United States: Automotive Companies Impacted By Expanded Section 301 Tariffs Given Possibility Of Product-Specific Exclusions


The latest announcement of new Section 301 tariffs on imports from China contained an unwelcome surprise for the U.S. automotive sector. In addition to the announcement of a potential Section 232 tariffs or other trade measures on imported automobiles and automotive parts (an investigation that is still ongoing), the Trump Administration now has announced a list of $200 billion in special Section 301 tariffs on over 6000 types of products imported from China. And to add further to the import-related misery, the Trump Administration then upped the ante by increasing the potential duties on the $200 billion of new annual trade from 10 to 25 percent, thereby proposing a new tax on imports in the range of $50 billion per year.

To help automotive companies navigate this new likely tax on imports, this update describes the current state of play for the Section 301 tariffs and outlines strategies that importers and consumers of Chinese goods, parts, and components can take to help deal with the three rounds of Section 301 tariffs.


The Trump Administration has imposed duties under Section 301 of the Trade Act of 1974 to counter what the Administration claims is China's forced technology transfer rules and other industrial policies that are designed to give Chinese companies access to the R&D and business know-how of U.S. companies that operate in China. Under the Section 301 process, these special tariffs are imposed on entire categories of merchandise, as defined by the 10-digit harmonized tariff system code.

The U.S. Trade Representative has announced a Section 301 tariff exclusion process, which allows U.S. companies to petition the government for specific products to be exempted from the duties. This exclusions process allows companies to argue that their own, specific imports should be exempted from the special 25 percent ad valorem tariffs.

The U.S. Trade Representative has indicated that in determining which requests to grant it will consider a number of factors, including whether the product in question is available from non-Chinese sources and whether the new 25 percent Section 301 tariff would cause "severe economic harm" to the importer or other U.S. interests. The process here will be open only for a limited time. Companies seeking exclusions must file the request within ninety days (i.e., by October 9, 2018).1 Following a public posting of the request on Regulations.gov (under docket number USTR-2018-0025), the public will have fourteen days to file a response to the request. After the close of that fourteen-day period, any interested person will have any additional seven days to reply (either in support of or in opposition to the request).2

If the U.S. Trade Representative issues an exclusion for List 1, it will apply for one year (retroactive to July 6th).3 This means that companies that are filing an exclusions request while actively importing the product should carefully keep track of all entries, since they may need to seek a refund on an individual-entry basis of any section 301 tariffs paid should the exclusion request succeed. In all likelihood, a similar exclusions process will be set for Lists 2 and 3.

Any exclusion request "must specifically identify a particular product, and provide supporting data and the rationale for the requested exclusion." Specifically, the request "must include the following information":

  • The ten-digit subheading of the HTS applicable to the exclusion request.
  • Identification of the particular product "in terms of the physical characteristics (e.g., dimensions, material composition, or other characteristics) that distinguish it from other products within the covered 8-digit subheading."
  • The "annual quantity and value of the Chinese-origin product that the requester" or trade association purchased "in each of the last three years."
  • A certification that the information submitted is complete and correct.4

In addition, each exclusion request "should address" the following factors:

  • Whether the particular product is available only from China. In addressing this factor, requesters should address specifically whether the particular product and/or a comparable product is available from sources in the United States and/or in third countries.
  • Whether the imposition of additional duties on the particular product would cause severe economic harm to the requester or other U.S. interests.
  • Whether the particular product is strategically important or related to "Made in China 2025" or other Chinese industrial programs.5

Notably, the USTR specifically states that it "will not consider requests that identify the product at issue in terms of the identity of the producer, importer, ultimate consumer, actual use or chief use, or trademarks or tradenames."6 These restrictions will make it difficult or impossible to argue that companies that import from affiliates, subsidiaries, or joint ventures located in China should be exempted solely because the company brings over branded products or those that it has tailored to its own use in downstream production. Instead, companies will need to develop information grounded in the general product characteristics to support an exclusions request.

Automotive companies that import products from China should carefully review the various lists of products to determine whether their imports are covered by the imposed or prospective tariff lists. Companies also should evaluate whether they have valid reasons to seek an exclusion. Potential winning arguments can include the lack of any U.S. or non-Chinese suppliers of certain components, the need to import specialized forms of the merchandise that are not reasonably available from other sources (such as material made with dedicated tools and dies), a national security interest in the use of the product imported from China, the support of large downstream U.S. value added by the Chinese imports, the support of a large amount of downstream product exports, the lack of any connection of the particular Chinese imports with any of the alleged Chinese intellectual property intrusions, that the particular imports are not "strategically important or related to the 'Made in China 2025,'" or any demonstrable economic hardship flowing from the tariffs, particular for small- and medium-sized firms.

