Section 301 Tariff Exclusions (China)

Section 301 Tariffs against China imports

President Trump announced a series of Section 301 tariffs against numerous goods imported into the United States from China. These Section 301 “Trump Tariffs” resulted from an investigation started by the United States Trade Representative (USTR) in August of 2017. The USTR issued a long report with its findings and recommendations on March 22, 2018. The report can be read here.

The tariffs were imposed in a series of three stages. Each stage was designed to add increased pressure against China in order to punish, or at least counter-act, unfair trade practices related to technology transfer, intellectual property, and innovation by China.

The first stage involved goods with an estimated total annual trade value of $34 billion; the second stage was for goods valued at $16 billion; the third stage is for goods valued at $200 billion. The President has indicated there may be a fourth stage yet to come, but there has been no official proposal on what might be involved.

The first and second stage tariffs increased the duties on certain products by 25%. The products affected depends on their classification in certain “subheadings” of the tariff schedules.

The third stage has a 10% tariff (as of the time this page was last updated), but it will increase to 25% on January 1, 2019.

In total, 6,866 tariff subheadings are affected by the Section 301 Trump Tariffs against China.The USTR maintains a helpful summary of the status of all Section 301 tariffs, their current status, and lists of subheadings affected HERE.

To date, the fact that these tariffs might only end-up hurting domestic industries is getting a lot of attention (there is a lot of tariff activity). There seems to be little awareness or recognition — both with importers and the news community as a whole — that there is very large loophole in both new tariffs: exclusions.

Section 301 Exclusion Requests

The section 301 tariffs for the first and second stages allow importers to request an exclusion. The exclusion process for the first stage closed on October 9, 2018.

The exclusion requests for the second stage are due by December 18, 2018.

There has been no announcement of an exclusion program for the third stage yet, which seems to imply that there will be no exclusions allowed for the tariffs imposed on the subheadings of the third stage. I suspect that if an exclusion program is announced, it will be done so after the rate increases to 25% sometime after January 1. It may also come (or not come) after the U.S. has time to assess the impact on the Chinese and United States economy.

Exclusion requests should be filed by the importer or another interested party who purchases the product in the United States, such as a trade association. The USTR asks that each exclusion address the following:

  • If the product is available in the United States
  • If the duty will cause severe economic harm to the requester or other U.S. interests
  • If the product is strategically important to China’s “Made in 2025” program

There are more details about how to file an exclusion here. The USTR will also consider other rationale for granting a section 301 exclusion request. If an exclusion for a specific product is granted to an importer, any other importer may then rely on that exclusion to import that specific product even if from a different producer or exporter (more on that in the FAQ for the second round).

Most exclusion requests are still pending review. Some have been denied, but none have been granted. The exclusion review process consists of several stages (source):

Pre-Posting Stage – Format Review Review of whether the exclusion request conforms with the instructions provided in Product Exclusion Notice, including whether the request includes all required information.  Requests that pass the Format Review will be posted on the regulations.gov docket, and proceed to Stage 1.  Requests that do not pass the Format Review must be resubmitted.
Stage 1 – Public Comment Period As provided in the Product Exclusion Notice, interested persons will have 14 days from the date a request is posted on the docket to respond to the request.  If a response is submitted, the requester will have 7 days to reply to the response.  At the close of the public comment period, the request proceeds to Stage 2.
Stage 2 – Initial Substantive Review Initial Substantive Review of whether the exclusion request should be granted, based on the substantive criteria set out in the Product Exclusion Notice.  Requests that pass the Substantive Review will proceed to Stage 3.
Stage 3 – Administrability Review Based on consultations with U.S. Customs and Border Protection (CBP), the request is further reviewed to determine whether an exclusion would be administrable.  Requests that pass the administrability review will proceed to Stage 4.
Stage 4 – Publication in Process The exclusion has been granted and  will be prepared for publication in the Federal Register.  Exclusions are effective starting from the July 6, 2018 effective date of the additional duties, and extend for one year after the publication of the exclusion determination in the Federal Register.
Denied Letter to the requestor posted on Regulations.gov

Importers may be in a panic about the new tariffs; they should not. They should calmly consider requesting exclusions for the products so that the new tariffs will not apply to them, and they will not be required to pay the extra duties. Although the exclusion process can be done by anyone, as always, hiring an experienced attorney to advocate for the exclusion of the particular products will help to ensure the best result possible.

Warning: This information on this page is subject to our general disclaimer, and only current through Last updated: October 3, 2018 at 16:06 pm. For legal advice, please contact us for a consultation.

Want to discuss a possible 301 exclusion?

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