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 four 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. On May 17, 2019, the USTR announced a possible additional 25% duty on goods with an annual trade value of $300 billion; comments from interested persons are may be submitted before the public hearing on June 17; after that, post-hearing comments can be submitted for 7 days. Therefore, the tariffs could not be imposed until June 24.

The first, second, and third 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 25% tariff (it was increased from 10% in May or June, depending on time of export and time of entry). Though it was originally set to increase from 10% to 25% on January 1, then March 2, then, later in February it was announced that the increase would be indefinitely delayed while trade talks with China continued. However, in May 2019, trade talks with China significantly broke down resulting in the increase in the duty rate.

The first through third stages (Lists 1 through 3) are currently set to increase from 25% to 30% on October 15, following a notice and comment period. The USTR news release is here. There is an opportunity for comment, but it appears to be a fait accompli based on the text of the new release linked above.

A fourth stage was initially proposed on May 17, 2019 as a result of that breakdown, with a 25% tariff on $300 billion in annual trade value. On August 1, President Trump announced that effective September 1, 2019, the tariffs would be imposed at a 10% rate. It was later announced that List 4 would be split into List 4A and List 4B, with a 10% duty set to take effect for List 4A on September 1, and for List 4B on December 15. Subsequently, the President instructed the USTR to increase the rate from 10% for both lists to 15%, with the same effective dates. As of December 18, the List 4B has been suspended from having effect and list 4A is to be reduced from 15% to 7.5% “in the near future

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, second and now third, stages allow (or did allow) importers to request an exclusion. The exclusion process for the first stage closed on October 9, 2018.

The ability to request exclusions for the first and second stage have closed, even though some exclusions continue to be reviewed and granted for now.

An exclusion program for the third stage ended September 30, 2019. An exclusion program for List 4A opened October 31, 2019 and closes on January 31, 2020.

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

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).

Many exclusions have been granted. When an exclusion is granted, it is granted universally no matter who the producer or exporter of the product is. 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 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

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: December 18, 2019 at 9:49 am. For legal advice, please contact us for a consultation.

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