and overseas companies, the HKTDC offers a year-round, customised suite of integrated marketing and business-matching services dedicated to helping Hong Kong exporters connect with global customers.

1. Trade and Industry Department (TID)
2. HKSAR Government’s support for local and overseas enterprises
3. Office of the United States Trade Representative (USTR)
4. US Department of Commerce (USDOC)
5. US Bureau of Industry and Security (BIS)