On Friday, July 6, 2018, the United States Trade Representative (USTR) announced a process for U.S. interests to obtain product-specific exclusions from tariffs on Chinese imports as a result of the U.S. investigation into, and response to, China’s IP practices (see attached Federal Register notice). The duties, applied under Section 301 of the Trade Act of 1974, took effect on July 6 and cover an annual trade value of approximately $34 billion. In imposing the new tariffs, USTR focused on “products identified as benefiting from China’s industrial policies, including the ‘Made in China 2025’ program.”
A complete list of products – covering 818 tariff lines – currently subject to the new tariffs (at a rate of 25%) is available here. USTR will consider excluding a particular product within a subheading (but not the tariff subheading as a whole) from the tariffs. Note that USTR is currently considering / accepting public comment on an additional 284 proposed tariff lines. Once finalized, the additional tariffs will likely be accompanied by a similar exclusion process.
In announcing the exclusion process, USTR indicated it received comments that specific products “were only available from China, that imposition of additional duties on the specific products would cause severe economic harm to a U.S. interest, and that the specific products were not strategically important or related to the ‘Made in China 2025’ program.” The new exclusion process was designed to address those concerns.
USTR will accept requests from all interested persons, including trade associations. Each request must specifically identify a particular product and provide supporting data as well as the rationale for the exclusion request. Entities wishing to exclude more than one product must submit a separate request for each product.
In making its determination on each request, USTR may consider whether a product is available from a source outside of China, whether the additional duties would cause severe economic harm to the requestor or other U.S. interests, and whether the particular product is strategically important or related to Chinese industrial programs including “Made in China 2025.” USTR is unlikely to grant a request that would undermine the objective of the Section 301 investigation.
USTR will consider each request on a case-by-case basis. Exclusions will be granted on a product basis, meaning any individual exclusion will apply to all imports of that particular product (not just to products imported by the requestor).
Process / Timeline:
According to USTR’s notice:
- The public will have 90 days to file a request for a product exclusion; the request period will end on October 9, 2018.
- Following public posting of the filed request on Regulations.gov, the public will have 14 days to file responses to the request for product exclusion. After the close of the 14 day response period, interested persons will have an additional 7 days to reply to any responses received in support of or opposition to the request.
- Exclusions will be effective for one year upon the publication of the exclusion determination in the Federal Register, and will apply retroactively to July 6, 2018.
- USTR will periodically announce decisions on pending requests.
Requests as well as responses to requests will be published in a public docket, available at www.regulations.gov/ (docket number USTR-2018-0025).
Each request must include:
- 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. USTR 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. USTR will not consider requests that identify the product using criteria that cannot be made available to the public.
- The 10 digit subheading of the HTSUS applicable to the particular product requested for exclusion.
- Requesters also may submit information on the ability of U.S. Customs and Border Protection to administer the exclusion.
- Requesters must provide the annual quantity and value of the Chinese-origin product that the requester purchased in each of the last three years. (Trade associations should provide such information based on members’ data.) If precise annual quantity and value information are not available, USTR will accept an estimate with justification.
Each request for exclusion 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.
- Requesters may also provide any other information or data that they consider relevant to an evaluation of the request.
USTR has prepared a request form (available here) to facilitate exclusion request filings and strongly encourages its use.
Business confidential information may be submitted, but applicants must also include a public version for posting.