Just this month, on July 9, 2019, the United States Trade Representative ("USTR") published another set of exclusions for certain products subject to an additional 25% duty imposed on $34 billion worth of goods from China under Section 301 of the Trade Act of 1974.1 This is the sixth round of exclusions granted for products subject to the $34 billion action, also known as "List 1" products. For more information on the tariffs on Chinese imports, please see our previous article.
The product exclusions announced in this latest notice are retroactive to July 6, 2018 and will remain in effect until July 9, 2020. The exclusions cover over 100 products, including: heat exchangers, water tanks for steam boilers, motor vehicle oil pump housings, humidistats, certain surgical instruments and appliances, coagulators, and others. For the full list of products excluded from the additional 25% duty, please refer to the Annex of the Federal Register notice. Importers should review the list of excluded products to determine if they are eligible for refunds of any tariffs paid on such products since July 6, 2018.
The USTR is still accepting exclusion requests for products subject to the trade action on $200 Billion of Chinese goods, also known as "List 3" products. Tariffs on List 3 products increased from 10% to 25% on May 10, 2019,2 and the USTR published a process for requesting an exclusion on June 24, 2019.3 The USTR will accept List 3 exclusion requests until September 30, 2019. Any interested parties, including importers, should submit a request.
Exclusion requests are made public and are available for public commentary. Upon approval, an exclusion request will apply retroactively from September 24, 2018, the date the original 10% tariffs were imposed, and remain for one year from the date the exclusion is granted. The USTR will determine an exclusion on a product basis and not based on an individual request. In other words, once approved, a product exclusion will apply to all similar products and for all individuals – regardless of who initially filed for the exclusion. Before filing for an exclusion request, the requestor should gather the following:
- Contact information – Requests must include the contact information of not only the organization making the request, but also the information of any third party – such as a law firm – helping the requestor. On the application, requestors may designate the primary point of contact as either the requestor the third-party submitter.
- 10-Digit Subheading of the Harmonized Tariff Schedule of the United States ("HTSUS") – The HTSUS is the classification system used for imported goods. It is imperative that companies accurately identify the HTSUS code of the product for which they are requesting an exclusion.
- Detailed Description of the Product – The requestor should provide the product name and its description. The description should be as detailed as possible.
- Rationale – The rationale for exclusion should be detailed and must address the following: 1) product availability – whether the product is available only from China, 2) economic harm – whether the duties on the particular product will cause severe economic harm, and 3) relationship to any Chinese industrial programs – whether the product is important or related to programs such as "Made in China 2025."
Once the request is processed, the USTR will make the request publicly available on its online Exclusions Portal. Any interested persons may respond to the request – to offer support or opposition – within 14 days of the posting of the request. There is no requirement to register within the Exclusions Portal to respond to a posted exclusion request. Like the requests, the responses will also be publicly available. The original requester will have seven days to reply to any responses.
After the public comment period ends, the USTR will review the request and determine whether an exclusion should be granted. The stages of review are summarized below:
- Stage 1 – Public Comment Period – During this stage, the public is welcome to respond to posted requests, and the requestor may reply to any responses. At the end of the stage, the request will automatically proceed to Stage 2.
- Stage 2 – Initial Substantive Review – At this stage, the USTR will review the request based on the criteria in the June 24 Federal Register Notice describing the List 3 exclusion request process. If the request passes this stage, then it will proceed to Stage 3.
- Stage 3 – Administrability Review – Based on consultations with U.S. Customs and Border Patrol, the USTR will determine whether an exclusion would be administrable.
- Stage 4 – Publication in Process – If an exclusion has been granted, then it will be submitted for publication in the Federal Register.
All approved exclusions will be published in the Federal Register. If the request is denied, the USTR will notify the original requestor.
For more information on Section 301 tariffs, including how to file an exclusion request and how to apply for tariff refunds, please do not hesitate to contact us.
1 Notice of Product Exclusions: China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 84 Fed. Reg. 32,821 (July 7, 2019), available at https://ustr.gov/sites/default/files/enforcement/301Investigations/Notice_of_Product_Exclusions.pdf.
2 Notice of Modification of Section 301 Action: China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 84 Fed. Reg. 20,459, (May 9, 2019), available at https://ustr.gov/sites/default/files/enforcement/301Investigations/84_FR_20459.pdf.
3 Procedures for Requests To Exclude Particular Products
From the September 2018 Action Pursuant to Section 301: China's
Acts, Policies, and Practices Related to Technology Transfer,
Intellectual Property, and Innovation, 84 Fed. Reg. 29,576 (June
24, 2019), available at https://ustr.gov/sites/default/files/enforcement/301Investigations/Procedures_for_Requests_to_Exclude_Particular_Products_
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.