Originally, the U.S. and China Phase One trade agreement was going to be reviewed at the six-month mark, which came and went on Saturday, August 15th, though President Trump has publicly commented that he’s satisfied with the movement of the deal. There is no detailed explanation for why the review didn’t happen. Some offer terms that this would give China more time to meet their purchase requirements of agricultural and energy products; issues with which were compounded as the world slowed down to stop the global pandemic of Coronavirus.
Should the review have happened as scheduled, the deal would not look as good as it might look given time for China to catch up on purchases they’re required to make under the agreement. More time allows them more spending and sets the negotiation in a more positive light, as currently, it doesn’t appear China is complying as they only completed 25% of the purchases to which they’d committed. Giving them extra time and reviewing later may set this in a better light and give both sides more confidence to go forward with continued agreements in the negotiation. It should also be said, that a more successful deal will be better received by the U.S. and could have more of an impact during the U.S. election.
The delay also allows the Chinese time to discuss unrelated trade measures being actioned against Chinese tech companies as U.S. executive orders have banned some transactions.
Last night, another executive order (Executive Order 13936) was recorded to confirm, “Special Administrative Region of Hong Kong (Hong Kong) is no longer sufficiently autonomous to justify differential treatment in relation to the People’s Republic of China (PRC or China) under the particular United States laws and provisions thereof set out in this order.”
In addition to the EO, the U.S. Customs and Border Protection recently declared effective September 25, imported goods which were produced in Hong Kong must now be marked to indicate China is the country of origin. This also means that goods produced in Hong Kong will be subjected to Section 301 tariffs that impact Chinese exports. Information regarding the new country of origin rules is covered in 19 USC 1304 and can be found here.
The relationship between the U.S. and China is the most critical in global trade at the moment when everyone is watching to see where we all go from here. Your representatives at Edward J. Zarach & Associates have a unique understanding regarding the fast-moving changes between our nations. We know it’s difficult to work in an environment in flux, but our expertise can help you plan and navigate the period between now and the review. If you have import cargo from China and want to make sure your supply chain is protected from a rapidly changing environment, reach out to us and let us help you stay competitive regardless of the political side.