On July 6, 2018, the U.S. Trade Representative (USTR) Robert E. Lighthizer announced a new procedure for parties to request so-called product exclusions from the 25% tariff that the USTR has imposed on imports of certain Chinese goods. The new procedure will be published in the Federal Register this week. Interested parties have until October 9, 2018 to request a product exclusion. Requests will be considered on a case-by-case basis but the USTR has indicated that exclusions will provide tariff relief principally where: (1) the product is only available in China; (2) duties would cause “severe economic harm;” or (3), the product is not strategically important or related to Chinese industrial programs including, in particular, “Made in China 2025.”
This client alert: (1) provides background on the Section 301 tariff; (2) explains when and how the tariff applies; (3) describes the new procedure for obtaining product exclusions; and (4) provides recommendations for preparing to seek product exclusions requests.
In August 2017, the USTR exercised its authority under Section 301 of the Trade Act of 1974 (Section 301) to: (1) investigate the government of China’s acts, policies, and practices –particularly those related to technology transfer, intellectual property, and innovation; and (2) determine if such policies and practices were actionable under Section 301. The USTR solicited comments on this subject in March 2018, proposing that additional import duties be imposed on a preliminary list of approximately 1,300 Chinese products (see 83 Fed. Reg. 14906). After a notice and comment process and an interagency review, on June 15, 2018, the USTR issued a notice of action that imposed an additional ad valorem duty of 25% on a final list of approximately 800 Chinese-origin products.
The USTR removed approximately 500 products from the preliminary list before imposition of the tariff because of comments that certain products should be removed from the list because: (1) those specific products were only available from China; (2) the imposition of additional duties on those products would cause severe economic harm to U.S. interests; or (3) those specific products were not strategically important or related to the “Made in China 2025” program. As noted below, these criteria are also relevant to whether a product exclusion should be granted.