Update on U.S. and China Trade Tariffs

SUMMARY:  US trade actions and China’s counteractions may impact US exports of packaging machinery to China as well as US imports of parts sourced from China.  This alert contains background on US-China actions, recommended next steps for PMMI members, and reference documents to assist PMMI members.  PMMI members should review targeted tariff lists against US export and import transactions to determine whether there is increased tariff-cost risk for your company.

 

BACKGROUND:  The United States and China have each imposed additional tariffs and proposed further tariffs on the other’s exports in an ongoing trade escalation.

 

US Actions Against China:  The US Administration has taken numerous overlapping trade actions since March with the aim to reduce the US trade deficit with China. (See Annex A for full list of US trade actions against China and scope.)

• Select food processing and packaging machinery/equipment made in China has been targeted for increased duties of 25% into the United States. 
• In regards to materials, parts, and other inputs:
  
  • costs for domestic and imported steel and aluminum have increased in the United States due to 25% additional tariffs on certain steel products and 10% additional tariffs on certain aluminum products sourced from all countries, including China; and
  • Chinese-origin parts/inputs may be included on various tariff “hit” lists that the United States is targeting for 25% additional duties.

 

China’s Countermeasures Against the United States:  In response to US actions, China has published its own set of lists targeting US products with additional tariffs ranging from 5% to 25%.  (See Annex B for full list of China’s retaliatory actions against the United States and scope.)

• In early August, China proposed tariffs on numerous tariff lines that include PMMI members’ food processing and packaging machinery/equipment made in the United States.  See Table 1 on the next page for summary of tariff codes included and level of proposed tariff.
• In addition, various US-origin parts/inputs may be included on China’s retaliatory “hit” lists.

 

RECOMMENDED NEXT STEPS:  In order to gauge potential impact of the various US trade actions and

China’s counteractions, PMMI recommends members take the following steps:

1.  Review your US import transactions to determine if sourcing Chinese-made parts or inputs, and determine potential tariff cost impact if continuing to source parts from China.
   • If available, obtain your US import data from your customs broker for years 2017 and 2018 year-to-date including parts/inputs description, US tariff code, value and volume, and country of origin.
   • Review the various US Section 301 tariff hit lists: List 1, List 2 and List 3 to see if US tariff code(s) of Chinese-origin parts/inputs are included.
   • Multiply the import value by 25% to determine potential tariff cost exposure if continuing to source from China into the United States.
   • In addition, obtain information from primary suppliers in the United States that may be selling Chinese-origin imports domestically to learn if any increased tariff costs are expected on those purchases made in the United States.
   • If increased costs are significant for any Chinese-origin part/input:
     • determine whether it is possible to source the part/input from a country other than China, and/or
     • consider submitting comments to USTR requesting exemption from additional tariffs.  Contact PMMI for more details.

2. Review your US export transactions/export sales to see if your company is exporting US-made machinery or parts to China, and determine potential tariff cost impact on your outbound US sales.
   • If available, obtain your US export data from your customs broker for years 2017 and 2018 year to date including product description, US tariff code, value and volume. 
   • Review China’s Section 301 retaliation tariff hit lists to see if tariff code(s) of your machinery are included.  Known tariff codes of PMMI members’ machinery included on the most recent lists are noted in Table 1 below for easy reference. 
   • Multiply the export value by the appropriate tariff rate (5%, 10%, 20%, or 25% depending on which list) to determine potential tariff cost increase on your outbound sales to China.

 

TABLE 1: PMMI Members’ US Exports Targeted by China

(as included on China’s Retaliation Lists 3A thru 3D)

HS Code	Product Description(Unofficial translation)	Product Description (Mandarin)	2017 US Exports to China	2017 US Exports to World	US Exports to China as % of US Exports to World	Estimated Tariff Cost Exposure based on 2017 US Export Value to China
	China’s Section 301 Retaliation List 3A:  25% proposed tariff
8434.20.00	DAIRY MACHINERY	乳品加工机器	$1.95 M	$33.4 M	5.85%	$488 K
8438.20.00	MACHINERY FOR THE MANUFACTURE OF CONFECTIONERY, COCOA OR CHOCOLATE	生产甜食、可可粉、巧克力的机器	$454 K	$12.2 M	3.73%	$113.6 K
8438.30.00	MACHINERY FOR SUGAR MANUFACTURE	制糖机器	$71.5 K	$2.5 M	2.85%	$17.9 K
8438.40.00	BREWERY MACHINERY	酿酒机器	$5.6 K	$16.4 M	0.03%	$1.4 K
	China’s Section 301 Retaliation List 3B:  20% proposed tariff
8435.10.00	PRESSES, CRUSHERS AND SIMILAR MACHINERY USED IN THE MANUFACTURE OF WINES, CIDER, FRUIT JUICES OR SIMILAR BEVERAGES	制酒、果汁等的压榨、轧碎机	$143.2 K	$22.5 M	0.64%	$28.6 K
8435.90.00	PARTS OF PRESSES, CRUSHERS AND SIMILAR MACHINERY, USED IN THE MANUFACTURE OF WINE, CIDER, FRUIT JUICES OR SIMILAR BEVERAGES	制酒、果汁等压榨、轧碎机零件	$150.6 K	$10.6 M	1.42%	$30.1 K
8437.80.00	MACHINERY USED IN THE MILLING INDUSTRY OR FOR THE WORKING OF CEREALS OR DRIED LEGUMINOUS VEGETABLES, OTHER THAN FARM TYPE MACHINERY	谷物磨粉业加工机器	$593.6 K	$24.2 M	2.45%	$118.7 K
8438.10.00	BAKERY MACHINERY AND MACHINERY FOR THE MANUFACTURE OF MACARONI, SPAGHETTI OR SIMILAR PRODUCTS	糕点、通心粉、意大利面条的生产加工机器	$4.5 M	$159.4 M	2.85%	$908.7 K
8438.50.00	MEAT-AND POULTRY-PACKING PLANT MACHINERY	肉类或家禽加工机器	$7.1 M	$99.2 M	7.20%	$1.42 M
8438.80.00	MACH FOR INDUST PREPARATION OR MANUF OF FOOD OR DRINK, OTHER THAN MACH FOR THE EXTRACT OR PREPARAT OF ANIMAL OR FIXED VEG FATS OR OILS, NESOI	84 章其他未列名食品等加工机器	$10.2 M	$175.2 M	5.84%	$2.0 M
8438.90.00	PARTS OF MACHINERY OF CHAPTER 84, NESOI, FOR THE INDUSTRIAL PREPARATION OR MANUFACTURE OF FOOD OR DRINK	食品、饮料工业用机器的零件	$6.7 M	$330.0 M	2.03%	$1.3 M
	China’s Section 301 Retaliation List 3C:  10% proposed tariff
8438.60.00	MACHINERY FOR THE PREPARATION OF FRUITS, NUTS OR VEGETABLES	水果、坚果或蔬菜加工机器	$7.8 M	$87.2 M	8.93%	$778.4 K
	China’s Section 301 Retaliation List 3D:  5% proposed tariff
8434.10.00	MILKING MACHINES	挤奶机	$24.7 K	$38.9 M	0.06%	$1.2 K
8434.90.00	PARTS OF MILKING MACHINES AND DAIRY MACHINERY	挤奶机及乳品加工机器用零件	$6.5 M	$107.1 M	6.08%	$325.7 K
TOTAL						$7.63 M

