Like so many other U.S. industries, the U.S. vaping industry is now in the crosshairs of a 25% tariff on products imported from China. The first two waves of proposed tariffs against China covered about $50 billion worth of Chinese products, but did not include vaping products. After China retaliated and proposed its own equivalent tariffs on an estimated $50 billion worth of U.S. products imported into China, President Trump proposed a third list of China products to cover an additional $200 billion in imports from China. This third list targets vaping devices, vaping parts, and batteries from China. Because our law firm represents many companies involved in various aspects of the vaping industry we are hearing a handful about how these tariffs will “decimate” this nascent industry.
The U.S. vaping industry is indeed exposed to these tariffs. Though much of the e-liquid used for vaping is made in the United States, almost all vaping hardware is imported from China. Some have noted that there are no U.S. companies that produce any vaping hardware products. We are hearing of how many vape shops will be unwilling or unable to pay the extra 25% tariffs because they do not believe they will be able to pass these extra costs on to their customers. If proves true, the vaping industry will be decimated.
Fortunately, there is still time for vaping companies to seek a tariff exemption for certain vaping products. The U.S. Trade Representative will accept comments until September 6 on whether entire categories of products listed on the third wave of proposed tariffs — the $200 billion in imports from China — should be exempted. There likely will be yet another chance to make more product-specific exclusion requests later in the fall.
For an exclusion request to have a realistic chance of being granted, vaping companies should address the following factors:
- A description of the physical characteristics (dimensions, material composition, etc.) of the particular vaping products and the 10 digit subheading of the HTSUS tariff category applicable to those products.
- Whether the particular vaping product is available only from China. In addressing this factor, requesters should address specifically whether the particular vaping product and/or a comparable product is available from sources in the United States and/or in third countries.
- Whether imposition of additional duties on the particular vaping product would cause severe economic harm to the requester or other U.S. interests.
- Whether the particular vaping product is strategically important or related to “Made in China 2025” or other Chinese industrial programs.
- Requesters must provide the annual quantity and value of the Chinese-origin product the requester purchased in each of the last three years. If precise annual quantity and value information are not available, USTR will accept an estimate with justification.
- Requesters may also provide any other information or data they consider relevant to evaluating their request.
The process for reviewing and deciding on these exclusion requests will not result in an immediate decision, but the hope is that a favorable decision eventually will allow for refunding the tariffs paid. The goal is to have the USTR review the comments and grant exclusions, particularly for products that can only be sourced from China.
Many opposing comments and exclusion requests have been submitted for the first two waves of proposed China tariffs. Many of the opposing comments have noted how the proposed tariffs on Chinese products have nothing to do with Chinese practices of stealing or extorting intellectual property from U.S companies, which are the reasons claimed for invoking the China tariffs in the first place. Many have also objected to how these tariffs are not likely to change how China respects intellectual property rights, but will have a catastrophic effect on certain American companies. What was a booming U.S. vaping industry now faces going bust with the proposed tariffs. If you are in the vaping industry, now is the time to do what you can to prevent this.
