THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Voluntary - Public Date: 3/23/2018 GAIN Report Number: CH18012 China - Peoples Republic of Post: Beijing China Targets U.S. Agriculture in Response to U.S. Trade Actions Report Categories: Trade Policy Monitoring Approved By: Michael Ward Prepared By: Gene Kim and Abraham Inouye Report Highlights: On March 23, 2018, the People’s Republic of China’s Ministry of Commerce (MOFCOM) announced a proposal to levy retaliatory tariffs impacting approximately $2.0 billion in U.S. food and agricultural exports to China in response to the recent U.S. 232 Trade Action on steel and aluminum. The products subject to this proposed increase in tariffs include pork and pork products, horticultural products, wine, American ginseng, and denatured ethanol. Interested domestic parties have until March 31, 2018 to comment or submit additional information to MOFCOM’s Trade Relief and Investigation Bureau regarding these countermeasures. This GAIN report contains unofficial translations of the MOFCOM announcement, including a translated table of the products subject to these proposed tariff increases, and a statement from the MOFCOM Spokesperson concerning the announcement. Page 1 General Information: Introduction: This report summarizes an announcement titled “Notice by the Ministry of Commerce on Public Consultation regarding the U.S. 232 Measures on Imported Steel and Aluminum Products and Chinese Countermeasures” published on the People’s Republic of China’s MOFCOM website on March 23, 2018. Announcement Link: http://www.mofcom.gov.cn/article/au/ao/201803/20180302722670.shtml Disclaimer: This summary is based on a cursory review of the subject announcement and therefore should not, under any circumstances, be viewed as a definitive reading of the MOFCOM announcement, or of its implications for U.S. agricultural export trade interests. In the event of a discrepancy or discrepancies between this summary and the complete announcement as published in Mandarin, the latter shall prevail. Executive Summary: On March 23, at 7:00 am local time, China’s Ministry of Commerce (MOFCOM) published a proposal to increase tariffs on a targeted set of U.S. exports. MOFCOM stated that these tariffs were intended to balance the losses caused to Chinese interests as a result of the U.S. 232 Trade Action on steel and aluminum. MOFCOM stated that it proposed these measures based on the World Trade Organization (WTO) Agreement on Safeguard Measures and the Foreign Trade Law of the People’s Republic of China. MOFCOM announced that it is soliciting written opinions and suggestions from “relevant domestic departments, local governments, business associations, companies, and citizens” regarding both the U.S. 232 Trade Action and China’s proposed countermeasures. This solicitation period is scheduled to end on March 31, 2018. Product Scope: The proposed tariff increases will impact approximately $2.0 billion in U.S. food and agricultural exports to China, identified by their HS-6 digit tariff codes. The majority of the products targeted by China are food and agricultural products, accounting for 105 out of the 128 tariff codes; specifically targeted in this announcement are pork and pork products, horticultural products such as fruit (both fresh and dried) and tree nut products, American ginseng, wine, and denatured ethanol. MOFCOM’s announcement divides the products into two groups. The first group includes 120 products and the proposed additional tariff is 15 percent. The second group includes another 8 products and the proposed additional tariff is 25 percent. (See the attached list.) These tariffs will be applied in addition to existing tariffs on an ad valorem basis for cost of goods, insurance, and freight (CIF) values. (For example, if Product A is in the first group, with a Page 2 current tariff level of 10 percent, the proposed tariff level after this increase would be 25 percent.) Timing: In the March 23, 2018 announcement, MOFCOM did not specifically state when it will begin applying these additional tariffs. It is important to note that the application of these additional tariffs is not necessarily dependent on MOFCOM’s solicitation for comments. China’s General Administration of Customs will also make a public announcement indicating when the additional tariffs will enter into force. See the translated remarks from a MOFCOM Spokesperson at the end of this report. For More Information, Please Email: AgBeijing@usda.gov Useful Government of China Web Sites: China’s equivalent of the U.S. Department of Commerce is MOFCOM. Additional information can be found at: http://english.mofcom.gov.cn/. China’s equivalent of the U.S. Customs and Border Protection Service is the General Administration of Customs. Additional information can be found at: http://english.customs.gov.cn/. Page 3 BEGIN UNOFFICIAL TRANSLATION Notice by the Ministry