Tariff Talk: IEEPA and Section 301

Firsd Tea has been working to keep our customers and the larger tea community aware of the changing landscape of tariffs and tea trade between the US and China. Starting as far back as June 2019, we began to chronicle these changes and provide policy updates as they affected the import of Chinese tea.

 

More recently, the US Supreme Court struck down tariffs imposed under IEEPA, and Customs and Border Protection began a process for processing refunds for IEEPA tariffs paid. Recent news indicates that the legality of that reimbursement process is also being challenged.

 

With IEEPA off the table as a method for imposing tariffs, the Trump administration has returned to the use of Section 301 to impose new tariffs. Two separate Section 301 investigations were held recently for the purpose of imposing new tariffs on a wide range of countries and goods from those countries. It should be noted that the process for imposing a Section 301 tariff differs from the more straightforward method used to introduce the IEEPA tariffs. For Section 301, the Office of the United States Trade Representative (USTR) holds hearings and invites public comment regarding how businesses, trade organizations, and private citizens may be in favor of, or opposed to, the impacts of any proposed tariffs or actions. The USTR then makes recommendations as the the best course of action regarding the imposition of tariffs, and any exemptions from tariffs.

 

FIRSD TEA TESTIMONY

 

Firsd Tea recently testified during USTR Section 301 hearings regarding tariffs being considered on China, including Chinese tea. In those hearings, we requested that imports of Chinese teas be exempted from additional tariffs. It should be noted that a Section 301 tariff rate of 7.5% has been in effect on Chinese teas since February 2020.

This new round of Section 301 investigations centered around:

Forced Labor

Excess Capacity (Dumping)

Firsd Tea appeared at the USTR hearings and provided testimony. The main talking points below outline why tariffs on Chinese tea imports harm US businesses more than the Chinese tea industry:

 

• The United States is not a tea growing nation. There is no US-grown tea of meaningful commercial volume that needs to be protected by tariffs, nor are there any farm-based jobs that would be protected.

 

• Like wine or coffee, tea varies dramatically due to local terroir (geography, climate, and local manufacturing techniques). China has many unique teas that are unavailable elsewhere, due to their unique cultivars, terroirs, and processing methods. In the area of specialty tea, many teas are unable to be sourced anywhere else in the world.

 

• China produces approx 8.2 billion pounds of tea and exports 815 million pounds for domestic consumption. That means that roughly 90% of China’s tea stays in China

• China exports 26 million pounds to the US (less than 1% of total production, and less than 4% of total export volume). This quantity is not a significant amount of tea trade from the perspective of Chinese tea producers.

 

• About one-third of US green tea imports originate from China. This includes high value specialty teas, matcha, and base green teas for bottled green tea beverages

 

• About one-third of US organic tea imports originate from China. As US consumers are encouraged to make healthy, nutritious beverage decisions, China tea stands out as an important contributor to Making America Healthy Again.

 

NEXT STEPS

 

Despite opposition expressed from a wide range of corporations and trade groups, it appears that the USTR is proceeding to recommend a 10-12% tariff on goods from China and many other countries across the globe. The final decision has yet to be announced at the time of publication.