U.S. Companies Face China Tariffs as Exclusions Expire

on Jan2
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WASHINGTON — American companies will have to pay higher taxes on some of the products they import from China, as the tariff exclusions that had shielded many businesses from President Trump’s trade war expired at midnight on Thursday.

Mr. Trump began placing tariffs on more than $360 billion of Chinese goods in 2018, prompting thousands of companies to ask the administration for temporary waivers excluding them from the levies. Companies that met certain requirements were given a pass on paying the taxes, which range from 7.5 percent to 25 percent. Those included firms that import electric motors, microscopes, salad spinners, thermostats, breast pumps, ball bearings, fork lifts and other products.

But the bulk of those exclusions, which could amount to billions in revenue for businesses based in the United States, were set to automatically expire at midnight on Thursday. After that, many companies have to again pay a tax to the government to import a variety of goods from China, including textiles, industrial components and other assorted products.

The lack of clarity from the Trump administration about whether it would extend the exclusions left many companies in limbo.

The United States had announced some extensions — on Dec. 23, the trade representative said that it would extend exclusions until March 31 for a small category of medical care products, including hand sanitizer, masks and medical devices, to help with the battle against the coronavirus pandemic.

But Ben Bidwell, the director of U.S. customs at the freight forwarder C.H. Robinson, who has been helping clients apply for exclusions, said that “the large majority” of those that had been granted would expire at the end of the year, leaving importers with either an additional 7.5 percent or 25 percent tariff, depending on their product.

The United States trade representative had been “rather silent about any type of extension,” Mr. Bidwell said.

Lawmakers lobbied the administration to extend the waivers. On Dec. 11, more than 70 members of Congress, including Representative Jackie Walorski, a Republican from Indiana, and Ron Kind, a Democrat from Wisconsin, sent a letter urging Robert E. Lighthizer, the United States trade representative, to extend all of the active exclusions to help businesses that have been hurt by the pandemic.

“Our economy remains in a fragile state due to the ongoing Covid-19 pandemic,” the letter states. “Extending these exclusions will provide needed certainty for employers and help save jobs.”

Mr. Trump has wielded tariffs to protect some American industries from foreign competition and encourage others to move their supply chains from China. The tariffs have partly accomplished those goals, though most companies have moved operations to other low-cost countries like Vietnam or Mexico, rather than the United States.

But most economists say those gains have come at a high price, and hurt the American manufacturing sector over all by greatly increasing the cost of imported components and making U.S. manufacturers less competitive with other companies abroad.

Some companies say the exclusions process has been particularly unfair. While large companies have invested huge sums in hiring Washington law firms to lobby the administration and apply for exemptions, some small companies say they have lacked the resources to apply for and win exclusions.

“Allowing these exclusions to expire — especially because the facts supporting their original determination remain unchanged — shows how arbitrary and capricious this process has been,” said Stephen Lamar, the chief executive of the American Apparel & Footwear Association, which represents makers of shoes and clothing.

“These companies could ill afford a tax on their imported inputs and U.S. workers when they originally applied for these exclusions and they certainly can’t afford one now,” he added.

Two other long-running programs that have exempted imported products from tariffs also expired on Thursday.

The Miscellaneous Tariff Bill, which temporarily suspends tariffs on some imported goods, including inputs used by American manufacturers, and the Generalized System of Preferences, which provides thousands of products from developing countries duty-free access to the U.S. market, expired at the end of the year. There has been little momentum in Congress to resurrect the programs, as popular opinion has gradually turned against initiatives that offer foreign companies cheaper access to the American market as a way to promote freer trade.

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