The United States Government has recently begun to impose import tariffs on countries around the world, especially on goods originating in China. Nevertheless, there is still a rigid demand for many Chinese goods in the United States market, and China's production capacity advantage is difficult to be replaced in the short term.

Based on our U.S. law practice and extensive case data, Ren Yue advises Chinese companies on how to interpret the latest tariff policies, utilize tariff planning, apply for tariff exemptions, and manage the risk of breach of trade contracts. Ren Yue will continue to launch a series of in-depth analyses of tariffs for five major industries (biopharmaceuticals, consumer electronics, semiconductors, cross-border e-commerce, and automobiles and accessories) to help readers understand the direction of tariffs in each industry and how to deal with them.

Legal compliance is the bottom line that cannot be crossed.

Only by familiarizing themselves with U.S. tariff policies and enforcement trends can Chinese companies turn challenges into opportunities.The

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Tracking and interpreting U.S. tariff policy

With Trump's return to the U.S. White House in 2025, the U.S.-China trade war enters deep waters.In February-March 2025, the U.S. announced 20% tariffs on China based on the domestic fentanyl crisis.On April 2, Trump offered to"Reciprocal tariffs" policy, announced a tariff increase of 34% on all Chinese imports. Since then, with the Chinese government's strong counterattack, the U.S. reciprocal tariffs on China have gradually risen to 1,25%. The U.S. treasury secretary recently said that the U.S.-China trade talks will continue for at least two to three years, and that although it may cool off in the short term, the U.S. will not easily unilaterally reduce China's tariffs. In the long term.U.S. Tariff Increases and Tighter Enforcement Are the Big Trend, which is the same trade policy emphasized by Stephen Miran, Chairman of the President's Council of Economic Advisers, in his November 2024 User's Guide to Reinventing the Global Trading System.

Tariff increases have been in the works for a long time. The U.S.-China trade conflict officially erupted during Trump's first term.In 2018-2019, the U.S. imposed 25% tariffs on $200 billion worth of Chinese goods, while China countered by targeting mainly U.S. agricultural products such as soybeans.In January 2020, the U.S.-China signed a Phase I Trade Agreement, although the agreement covered agricultural purchases and intellectual property rights protection commitments, with the majority of tariffs In 2021, Biden was inaugurated and largely continued the Trump-era tariff policy, but with a more strategic focus on key industry protections and targeted impositions, such as the 1,00% tariffs imposed on Chinese electric vehicles in 2024, in an attempt to protect the country's green energy industry.

In assessing U.S. tariff obligations, the first key threshold issue that Chinese companies need to identify is theAre exports to the U.S. subject to tariffs.. For example, whether a product is included in the list of tariff exemptions under the April 2, 2025 U.S. Executive Order. Second.What is the taxable price of the product and the applicable tax rateFor example, whether the value declared in customs under U.S. federal law is taken as sales price or cost price, and what is the Harmonized Tariff Schedule of the United States (HTSUS) code for the product and what is the corresponding rate of duty. Proper use of tariff planning and re-export trade

Tariff engineeringIt is a common, worldwide means for enterprises to achieve tariff cost reduction in importing countries through the optimization arrangement of import and export processes, product classification, origin determination, supply chain structure and other elements. In the face of increasing trade friction between the U.S. and China and a strict tariff environment, theChinese companies should be prudent and rationalize the use of tariff planningThe

Favorable categorization of exported goods according to the latest HTSUS codes of the U.S. Customs by adjusting product design, function, etc. can reduce the tariff burden. Reasonable planning of the taxable price of export commodities, such as separating intangible assets, can reduce the import tax base. Reasonable use of bonded zone policy, in the bonded zone for the collection of goods, processing, distribution, etc., is also conducive to enterprises to strive for tariff reduction opportunities.

The greater risks in current practice arepass (a bill or inspection etc)Re-export processing trade changes the origin of productsThe U.S. Customs Service has a different and more favorable duty rate for third countries. Under CFR 134.1(b), "country of origin" means the country of manufacture, production, or cultivation of any article of foreign origin entering the United States. When more than one country is involved in the production of an imported product, the following rules applySubstantive change of rules（The place of origin is determined by the place where a particular manufacturing process takes place (substantive transformation, and whether or not there has been a substantial change in the name, nature or use of the goods). There are also a few commodities whose origin is determined by the process-based location of a particular manufacturing process, such as the sewing operation of the main seams of garments.

There is a wealth of case law guiding United States courts on the rule of origin as to whether there has been a material change in the "name, nature, or use" of the imported merchandise. However.In recent years of enforcement practice, U.S. Customs and Border Protection has typicallyCase-by-case judgments are made on the basis of "comprehensive circumstances", and the criteria for determining origin are influenced by current trade policies, which often use more subjective and stringent criteria to deal with Chinese goods.For example: based on the composition of the product's "essential character" of the component origin (essential character); based on the declaration of origin of the operation of the process constitutes "adequate processing or processing" (sufficient) working or processing" (sufficient working or processing); based on the declared origin of the processing process to produce value in the final value of the goods in the percentage (value-content), and so on.

