New tariffs have taken effect as of July 24, imposing 10% or 12.5% tariffs on dozens of economies (Opens a new window) and applying to over 99% of all imports into the United States. While these rates are similar to ones that were already in place up to July 24, their applicability to countries differ slightly, and thus businesses will need to carefully reassess their exposure.

Background

In April, the Supreme Court ruled that tariffs imposed by President Trump using the International Emergency Economic Powers Act (IEEPA) were unconstitutional (Opens a new window). Immediately after that decision, the president sought to impose tariffs using the Section 122 of the Trade Act of 1974, which enables the president to impose tariffs when the United States confronts “fundamental international payments problems.” These tariffs were also subject to a number of court developments; but in any event, the Section 122 tariffs expire after 150 days unless Congress extends them, and because Congress did not do so, they expired on July 24.  

New tariffs: Section 301

Upon that expiration, effective July 24, the United States Trade Representative (USTR), at the direction of the President, imposed 10% or 12.5% tariffs on over 60 countries due to those countries’ alleged “failure to impose and effectively enforce a prohibition on the importation of goods produced with forced labor” pursuant to Section 301. While these tariffs are constructed upon a wholly different section of the Trade Act of 1974, they seem to simply replace the expired Section 122 tariffs, which applied a very similar tariff rate. The Section 301 Tariffs apply to over 99% of all imports (Opens a new window) into the United States.  

There is already a complaint filed with the Court of International Trade (CIT) (Opens a new window) contesting the legality of the Section 301 tariffs. According to that complaint, the USTR can only impose tariffs: 

“…upon a determination that a particular act, policy, or practice of a foreign country is unreasonable or discriminatory and burdens or restricts United States commerce, 19 U.S.C. Section 2411(b)(1), and any responsive action must be directed to that act, policy, or practice, 19 U.S.C. Section 2411(b)(2). It is not a freestanding authorization to tax substantially all imports from substantially all trading partners at rates selected to replicate the invalidated IEEPA tariff regime rather than to eliminate identified foreign practices.”

We anticipate additional litigation regarding these Section 301 tariffs.

What businesses should do now

The tariff landscape is under continuous change. Businesses should:

• • Examine their import sourcing to determine if and how they are impacted from the countries subject to the Section 301 Tariffs.
  • Monitor the litigation challenging whether these tariffs were improperly imposed, as those challenges may result in potential refunds.