by Craig Brightup, The Brightup Group —
On July 24, new tariffs were imposed on 60 economies (59 countries and the European Union) based on whether they either have lax laws prohibiting imports made by forced labor or no such laws at all. Thus, these new Sec. 301 tariffs under the Trade Act of 1974 are 10% for the economies with loosely enforced laws and 12.5% for those with no laws, and they replace IEEPA tariffs that were ruled illegal in February followed by Sec. 122 temporary tariffs which expired July 24.
The new tariffs come after the U.S. Trade Representative (USTR) conducted investigations into the 60 economies for failing to sufficiently ban “goods produced with forced labor” because such foreign producers have an “artificial cost advantage.” Thus, the tariffs cover all products from each economy although there are some individual product exemptions.
Specifically, for an economy that imposes a forced labor prohibition or has committed to impose such a prohibition through an Agreement on Reciprocal Trade (ART), or has a partial regime with the effect of preventing the importation of forced labor goods, tariffs are 10% net of a product’s most-favored-nation (MFN) duty for certain economies. For every other economy, tariffs are 12.5% with certain economies subject to a 12.5% rate net of a product’s MFN duty.
This currently translates to five economies and means that for a product of the European Union or Taiwan, where such product’s MFN tariff is less than 10%, the sum of the MFN tariff and new Sec. 301 tariff is 10%, and where such product’s MFN tariff is greater or equal to 10%, the new 301 tariff is zero. For a product of Japan, Korea, or Switzerland, where such product’s MFN tariff is less than 12.5%, the sum of the MFN and 301 tariffs is 12.5%, and where such product’s MFN is greater or equal to 12.5%, the 301 tariff is zero.
Seventeen economies are subject to a baseline 10% tariff: Argentina, Bangladesh, Cambodia, Canada, Ecuador, El Salvador, Guatemala, Honduras, India, Indonesia, Jordan, Malaysia, Mexico, Pakistan, Sri Lanka, the United Kingdom, and Trinidad and Tobago.
A baseline 12.5% tariff rate applies to all other investigated economies: Algeria, Angola, Australia, the Bahamas, Bahrain, Brazil, Chile, China (and Hong Kong), Colombia, Costa Rica, Dominican Republic, Iraq, Israel, Kazakhstan, Kuwait, Libya, Morocco, New Zealand, Nicaragua, Nigeria, Norway, Oman, Peru, the Philippines, Qatar, Russia, Saudi Arabia, Singapore, South Africa, Thailand, Turkey, United Arab Emirates, Uruguay, Venezuela, and Vietnam.
For economies subject to baseline 10% or 12.5% tariffs, these tariffs are stacked on top of any product’s MFN tariff rate. Also, Customs and Border Protection’s notice to implement the 301 forced labor tariffs doesn’t address how they interact with existing China 301 tariffs, so it’s assumed they stack as well. However, on a positive note, there are carve-outs from the new 301 tariffs associated with ART deals such as the products covered by the U.S.-Mexico-Canada (USMCA) trade agreement.
In addition, 471 products have been added to the list of exemptions in Annexes I and II which were originally exemptions from IEEPA tariffs. Categories include certain fertilizer and pesticide inputs; certain wood products; pig iron; certain ferrous inputs and waste; certain semiconductor equipment; certain pharmaceuticals and ingredients; and certain food and agricultural products. Also, consistent with the IEEPA reciprocal tariffs and Sec. 122 tariffs, the new 301 forced labor tariffs don’t stack on top of steel, aluminum, and copper products subject to Sec. 232 tariffs.