of Commerce on Public Consultation regarding the U.S. 232 Measures on Imported Steel and Aluminum Products and Chinese Countermeasures On March 8, 2018, U.S. President Trump signed an announcement confirming that imported steel and aluminum products threaten U.S. national security. He decided to impose a tax on all imported steel and aluminum products (i.e., 232 measures) beginning March 23. The tax rates are 25% and 10%, respectively. The U.S. measures violate the relevant WTO rules and do not satisfy the requirements of the "national security exemption." It actually constitutes a protectionist trade measure and seriously violates the interests of China. In order to effectively protect China's interests, China intends to suspend substantive equivalent concessions and other obligations to the United States, in accordance with the relevant provisions of the WTO Agreement on Safeguard Measures and the Foreign Trade Law of the People's Republic of China, that is, to add tariffs on certain products imported from the United States in order to balance the losses to our country caused by the 232 measures (list of products attached). Relevant domestic departments, local governments, business associations, companies, and citizens who have opinions and suggestions on the U.S. 232 measures and China’s proposed countermeasures, should please provide relevant written materials to the Trade Remedy and Investigation Bureau of the Ministry of Commerce before March 31, 2018. Contact Person: Deng Jun, Li Xie Telephone: 010-85093407, 010-65198721 Fax: 010-65198497 E-mail: trb@mofcom.gov.cn Mailing Address: No. 2 East Chang’an Street, Trade Remedy and Investigation Bureau of the Ministry of Commerce of the People’s Republic of China, Beijing Post Code: 100731 Attachment: Suspended Concessions Product List Group One Serial No. HS Code Commodity Category I. Fresh fruits, dry fruits and nuts products 1 2 3 4 08011100 08011200 08011990 08012100 Desiccated coconut Coconuts, in the inner shell Coconuts, other Brazil nuts, in shell 5 6 7 8 08012200 08013100 08013200 08021100 Brazil nuts, shelled Cashew nuts, in shell Cashew nuts, shelled Semen amygdalae, in shell Page 4 9 10 11 08021200 08022100 08022200 Semen amygdalae, shelled Hazelnuts, in shell Hazelnuts, shelled 12 13 14 15 16 17 08023100 08023200 08024110 08024290 08025100 08025200 Walnuts, in shell Walnuts, shelled Chinese chestnuts, in shell Chestnuts, other Pistachios, in shell Pistachios, shelled 18 19 20 21 22 23 08026190 08026200 08028000 08029030 08029090 08031000 Macadamia nuts in shell, other Macadamia nuts, shelled Areca nut Pine nuts, shelled Other, unlisted fresh or dry nuts Plantains, fresh or dried 24 25 26 27 28 29 08039000 08041000 08042000 08043000 08044000 08045010 Other bananas, fresh or dried Dates, fresh or dried Figs, fresh or dried Pineapples, fresh or dried Avocados, fresh or dried Guavas, fresh or dried 30 31 32 33 34 35 08045020 08045030 08051000 08052190 08052200 08052900 Mangoes, fresh or dried Mangosteens, fresh or dried Oranges, fresh or dried Other mandarins (including tangerines and satsumas) Clementines Other wilkings and similar citrus hybrids 36 37 38 39 40 41 08054000 08055000 Grapefruit, including pomelos Lemons and limes Other unlisted citrus fruits Grapes, fresh Grapes, dried Watermelons, fresh 42 43 44 45 46 47 08071910 08072000 48 49 50 51 08092900 08093000 08059000 08061000 08062000 08071100 08081000 08083010 08083090 08092100 08094000 08101000 Hami melons, fresh Papayas, fresh Apples, fresh Ya pears and snowy pear white, fresh Other pears, fresh Sour cherries, fresh Other cherries, fresh Peaches, including nectarines, fresh Plums and sloes, fresh Strawberries, fresh Page 5 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 08102000 08104000 08105000 08106000 08107000 08109010 08109030 08109040 08109050 08109060 08109070 08109080 08109090 08111000 08112000 08119090 08121000 08129000 08131000 08132000 08133000 08134010 08134020 08134030 08134040 08134090 08135000 Raspberries, blackberries, mulberries and loganberries, fresh Cranberries, bilberries and other fruits of the genus, fresh Kiwifruit, fresh Durian, fresh Persimmons, fresh Lychee, fresh Longan, fresh Rambutan, fresh Sugar apple, fresh Carambola, fresh Wax apple, fresh Dragon fruit, fresh Other unlisted fresh fruits Strawberries, frozen Raspberries, blackberries, mulberries , loganberries and gooseberries, frozen Other unlisted frozen fruits and nuts Cherries, provisionally preserved Other provisionally preserved fruits and nuts Apricots, dried Prunes, dried Apples, dried Longans and longan pulps, dried Persimmons, dried Red jujubes, dried Preserved litchi Other unlisted dried fruits Mixtures of nuts or dried fruits Category II Wine 79 80 22041000 22042100 81 22042200 82 83 22042900 22043000 Sparkling wine Other wine or grape must with fermentation prevented or arrested by the addition of alcohol in containers