Trade & Tariff Update #38 - Economic Indicators, Section 301 Tariffs & More

Section 301 Tariffs Under Assessment 

Still being assessed are the scope, impact, and durability of the Section 301 duties imposed by the Administration, looking to re-create the IEEPA tariff framework under more durable legal authority.  Click here for a good overview of the Section 301 active and proposed duties. Speculation abounds as to whether the Section 301 and 122 duties will survive legal challenges.  Factors companies may wish to consider when planning for the rest of the year are discussed here.  

Last Thursday, the Court of International Trade ruled that President Trump's revocation of a de minimis exemption for low-value goods to enter the U.S. duty-free was allowed under a law that the U.S. Supreme Court separately determined could not otherwise authorize tariffs on its own. 

Litigation against the recent Section 301 tariffs on countries based on forced labor policies and practices expanded recently with a lawsuit from 25 attorney generals from Democratic states.  The lawsuit alleges the United States bypassed country-specific consultations and failed to explain why duties on countries with such varied forced-labor measures were set in a “nearly uniform manner.” The lawsuit is before the same Court of International Trade that ruled the IEEPA tariffs illegal, and a new 3-judge panel was appointed last week. 

It is worth noting that, with the decision overturning the IEEPA tariffs and the resulting refunds, the U.S. deficit has increased.  This factor should be kept in mind when assessing which actions Congress may or may not take regarding tariffs.

Other Tariff Activities: Semiconductors, Drones, Canada and China

The Administration continues to expand its tariff policy in specific sectors that pose economic or political challenges.  On August 6, it issued a Proclamation imposing new Section 232 tariffs on imports of polysilicon and certain downstream derivatives of polysilicon.  This is a continuation of its policy to protect strategically sensitive semiconductor and solar manufacturing, which supports virtually every sector of the modern economy, including defense, cybersecurity, communications, artificial intelligence, renewable energy, and advanced manufacturing.  At the end of last week, the Administration imposed duties on drones.   

In addition, negotiations with Canada continue, but so far there have been no breakthroughs, and there are indications that Canada remains firm in its position.  The Administration is also signaling a crackdown on attempts by China to evade tariffs by using other countries, which has been estimated to have cost the United States as much as $26 billion.  In response, the United States Customs and Border Protection has begun using prototype artificial intelligence to stop transshipments.  When an importer has been found to have falsified the origins of a good, its imports can be retroactively tariffed going back roughly a year.  All of this indicates that trade policy and its impacts remain uncertain, notwithstanding the pending summit between Presidents Trump and Xi next month and the mid-term elections. 

Economic Indicators 

Economic indicators remain ambiguous.  On August 6, the Labor Department reported that manufacturing output rose at a 4.6 percent annual rate in the second quarter. Hours worked increased 2.6 percent, and productivity, which measures output per hour, rose 1.9 percent. 

According to the latest Consumer Price Index, July consumer prices rose just 0.1%, suggesting that inflation is moving in a positive direction.  Additionally, new Producer Price Index data indicated that wholesale inflation was falling, possibly signaling further relief for consumers. 

Association Health Plans 

The U.S. Department of Labor is a step closer to expanding the definition of "employer" under federal benefits law and allowing businesses to band together to offer health plans that skirt certain Affordable Care Act requirements, after proposed regulations were sent to the White House for review. 

Textile EPR 

A California court has declined to issue an injunction against the textile EPR law currently being implemented.  We continue to monitor the litigation against the EPR laws for paper products in California, Colorado, and Oregon.  Click here for a useful overview of a recent webinar on California law. 

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Disclaimer from Progressive Trade Consulting: PTC is not a law firm, does not practice law, and does not provide legal advice. The Client should consult legal counsel for any legal matters, including trade compliance. The Importer of Record (IOR) is responsible for complying with customs regulations and managing the import process. This includes obtaining required licenses and permits, classifying and valuing goods correctly, declaring goods accurately, paying duties and taxes, following import rules, and maintaining proper records.