Rules of origin are key rules that need to be met by many Chinese companies trading in re-export processing.The focus of product-specific evaluations varies from industry to industryIn the semiconductor industry, for example, the wafer fabrication stage is often considered to be a "material change" to the product. For example, in origin determination in the semiconductor industry, the wafer manufacturing stage is often considered to be the point at which a "material change" is made to the product. In some cases, microcontroller unit (MCU) wafers are manufactured in Taiwan, China, with subsequent testing, backside grinding, and dicing taking place in South Korea and the Philippines. U.S. Customs ruled that the subsequent processes did not change the essential character of the product or the purpose for which it was originally designed, and therefore did not constitute a "material change" and that the origin should be Taiwan, China. In other cases involving the export of printed circuit boards to the Philippines for product assembly and re-export to the United States, U.S. Customs ruled that circuit board parts from China constituted a "fundamental characteristic" of the final product, and that the Philippines could not be the place of origin even though the product in question involved the assembly of a large number of boards in the Philippines.

Chinese companies need toConsult a professional machineThe company has a systematic understanding of U.S. Customs rules of origin and the latest enforcement practices, and quantitatively evaluates the production process.. When designing re-export processing trade, avoid simple assembly or minor processing that is not significant at the commercial level, and pay special attention to whether the processing chain in the re-exporting country is up to"Substantive transformation"of the statutory threshold.Balancing long-term outward investment with the risk of short-term policy uncertaintyRational Planningintangible assetLocation of the machining process (e.g. software programming in smart devices).

In recent years, in response to common fraudulent practices in re-export trade, the U.S. GovernmentEnhanced enforcement against popular countries such as Vietnam, Thailand, Malaysia and Cambodia"Anti-circumvention investigation".(anti-circumvention investigation). Companies and/or individuals who violate the regulations may face civil damages, product seizure and forfeiture, import qualification restrictions, government procurement bans, criminal charges, and other consequences. Recently, a Chinese-founded California wood flooring importing company was charged with criminal fraud for simply re-exporting Chinese-origin automobile tires and concealing their origin to avoid duties due. The company 2025 reached a settlement with the U.S. Department of Justice in March, contingent upon payment of a fine of up to $8.1 million. Chinese companies also need to be aware that enforcement risks do not only come from external governmental inspectors, as the U.S. False Claims Act created in the"Whistle-blower" systemDown the road, many of the case leads come from business employees or competitors reporting them. How to Apply for a U.S. Tariff Exemption

To reduce the domestic burden, the United States imposed massive tariffs while allowing theU.S. importers or trade associationsApplication for tariff exemption for specific goods.. Typically, the Office of the U.S. Trade Representative (USTR) reviews applications for tariff exemptions based on five major factors:

1. Product Uniqueness: Whether commodities can be sourced only from China or whether alternative sources are too costly.
2. economic damage: Whether the tariffs have a significant negative impact on the applicant or the U.S. economy.
3. Strategic importance to China: Whether the goods are related to key Chinese strategic industries.
4. Purpose of 301 investigations: Whether the exemption would undermine the core objectives of the 301 investigation, including eliminating Chinese business practices that the United States considers discriminatory or unreasonable. (Section 301 of the United States Trade Act of 1974 authorizes the President to "take all actions to address any unfair act, policy, or practice of a foreign government that imposes a burden on United States commerce", and has been the basis for most of the recent tariff increases.)
5. feasibility: Whether the exemption application clearly defines the scope of the exemption and whether the operation of the exemption by U.S. Customs is feasible.

With the opening of the application channel by USTR, applicants used to be able to apply within three months through theWebsite to submit applications for tariff exemptions. After the application is made public, stakeholders (e.g., competitors or consumers) may submit comments and the applicant may submit a response. The Office of the U.S. Trade Representative (USTR) then reviews whether to grant the exemption based on the application materials, public comments, and an internal assessment. If the substantive review passes, the application is forwarded to U.S. Customs and Border Protection and the U.S. International Trade Commission for a feasibility review, which determines whether the products in question can be correctly and consistently classified for customs clearance. During Trump's first term, the Office of the U.S. Trade Representative began approving applications for tariff exemptions in December 2018, only five months after announcing the exemption process. The approvedTariff exemptions are valid for varying periods of time, ranging from about 12 to 27 months.Some of these can be backdated to before the tariff exemptions were announced and have been extended to varying degrees depending on the circumstances.

