Health Law Scan

Legal Insights and Perspectives for the Healthcare Industry

On a fourth go-around, the Trump administration has issued another set of proposed tariffs on an additional $300 billion of goods related to China, this time adding a range of commercial goods across industries. With respect to healthcare products, this round affects medical devices and their components, certain chemicals and precursors that can be used in pharmaceuticals and dietary supplements, and other FDA-regulated products. The administration continues to try to use tariffs as a means of balancing the trade deficit with China and to bring the Chinese government to the negotiating table on a longstanding set of issues related to intellectual property (IP), cyber, and technology transfer. There are two steps to the tariff process:

  1. At the proposed stage, parties can submit comments on why the proposed tariffs are damaging to US interests while not addressing the root cause of either the trade imbalance or China’s policies in the IP, cyber, and technology transfer areas. The Office of the United States Trade Representative (USTR) (and other government agencies) will consider the rationale for the comments and factor into the finalization of the tariffs whether the changes proposed in the comments would meet the US government’s objectives. Generally, this administration finds tariffs to be a useful tool, and it is likely that some form of this fourth round of tariffs will be implemented once the comment period ends.
  2. Once the tariffs are implemented, parties can request “exclusions” for their particular products. Exclusions require a party to indicate why application of the tariffs to its product would be damaging to US interests, disrupt the supply chain, significantly adversely affect the industry, or prevent a US company from providing products, services, or technical assistance based on the cost of the products under the tariff. Other fact-specific arguments can also be presented.

Generally, companies can file comments and exclusions through the portal or directly to the USTR. Importers should be aware that the USTR has received thousands of requests for tariff exclusions, resulting in delays in decisions.

From a practical standpoint, the restrictions on changing Chinese manufacturers of devices, device components, drugs, or active ingredients without sourcing from other suppliers currently inspected and approved by FDA, and the nature of contracting with purchasers including GPOs and IDNs, may result in US-based and other device and drug manufacturers finding it difficult to shift responsibility for the increased costs stemming from imposition of the new tariffs.