 

REFERENCE DOCUMENTS:  The following pages include two annexes with more detailed summaries of tariff “hit” lists published by the United States and China, including key dates, scope, and potential impact on PMMI members.

 

 

ANNEX A: Summary of US Trade Actions Against China

US trade action	Tariff “hit” list	Date tariffs implemented	Level of tariffs imposed or proposed	Potential impact on PMMI members’ US imports and US operations
US Section 232 action on Steel and Aluminum citing US national security interests	US Section 232 steel & aluminum lists	23 March 2018	25% additional tariffs on certain steel products and 10% additional tariffs on certain aluminum products sourced from all countries, including China.	Costs for domestic and imported steel and aluminum have increased for US manufacturers.
US Section 301 action citing China’s lack of protections for US intellectual property	US Section 301 List 1	6 July 2018	25% additional tariffs on $34 billion of imports from China.	Several tariff lines for packaging machinery and equipment imported from China are now subject to 25% additional tariff.      In addition, Chinese-origin parts/inputs may be included.   PMMI members should review to determine impact.
	US Section 301 List 2	List published on 20 June 2018.  Tariffs not yet in effect.  Earliest possible date of implementation is early September.	Proposed 25% additional tariffs on $16 billion of imports from China	Chinese-origin parts/inputs may be included on the list; PMMI members should review to determine impact.
	US Section 301 List 3   (List begins on page 11.)	List published on 10 July 2018.  Tariffs not yet in effect.  Earliest possible date of implementation is mid-September.	Proposed 25% additional tariffs on $200 billion of imports from China.    (Note:  USTR initially proposed 10% additional tariffs.  On 1 August, USTR increased proposed additional tariff to 25%.)	Chinese-origin parts/inputs may be included on the list; PMMI members should review to determine impact.    USTR is accepting comments from stakeholders through Thursday, 6 September to request consideration for exemption from the additional 25% tariff.  See Sections E and F in  USTR’s Federal Register Notice for details on how to submit comments.

 

 

ANNEX B: Summary of China’s Retaliatory Trade Actions Against the United States

China’s retaliatory trade action	Tariff “hit” list	Date tariffs implemented	Level of tariffs imposed or proposed	Potential impact on PMMI members’ US exports
China’s retaliation against US Section 232 actions	China’s Section 232 retaliation list (in Mandarin)	2 April 2018	Tariffs of 10% or 25% are currently in place on nearly $3 billion of US exports, primarily steel, aluminum, and select agricultural products.	There are no known tariff codes for PMMI member’s packaging machinery and equipment included on these lists.   US-origin parts/inputs may be included on the list; PMMI members should review to determine impact.
China’s retaliation against US Section 301 actions	China’s Section 301 retaliation List 1 (unofficial English translation)	6 July 2018	Tariffs of 25% are currently in place on $34 billion of US exports, primarily agricultural products.	There are no known tariff codes for PMMI member’s packaging machinery and equipment included on these lists.   US-origin parts/inputs may be included on the list; PMMI members should review to determine impact.
	China’s Section 301 retaliation List 2 (unofficial English translation)	List published on 6 July 2018.  Tariffs not yet in effect.  China expected to apply tariffs if the US applies tariffs on its US Section 301 List 2.	Proposed additional tariffs of 25% on $16 billion of US exports	There are no known tariff codes for PMMI member’s packaging machinery and equipment included on these lists.   US-origin parts/inputs may be included on the list; PMMI members should review to determine impact.
	China’s Section 301 retaliation Lists (in Mandarin) List 3A (25%) List 3B (20%) List 3C (10%) List 3D (5%)	List published on 3 August 2018.  Tariffs not yet in effect.  China expected to apply tariffs if the US applies tariffs on its US Section 301 List 3.	Proposed additional tariffs of 25%, 20%, 10% and 5% on $60 billion of US exports	There are numerous tariff codes for PMMI members’ packaging machinery and equipment included on China’s Section 301 Lists 3A through 3D.  See Table 1 on the next page for summary of tariff codes included.   US-origin parts/inputs may be included on the list; PMMI members should review to determine impact.