In terms of the success rate of exemption applications, from 2018 to 2020, during Trump's first term, the Office of the U.S. Trade Representative (USTR) received about 53,000 applications for tariff exemptions and conducted 24 rounds of tariff exemptions, such as exemptions from the March 2020 epidemic-related tariffs, according to the USTR's official website and summarized by the Vietnam Chamber of Commerce's WTO and International Trade Center.While the overall approval rate for waiver applications is not high (about 131 TP3T).Direction of exemption is still of great reference value for Chinese companies, these product categories mainly include:

1. Medical Device Products: On February 1, 2025, AdvaMed, the trade association for medical device companies, has issued a statement requesting tariff exemptions for medical devices from China, Mexico, and Canada.
2. Consumer electronics and semiconductors: For example, Apple convinced the Trump administration that the Apple Watch was a life-saving instrument, which led to a series of tariff reductions.
3. Agricultural products:: Includes shrimp for aquaculture, whey and fishmeal for feed, alfalfa, and hardwood products.
4. Industrial Agricultural Equipment: e.g. airplane parts, motorcycles, etc.
5. Consumer goods: e.g. textiles, footwear, furniture, etc.

It is important to note that in addition to the 301 tariff investigation against China, the Trump administration has imposed tariffs pursuant to other laws. For example, the Trade Expansion Act of 1962 authorizes the President of the United States to restrict the importation of products that could harm national security.2025 On February 11, pursuant to Section 232 of the Act, Trump raised import tariffs on steel and aluminum by 251 TP3T.The reviewing body for such tariff exemptions is theBureau of Industry and Security, U.S. Department of Commerce, not the Office of the Trade Representative.

China has also increased the duty rates on U.S. imports. The tariff exemption application process for China Customs is available for further consultation by private message to the service. Other Legal Compliance Tools

apart fromTracking and interpreting U.S. tariff policies, utilizing tariff planning and re-exporting, and considering applying for tariff exemptions.In addition, Chinese enterprises should also consider the following legal tools to deal with compliance issues in trade with the U.S., and do a good job of risk prevention and advance deployment:

• U.S. Customs Advance RulingBased on the uncertainty of the U.S. judgment on individual cases of rules of origin, in addition to internal assessment and external consultation, enterprises can also make use of the U.S. Customs administrative pre-determination of origin system to apply for prospective rulings from the U.S. Customs and Border Protection through the assistance of attorneys to confirm whether the goods can enjoy tariff preferences and make timely adjustments to the raw materials of the products or the processing procedures.
• Documentary proof of origin: Prepare comprehensive certificates of origin documents describing the source of raw materials and the production process of the merchandise in response to the recent and potentially enhanced verification of the origin of Chinese merchandise by U.S. Customs. It is important to note that certificates of origin from exporting countries are issued based on the exporting country's rules of origin, which may differ from those of the importing country. Although the certificate of origin of the exporting country provided by the importer can provide reference for the U.S. Customs, the U.S. Customs has the absolute right to determine the origin of products exported to the United States.
• Regional FTAs: Focusing on re-exporting countries within the scope of China's FTAs and the rules-of-origin provisions in the relevant agreements. Up to now, China has signed 23 FTAs with 30 countries and regions, in which the content provisions also vary and the countries and regions involved are in a larger network of FTAs. For example, Vietnam and China have signed the China-ASEAN FTA and the Regional Comprehensive Economic Partnership Agreement (RCEPA), and Vietnam has also signed the Europe-Vietnam FTA with the European Union. Through the FTA network, Chinese goods can enter the EU market at lower or even zero tariffs by meeting the rules of origin in the Europe-Vietnam FTA.
• Trade policies of transit countries: Restrictions on re-export trade are one of the focal points of the current reciprocal tariff negotiations between the United States and Southeast Asian countries. Recently, the Ministry of Industry and Trade of Vietnam has begun to require a strict review of the origin information of export commodities, and impose temporary anti-dumping duties on Chinese steel products. Enterprises need to pay attention to the latest policy and origin verification dynamics of relevant re-export countries.
• Key terms of trade contracts:: Enterprises should re-examine and revise trade contracts and optimize their terms, paying particular attention to tariff burden and risk allocation, price adjustment mechanisms and dispute settlement clauses. For example, they should clearly agree on price adjustment mechanisms in trade contracts, flexibly adjust liquidated damages and payment terms in contracts, add new tariff policy response clauses, make it clear that both parties must negotiate a settlement if the contract cannot be fulfilled due to tariff policy, and include exemption clauses that determine the applicable force majeure rules, among other things.

This publication is for informational purposes only and it should be understood that the authors and distributors of this publication and Ren Yue Law Firm do not provide legal or other professional advice or opinions on specific facts or matters, and therefore do not assume any responsibility for the use of this publication. Ren Yue Law Firm is a foreign law firm incorporated in the State of New York, U.S.A. and does not provide legal advice on Chinese law. Nothing in this publication constitutes legal advice on Chinese law. Should you require such legal advice, we will be happy to assist in arranging it. ©2025 Renyue Law Firm PLLC All rights reserved.