Following a rapid deterioration in US-China trade negotiations, the US Trade Representative (USTR) this morning published an official notice in the Federal Register that it is increasing to 25 percent from 10 percent tariffs levied across $200 billion worth of Chinese-origin imports.
The $200 billion worth of affected products are reflected in the September 2018 "List 3" collection of HTSUS (Harmonized Tariff Schedule of the United States) codes promulgated under the USTR's Section 301 enforcement action against China for its alleged acts, policies and practices that harm US market access and competitiveness. As of Friday, May 10 at 12:01 a.m. (ET), any product that falls under one of the HTSUS codes on List 3 that was not already exported to the United States will now be subject to a 25 percent tariff. These tariffs affect thousands of different products, from live fish to auto parts. The increase was originally scheduled to become effective January 1, 2019, but was delayed given the progress being made during negotiations. Now, China's alleged backtracking on core concessions has triggered an almost immediate, and previously unplanned, increase.
The notice does provide some potential relief to importers who have already borne the brunt of the 301 tariffs for List 3 products. The near-final paragraph of the notice confirms previous statements by Ambassador Robert Lighthizer that the USTR will open up an "exclusion request" process that allows affected parties to request relief from the administration, similar to the exclusion process that was made available last year for the first $50 billion worth of products tariffed under Lists 1 and 2. Under those exclusion procedures, interested parties could request an exemption from the 301 tariffs for future imports, and receive a refund of previous 301 tariffs paid. While the parameters for the List 3 exclusion process have not yet been released, it is likely the USTR will model them on its previous versions.
An exclusion request must be made on a product-by-product basis, and meet certain criteria set forth by the USTR. So far, the procedure has been slow and unpredictable. Of the approximately 13,700 requests the USTR has received since the first tranche of tariffs went into effect on July 6, 2018, it has granted approximately 1,400 and denied approximately 5,300. While the process may be frustrating and uncertain, the cost of submitting an exclusion request can be relatively low compared to the potential savings should the exclusion be granted. Dentons' team has extensive experience advising clients in connection with the drafting and submission of exclusion requests, and on a wide range of other Section 301 issues, both technical and substantive. Importers of products subject to tomorrow's increase are well advised to take stock of their potential exposure, and to seek counsel to determine whether filing an exclusion request or taking some other remedial measure would serve their interests.
The USTR's May 9, 2019 Notice can be found here.
A list of the products on "List 3" can be found here.
A full record of the USTR's Section 301 actions against China to date can be found here.
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