On May 21, 2019, the Office of the United States Trade Representative (USTR) published a Federal Register notice requesting comments on the proposed exclusion process for List 3 of the Section 301 tariffs on Chinese imports.
Comments on the USTR’s proposal are due June 7, 2019 and USTR plans to open the window for interested parties to submit exclusion requests on or around June 30, 2019.
Among various changes to the exclusion process for List 3, the proposal appears not to include a mechanism for applicants to designate specific information requested, e.g. company’s gross revenue and recent purchasing values and volumes, as business confidential in the current form. It is unclear at this time if omitting information requested but not identified as “required,” would allow USTR to not consider the request since estimates are allowable for certain fields, although these appear to be limited to when actual information is not known. Unlike the exclusion process for List 1 and List 2, the new process for List 3 exclusions does not permit parties to submit written arguments in an attachment to the USTR’s standard form, but rather all arguments must be submitted on the form itself.
Section 301 List 3
Section 301 List 3 covers $200 billion worth of Chinese goods and 5,745 product lines defined at eight-digit level of the Harmonized Tariff Scheduled of the United States (HTSUS). Pursuant to a May 9, 2019 notice published by the USTR, the tariff rate applicable to List 3 was increased from 10 percent to 25 percent on May 10, 2019. This notice clarified that List 3 goods already in transit from China before May 10 and entered prior to June 1 will be subject to the 10 percent duty rate rather than the higher 25 percent rate. However, goods exported and entered on or after May 10 will be assessed the 25 percent rate, as will all goods entered on or after June 1, regardless of export date. Please see our previous alert for additional information on List 3.
Proposed Exclusion Process for Section 301 List 3
The proposed exclusion process for List 3 requires use of a standard exclusion request form similar to that used in the List 1 and List 2 exclusion process, but adds multiple questions and new constraints. As with the prior Section 301 exclusion processes, the proposed List 3 exclusion process would include a 14-day comment period after an exclusion request is posted, followed by a 7-day rebuttal period. Similarly, the proposed the List 3 exclusion process would still require providing:
- 10-digit HTSUS subheading
- Detailed product description (e.g., dimensions, material composition, weight, function, etc.)
- Annual quantity and value of the Chinese-origin product that the requester purchased in each of the last three years
- Percentage of gross sale or total cost that subject import accounted for
- Information relating to the product’s availability, economic impact, and relation to “Made in China 2025” or other Chinese industrial programs
However, the new aspects of the proposed exclusion process would include:
- No reference to a mechanism for designating responses to questions within the form as business confidential information
- All arguments must be included in the form, and separate written arguments are not allowed
- Questions relating to List 1 and List 2 exclusion request submissions, including whether parties have submitted past requests
- Annual quantity and value of the product that the requester purchased from third party sources in each of the last three years
- Annual quantity and value of the product that the requester purchased from domestic sources in each of the last three years
- Requestor’s gross revenue information for 2018 and 2019
- Additional contact information, including the importer of record
Commenting on Proposed Exclusion Process for List 3
Comments on the proposed exclusion process for List 3 are due by June 7, 2019, and should be submitted to Office of Information and Regulatory Affairs at OMB either by:
- Mail to 725 Seventeenth Street NW, Washington, DC 20503, Attention: USTR Desk Officer
Preparing for the Implementation of the List 3 Exclusion Process
Per the May 21 notice, USTR plans to implement an exclusion process for List 3 on or around June 30, 2019. Companies are urged to be strategic in considering a request for exclusion as there are several factors to be considered apart from the data required.
Arent Fox has developed an internal process to help clients efficiently apply for List 3 exclusions, as well as a program to determine the impact from Section 301 tariffs on companies and assist them in developing strategic duty mitigation alternatives.
Status of List 1 and List 2 Exclusion Requests
The previous exclusion processes included 10,834 exclusion request submissions for List 1 and 2,920 exclusion request submissions for List 2. As of May 17, 2019, the status of these requests is as follows:
|STAGE 1||STAGE 2||STAGE 3||GRANTED||DENIED|