Tariff updates respond to phase one deal

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Amid the trade tensions with the US, China’s Tariff Commission of the State Council in the past two years announced three batches of retaliatory tariff measures on US goods to counter a flurry of section 301 tariffs imposed by the US on Chinese goods.

In a bid to de-escalate the trade conflict, the two countries entered into a much-anticipated trade agreement on 15 January 2020 (the phase one deal). In connection with this deal, the following measures, among others, were agreed upon or given effect:

  • Reduction of US section 301 tariffs on list 4A goods, from 15% to 7.5%;
  • Suspension of US section 301 tariffs to be imposed on list 4B goods; and
  • Purchase by China in 2020-21 of an additional US$200 billion in US goods and services (above the 2017 baseline amount).

In response to these commitments, the central government has recently announced important developments affecting its retaliatory tariff measures on US goods.

On 6 February 2020, the tariff commission announced, through circular [2020] No. 1, that effective from 14 February retaliatory tariffs imposed on goods listed in the first tariff list attached to tariff commission circular [2019] No. 4 will be reduced as follows:

  • Tariff rate applicable to products in parts 1 and 2 is reduced from 10% to 5%; and
  • Tariff rate applicable to products in parts 3 and 4 is reduced from 5% to 2.5%.

This reduction only applies to the third batch of retaliatory tariffs and does not affect the earlier measures.

On 17 February 2020, the tariff commission announced, in circular [2020] No. 2, a new product exclusion process to help China fulfill its purchase commitments under the phase one deal (the purchase commitment exclusion). This unique process differs from the previous product exclusion processes and is targeted to exempt successful applicants from retaliatory tariffs imposed on specific goods, based on the approved purchase amount.

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