Introduction

On 6 July 2018, the implementation day for the Section 301 List 1 duties, the United States Trade Representative (USTR) released the procedures for filing exclusion requests for List 1 products subject to the 25% tariff pursuant to Section 301 of the Trade Act 1974.

On the same day, China confirmed its retaliatory tariffs, prompting the Trump administration to publish a new list of products (List 3), proposing an additional 10% tariff on 6,031 product lines worth approximately $200 billion.

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.

List 1 and List 2: current and proposed 25% tariffs

Pursuant to the findings based on Section 301 of the Trade Act (19 USC §2411), on 15 June 2018 the USTR released two product lists that would be subject to an additional 25% ad valorem tariff (for further details see "USTR publishes final Section 301 duty list with eye towards adding more"):

  • List 1 covers 818 product lines worth approximately $34 billion in Chinese imports and has been in effect since 6 July 2018 (provided as Annexes A and B to the 15 June 2018 Federal Register notice).
  • List 2 covers 284 product lines worth approximately $16 billion in Chinese imports and is currently undergoing review through a public notice and comment process, which included a hearing on 24 July 2018 (provided as Annex C to the 15 June 2018 Federal Register notice).

According to the procedures outlined in the USTR's 6 July 2018 notice, granted exclusions for List 1 products will apply retroactively to the date on which the additional duties were imposed (ie, 6 July). Exclusions for List 1 products will be valid for one year after the publication of the determination in the Federal Register. Exclusion requests must be filed by 9 October 2018.

All exclusion requests for List 1 products must include the following information:

  • identification of the particular product in terms of the physical characteristics (eg, dimensions, material composition or other characteristics) that distinguish it from other products within the covered eight-digit subheading;
  • the 10-digit subheading of the Harmonised Tariff Schedule of the United States (HTSUS) applicable to the particular product requested for exclusion;
  • information on the US Customs and Border Protection's ability to administer the exclusion; and
  • the annual quantity and value of the Chinese-origin product that the requester purchased in each of the past three years. If precise annual quantity and value information are not available, an estimate must be provided, as well as an explanation of the estimation.

The USTR has confirmed that it wants targeted exclusions and has recommended that parties seeking exclusions for their products submit separate requests for each 10-digit HTSUS subheading covering products for which exclusions are being sought. USTR officials have noted that this is the preferred manner for submitting requests, even if it results in repetitive requests for similar products that fall into different HTSUS subheadings.

The USTR will evaluate each request on a case-by-case basis and periodically announce decisions on pending requests. In making determinations, the USTR will consider whether the exclusion would undermine the objective of the Section 301 investigation based on the following criteria:

  • whether the particular product is available only from China (ie, whether the particular product or a comparable product is available from US sources or in third countries);
  • whether the imposition of additional duties on the particular product would cause severe economic harm to the requester or other US interests;
  • whether the particular product is strategically important or related to "Made in China 2025" or other Chinese industrial programmes; and
  • any other information or data that it considers relevant to an evaluation of the request.

Parties may submit public and business confidential versions of exclusion requests. The public version will be posted to docket number USTR-2018-0025 on www.regulations.gov. After the requests have been posted, the parties will have 14 days to file responses or objections to the requests. Any rebuttal comments are due seven days after the conclusion of the 14-day response period.

List 3: proposed 10% tariffs

Published on 10 July 2018, the proposed modification to the Section 301 tariffs via List 3 is a supplemental action. It maintains the 25% ad valorem tariff on List 1 and List 2 products and adds a 10% ad valorem tariff on List 3 products.

List 3 consists of approximately 6,031 product lines defined at the eight-digit subheading of HTSUS in the attached annex. The proposed tariffs apply only to goods of Chinese-origin and cover products and parts within 81 chapters of the HTSUS (ie, Chapters 2-5, 7-8, 10-12, 14-17, 19-29, 31-48, 50-60, 65, 67-91, 94 and 96-97). The commodities include:

  • food products (eg, meat, seafood, butter, eggs, vegetables, fruit, nuts, grains and prepared foods);
  • tobacco products;
  • personal care products (eg, soap, shampoo and makeup);
  • chemicals and minerals;
  • petroleum and fuel products;
  • wood products (eg, wood, plywood, boards and building materials);
  • paper products (eg, wood pulp, paperboard and various types of paper);
  • textile materials (eg, wool products, yarns, threads and fabrics);
  • metal articles (eg, precious metals, articles of metals, fasteners and other articles of various metals (eg, iron, steel, copper, nickel and aluminium) and tools);
  • vehicles and automotive items (eg, engines, bodies, auto parts and tyres);
  • machines and appliances (eg, printing machines, cutting machines, drilling machines, sewing machines, washers and dryers, vacuums, heaters, air conditioners and refrigerators);
  • consumer products (eg, handbags, luggage, leather accessories, bicycles, recreational sporting goods and furniture);
  • consumer electronics (eg, certain computer parts and equipment (excluding laptops), telecoms equipment (including Apple Watches)); and
  • optical instruments and appliances.

The Section 301 tariff applicable to List 3 products will not become effective until after a notice and comment period, which will include a public hearing. The USTR's notice includes the following timeline:

  • 27 July 2018 – interested persons must file requests to appear at the hearing, summaries of expected testimony and any pre-hearing submissions.
  • 17 August 2018 – interested persons must file written comments with respect to any aspect of the proposed action, including the specific products covered, the rate of duty and the appropriate aggregate level of trade to be covered by additional duties. The USTR has also requested that comments address whether the tariff will be effective in reducing China's harmful acts, policies and practices and whether the tariff on a particular product would disproportionately harm US interests.
  • 20-23 August 2018 – a public hearing will be held before the Section 301 Committee at the International Trade Commission at 9:30am.
  • 30 August 2018 – parties must submit post-hearing rebuttal comments.

Impact of Section 301 tariff on List 1, List 2 and List 3

Due to the significant potential impact that these additional duties may have on a wide range of products from China, importers are urged to review their imports from China. If they are importing any of the products on List 1, List 2 or List 3, they should consider – at a minimum – filing written comments and possibly appearing at the public hearing.

For further information on this topic please contact David R Hamill, Nancy A Noonan, Teresa Polino or John Gurley at Arent Fox LLP by telephone (+1 202 857 6000) or email (david.hamill@arentfox.com, nancy.noonan@arentfox.com, teresa.polino@arentfox.com or john.gurley@arentfox.com). The Arent Fox LLP website can be accessed at www.arentfox.com.

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