Welcome to Weise Wednesday! Twice a month we will share a brief Q&A with the former U.S. Commissioner of Customs, Mr. George Weise. If you have questions, we encourage you to send them to This email address is being protected from spambots. You need JavaScript enabled to view it..

 

Q. What developments have you seen in the U.S.-China trade dispute since your last Weise Wednesday?

A. In my last blogpost, I discussed the arrangement made by President Trump and Chinese President Xi Jinping to postpone the planned January 1st tariff increase on $200 billion of Chinese products while the parties attempted to reach a comprehensive agreement by March 1. Talks between the two sides commenced on January 7 in Beijing and were continued in Washington on January 30-31. 

Last week Treasury Secretary Mnuchin and U.S. Trade Representative (USTR) Lighthizer were in China to continue the negotiations with senior Chinese officials. Although no substantive agreement was reached, and the parties appear to be far apart on some of the major structural issues being negotiated, both parties seemed hopeful that an agreement could be reached. 

The negotiations are continuing in Washington this week to try to narrow the gap between the two parties on their outstanding issues. As stated in my last blog, President Trump has suggested that a meeting between him and Chinese President Xi Jinping may be necessary in the coming weeks to reach a final agreement.

As the March 1 deadline to reach an agreement rapidly approaches, there has been speculation as to whether that deadline would be extended. In the past, President Trump has stated clearly that the tariff increase from 10% to 25% on Chinese goods would be effective on March 1 if no agreement was reached. The President seemed to open the door for a possible extension, however, when he recently said he might consider an extension “if we are close to a deal where we think we can make a real deal, and it’s going to get done.” But he followed that up by saying, “Generally speaking, I’m not inclined to do that.”

At this point, it continues to be impossible to predict where this will all end up. Hopefully, we will learn within the next couple of weeks what the future holds for U.S.-Chinese trade relations and the status of the additional tariffs that both countries have imposed on the other’s goods.

 

Exclusion process for List 3 products

There is also a related development concerning the Chinese goods that were part of the so-called List 3 of Chinese products subject to the 10% retaliatory tariffs that were scheduled for an increase to 25% on January 1, which I discussed above. Unlike the previous List 1 and List 2 of Chinese products subject to retaliatory tariffs, no product exclusion process was implemented by USTR for List 3 to allow interested parties to petition to exclude products from the retaliatory tariffs list that would have an unduly adverse impact on them. 

On February 15, in the Joint Explanatory Statement (JES) that accompanied the legislation to reopen the government, the Congress urged USTR to implement a product exclusion process identical to the exclusion process used for List 1 and List 2 products. The JES directed USTR to initiate the exclusion process by March 17, 2019. 

Although this language was not included in the bill the President signed, and is therefore not legally binding, it is a strong bipartisan expression of congressional sentiment on the subject and is not likely to be ignored by USTR. Companies looking for product exclusions should waste no time in working with counsel to prepare their petitions.