The Exclusions Granted from Section 301 Tariffs on Certain Chinese Products
The office of the U.S. Trade Representative (the “USTR”) has granted 984 individual product exclusion requests involving 21 separate HTS codes from the additional tariffs of 25% that went into effect on July 6, 2018 on $34 billion worth of imports from China.
- The grant was published on December 28, 2018.
- The product exclusions apply retroactively to the July 6, 2018, effective date of the imposition of the additional duties of 25% on $34 billion worth of Chinese goods and will extend for one year that expires on December 28, 2019.
Notable Products and Companies Covered by the Exclusion
The following products (and other products) are benefited from the exclusion:
- Single-row radial bearings having an outside diameter between 9 mm and 100 mm. Single row radial bearing with a diameter under 9mm or over 100 mm have not been excluded (HTSUS 8482.10.5044, 8482.10.5048, and 8482.10.5052);
- Injection or compression type molds for rubber or plastics (HTSUS 8480.71.80);
- Linear-acting hydraulic engines and motors (HTSUS 8412.21.00);
- Refrigerating or freezing equipment like ice making machines and drinking water coolers (HTSUS 8418.69.01); and
- Thermostats for air conditioning or heating systems (HTSUS 9032.10.00).
- To view the Federal Register Notice with all the excluded product categories, click here.
Among the companies whose requests were granted, there are several well established Chinese companies’ US affiliates and a few well-known non-Chinese multinational companies. These companies’ excluded products include the automotive interiors, automotive plastic mold parts, motor wheel covers, automotive advanced vision technology and safety, connectivity, and efficiency systems for motor, ball bearings, plastic injection molding, and drinking water coolers.
The Product Exclusions Apply to Non-Applicants as Well
It is worth noting that the product exclusions granted or to be granted could be beneficial for those importers who have not submitted any requests for product exclusions. USTR indicated that the tariff exclusions will be made on a product basis and therefore a particular exclusion will apply to all imports of the product, regardless of whether the importer filed a request.
Importers May Request for Refund of Tariffs Imposed
At the end of the partial government shutdown, the U.S. Customs and Border Protection (the “CBP”) will issue instructions on entry guidance and implementation. Any updates to the Automated Customs Environment (ACE) will be implemented 10 business days after the shutdown has concluded. Once CBP issues guidance and implements ACE enhancements, importers may submit request for a refund.
More Exclusions May Be Coming
This is the first release of product exclusions, which could be a good sign for those U.S. importers who have submitted requests and those requests remain pending.
- Based on the updated index of product exclusions requests, more than 10,000 applications have been filed, nearly 10% of requests were granted. The majority of requests are still under review process.
- The additional decisions on product exclusion requests will be announced periodically. Particularly, we noted some exclusion requests from the affiliates of Chinese companies remain pending, which involve certain products such as fiberglass reinforcements and fabrics to the reinforced plastics industry, filtering or purifying machinery for liquids and automotive electric products.
- Criteria for Granting Application for Exclusion Request:
- Whether the particular product is available only from China.
- 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.
Background of Section 301 Tariffs on Certain Chinese Goods
The US goverment has imposed additional duties on imports from China under Section 301 of the Trade Act of 1974 to after USTR’s investigation into China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation.
The punitive tariffs, with an unprecedent scale on Chinese imports, have been implemented in three rounds:
- A 25 percent tariff on Chinese goods worth an estimated $34 billion annually, effective July 6, 2018 (the “List 1 Products”).
- S. companies that are adversely impacted by this tariff can request exclusion from the tariffs by October 9, 2018.
- A 25 percent tariff on Chinese goods worth an estimated $16 billion annually, effective August 23, 2018 (the “List 2 Products”).
- S. companies that are adversely impacted by this tariff can request exclusion from the tariffs by December 18, 2018.
- A 10 percent tariff on Chinese goods worth an estimated $200 billion annually, effective September 24, 2018 (the “List 3 Products”). This rate was scheduled to increase to 25 percent on January 1, 2019, but the increase has been postponed until March 2, 2019.
- USTR has not established an exclusion request process for List 3 Products and many members of Congress have urged the USTR to create a process.
Uncertainty of US-China Trade War
- On January 7-9, an official delegation from the United States led by Deputy U.S. Trade Representative Jeffrey Gerrish held meetings in Beijing with Chinese officials to discuss ways to achieve fairness, reciprocity, and balance in trade relations between two countries. The result of the three days trade talks seems to be largely positive.
- Further talks are possibly set to take place on January 30-31 in Washington, DC. The US delegation is expected to be headed by Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin. The proposed talks, however, may be derailed by the partial shutdown of the US government, the longest in the US history and counting.
Questions to Be Answered
There are a few questions that can be answered only through future USTR guidance and further political development.
- How to request refund for tariffs imposed on the excluded products?
- If the proposed US-China trade talks result in an agreement, will some of tariffs imposed on $250 billion worth of products be refunded?
- If no agreement could be reached after the trade talks, will there be a similar exclusion process for the List 3 Products?
- Any other legal means to challenge the Section 301 tariffs?
- What would happen to the tariffs if President Trump is successfully impeached?