holding 2L or less Other wine or grape must with fermentation prevented or arrested by the addition of alcohol in containers holding more than 2L but not more than 10L Other wine or grape must with fermentation prevented or arrested by the addition of alcohol in containers holding more than 10L Other grape must Category III Modified ethanol 84 22072000 Ethyl alcohol and other spirits, denatured, of any strength Category IV American Ginseng 85 86 87 12112010 12112091 12112099 American ginseng Other fresh ginseng Other unlisted ginseng Page 6 Category V Seamless steel pipes 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 73041110 73041120 73041130 73041190 73041910 73041920 73041930 73041990 73042210 73042290 73042310 73042390 73042400 73042910 73042920 103 104 105 106 107 73042930 73043110 73043120 73043190 73043910 108 73043920 109 73043990 110 73044110 111 73044190 102 73044910 103 73044990 104 73045110 105 73045120 106 73045190 107 73045910 108 73045920 109 73045990 110 73049000 111 73043910 Page 7 112 73043920 113 73043990 114 73044110 115 73044190 116 73044910 117 73044990 118 73045110 119 73045120 120 73045190 Group Two Category VI Pork and pork products 121 02031200 Hams, shoulders and cuts thereof, with bone in, fresh or chilled 122 02031900 Other meat of swine, fresh or chilled 123 02032190 Other meat of swine, carcasses and half-carcasses, frozen 124 02032200 Hams, shoulders and cuts thereof, with bone in, frozen 125 02032900 Other meat of swine, frozen 126 02064100 Livers, frozen 127 02064900 Other edible offal of swine, frozen Category VII Recycled aluminum 128 76020000 Page 8 Statement by the Ministry of Commerce Spokesperson on China's release of the list of suspended concessions in response to U.S. 232 measures on imported steel and aluminum products Mandarin link: http://www.mofcom.gov.cn/article/ae/ag/201803/20180302722664.shtml On March 23, 2018, the Ministry of Commerce issued a list of suspended concessions in response to U.S. 232 measures on imports of steel and aluminum products and solicited public opinion regarding the intention to impose tariffs on certain products imported from the United States, in order to balance the losses to Chinese interests from the tariffs imposed on aluminum. The Ministry of Commerce Spokesperson made the following statement: This list tentatively contains 7 categories and 128 taxed products. Based on 2017 statistics, this list involves U.S. exports to China of about $3 billion USD. The first part (of the list) covers a total of 120 taxed products involving $977 million USD in U.S. exports to China, including fresh fruit, dried fruit and nut products, wine, denatured ethanol, American ginseng, and seamless steel pipes, and is anticipated to be levied an additional 15% tariff. The second part covers a total of eight taxed products involving $1.992 billion USD of U.S. exports to China, including pork and pork products, recycled aluminum, etc., and is anticipated to be levied an additional 25% tariff. The United States imposition of 25% and 10% tariffs on imported steel and aluminum products on the grounds of “national security” actually constitutes a protectionist trade measure. In accordance with the relevant provisions of the WTO Agreement on Safeguard Measures, China has formulated a list of suspended concessions. If China and the United States fail to reach an agreement on trade compensation within a specified time, China will exercise its right to suspend concessions on the first part of the product (list); China will implement the second part of the list after further evaluating the impact of the U.S. measures on China. China reserves the right to adjust measures based on actual conditions and will implement the necessary procedures in accordance with relevant WTO rules. The United States' action of restricting imports based on "national security" has severely damaged the multilateral trade system represented by the WTO and seriously interfered with the normal international trade order. This action has been opposed by many WTO members. The Chinese side has also negotiated with the United States through multiple levels and channels, and will take legal actions under the WTO framework with other WTO members to jointly maintain the stability and authority of the multilateral trade rules. As the world's two largest economies, the only correct choice is cooperation between China and the United States. China hopes that both sides proceed from the overall interests of China and the United States, work toward each other, focus on cooperation, control differences, and jointly promote the healthy and stable development of China-U.S. economic and trade relations. China urges the United States to resolve China’s concerns as soon as possible, resolve differences through dialogue and consultation, and avoid harming the overall situation of China-U.S. cooperation. END UNOFFICIAL TRANSLATION Page 9