Coping with the Section 301 Tariffs

In addition to looking for opportunities to request a section 301 exclusion, or to comment on the latest round of tariffs, automotive-sector companies should consider evaluating these trade strategies to mute the impact of these tariffs:

  • Evaluate When Acting As Importer of Record. Although the section 301 tariffs are aimed at Chinese manufacturers, the duties imposed actually are collected from the importer of record as a percentage of the ad valorem value of each entry of the subject merchandise. Companies need to be aware of contractual arrangements where they have agreed to be the importer of record or have agreed to reimburse for the payment of any Customs duties.
  • Establish Contingency Measures in Long-Term Supply Agreements. Companies highly reliant on imported goods need to evaluate whether their long-term contracts cover the contingency of which party acts as the importer of record, the delivery terms (terms of delivery like CIF and FOB can impact who is responsible for paying for duties), whether reimbursement of duties occurs, whether the possibility of increasing tariffs is even addressed, and whether the parties have the right to terminate the contract based upon the imposition of unanticipated duties.
  • Check Entries Carefully Against the Three Tariff Lists. The new procedures announced by Customs depend upon self-classification of goods under the new section 301 rules. Failure to properly declare the new tariff classification where required will result in both a back-bill for the duties owed (and any interest), but also additional penalties. Relying on customs brokers or freight forwarders to handle the new duties without oversight often can be inadequate, as these third parties generally are not given the responsibility of knowing what products are planned for importation. Once the goods have reached the customs territory of the United States, it is too late to do anything because the duties become owed upon entry.
  • Know the Correct Classification of Entries. Section 301 duties are imposed based upon the HTS tariff line. Thus, the liability for duties pre-supposes and accurate HTS classification. In any situation where entries are in a gray area, special attention should be paid to get the classification correct and determine whether the good falls within the scope of the order. Some orders have complicated scopes that can make classification, such as the aluminum extrusions order (which is the subject of approximately eighty scope determinations by the DOC). If certainty is not possible through self-classification, importers should consider filing a request for an advisory opinion to get a binding ruling from Customs.
  • Be Aware of Potential Circumvention Red Flags. Because duty rates can be high, some less scrupulous exporters will misclassify their goods, such as by claiming different product attributes or classifications than in fact exist, by claiming an erroneous country of origin, or otherwise. Any importer noticing red flags that indicate potential circumvention should check into it before CBP does.
  • Conduct a Risk Assessment Review of Critical Supply Contracts that May Be Impacted. Work with the company's sales and procurement teams to identify key long-term contracts and purchase orders that will be impacted by the new section 301 tariffs. Specific contract terms that should be examined include provisions that pertain to: (a) raw materials increases and any applicable pricing formulas; (b) other requests for cost increases; (c) force majeure; (d) notice requirements; and (e) termination rights.
  • Investigate Alternative Sources of Supply. As noted above, the duties are based upon the country of manufacture, not whether the products are directly exported from China. If there are alternate sources available, the company many work to line up and qualify a replacement supplier.

As with any raw materials or component cost increases, these tariffs will create many issues across the automotive-sector manufacturing supply chains. Automotive-sector companies likely will see an impact from these new tariffs, including:

  • The exercise of any applicable price adjustment clauses in supply contracts;
  • Unilateral demands for price increases or for price surcharges;
  • Demands that consumers take over responsibility for duties, including through shifting responsibility for which company acts as the importer of record;
  • Product shortages and allocation issues;
  • Claims of commercial impracticability under U.C.C. § 2-615;
  • Claims of force majeure and the exercise of force majeure provisions in contracts (particularly if the force majeure clause contains broad catch-all language such as "or any other events or circumstances that may affect the Company's ability to deliver products");
  • Refusals to ship product that could trigger duties; and
  • Court challenges and international arbitration actions in the case of international supply contracts.

When any of these issues arise, Foley has resources to help. Foley's International Trade & National Security attorneys have been representing both U.S. and foreign companies in international trade proceedings, dating all the way back to the last international trade war of the 1980s/1990s. Foley's Automotive Industry Team represents automotive-sector companies in a wide range of supply chain matters, including drafting contracts commonly used in the manufacturing and automotive industries and litigating supply chain disputes. For questions about supply chain disputes arising from the section 232 and 301 tariffs, please contact the authors of this update.


1 Office of the United States Trade Representative, "Procedures to Consider Requests for Exclusion of Particular Products from the Determination of Action Pursuant to Section 301: China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation," 83 Fed. Reg. 32,181, 32,182 (July 11, 2018), https://www.gpo.gov/fdsys/pkg/FR-2018-07-11/pdf/2018-14820.pdf.

2 Id.

3 Id.

4 Id.

5 Id.

6 Id.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions