Lutnick Floats 30% Foreign Content Threshold for Transshipment Tariffs
A 40% tariff on transshipped goods could apply to goods that include third-country content above 30%, according to Commerce Secretary Howard Lutnick, speaking on Fox Business Aug. 7.
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When asked to explain the 40% transshipment language found in the recent reciprocal tariff executive order and several country deals, including for Vietnam, he said, "If it's your country, you pay your tariff, and if it actually has like significant content, like 30% from any other country, then it should be taxed at that other country's tariff, and that's a higher tariff, obviously."
Tariffs on Chinese goods vary, with some as low as 30%, but many above 40%, between the most-favored nation tariff, Section 301 tariffs of either 7.5% or 25%, and the 30% total reciprocal and fentanyl tariffs.
This explanation followed Lutnick saying: "So we set a tariff on Vietnam of 20%, but that's for Vietnamese goods. If some other country, let's say China, wants to send things to Vietnam and have Vietnam then sell them to America, that comes with 40%. So China wants to send stuff to America, let's just do it through China -- Let's stop this nonsense of sending it through other countries."
He didn't explain how CBP would determine the country of origin of a good if it had, for example, 29% value from China, 31% from Vietnam, and 40% from Malaysia, but was assembled in Vietnam -- Malaysia has a 19% rate, and Vietnam, 20%.
In the same interview, Lutnick said tariffs on Chinese goods are likely to stay at current levels past Aug. 12.
"I think we're going to leave that to the trade team and to the president to make those decisions. But it feels likely that they're going to come to an agreement and extend that for another 90 days," he said.
Fox Business host Maria Bartiromo asked him if President Donald Trump would impose additional 25% tariffs on Chinese goods due to China's purchases of Russia's oil. He said that the president "hasn't ruled anything out," and that Trump thinks of himself as a peacemaker.
Lutnick elaborated on what the president had said the day before in the Oval Office, that there will be 100% tariffs on semiconductors, but that companies that manufacture chips, or are building fabricating plants to do so, wouldn't pay a Section 232 tariff on imports of chips.
"So what the president said is: if you commit to build in America during his term, and if you file with the Commerce Department, and if your auditor oversees you building it all the way through, then he will allow you to import your chips without a tariff, while you build."