Yesterday the White House announced another round of tariffs on Chinese imports which will become effective September 24, 2018. This round of tariffs (referred to as “List 3”) was proposed in July and includes human and animal foods and ingredients, cosmetics, and thousands of other products. The original list has been reduced from 6,031 tariff lines to 5,745. Removed products include some consumer electronics, chemicals, and health and safety products. The tariffs will start at 10% next week and move up to 25% on January 1, 2019.
Exclusion Process Expected for List 3
Importers and other interested parties may be looking to the exclusion process to rescue them from the substantial tariffs imposed on the Section 301 tranches. As we reported previously, companies, trade associations, or any interested party, can submit exclusion requests for products on List 1’s 25% tariffs by October 9, 2018. Over 1,000 such requests have been submitted as of last week, with no determinations made on any of the requests.
USTR announced this week that interested parties will be able to follow a similar process to request exclusions for List 2 products (also at the 25% tariff level). Notably, List 2 requesters will have to provide information about the total gross sales of the Chinese-origin product relative to total sales in 2017 and, for component parts, information about the Chinese-origin’s contribution to the total cost of the final product. Those product exclusion requests must be submitted by December 18, 2018.
Although recent announcements about List 3 have been silent as to possible exclusions, we expect a process very similar to those for Lists 1 and 2 to be announced soon. We predict those exclusion requests will be due sometime in February 2019.
USTR’s 2-Page Tariff Exclusion Request Form: A Pathway to Failure
While filing an exclusion request may be a valuable part of a tariff management strategy, simply filling out the exclusion request form without providing more is a pathway to failure. The USTR has published a two-page form for submitting an exclusion request from the Section 301 tariffs on Chinese origin goods.
But simply filling out and filing that form is not likely to result in an exclusion from the tariffs. In fact, all that making that form available may do is give USTR adequate political cover to say that there is a process for seeking exclusions, while not actually providing a meaningful pathway to tariff relief.
If the USTR process is anywhere close to that of the Commerce Department’s process for the Section 232 tariffs on steel and aluminum, then there will be thousands of denied requests. The fact that the tariffs will put some companies out of business is a sad one, but not necessarily a sufficient one for USTR to grant an exclusion. And it makes sense that USTR would publish a template for failure. USTR has been instructed to establish the tariffs to have as wide an effect as possible to achieve an impact affecting a certain value of trade with China. Granting any exclusions runs directly counter to the mandate. So if you want an exclusion for your product and have hired someone to simply fill in the USTR form (or did it yourself) you’re probably wasting your money and your time. You should use both for preparing yourself for the 10-25% hit to your costs of materials from China.
Affiliated Customs Attorney Jessica Rifkin explains, “because the tariffs are meant to cause economic pain, and because the USTR must wade through hundreds or thousands of exclusion applications, simply filling out the USTR form will not be enough to obtain an exclusion – successful applicants will need to provide additional factual analysis and a compelling policy argument.”
Our affiliated attorneys, who deal with highly regulated commodities, have spent years successfully crafting these types of arguments and presenting them to federal agencies. In particular, they have successfully obtained exclusion of goods from tariffs in proceedings before U.S. Customs and Border Protection and the U.S. Department of Commerce. Contact us today and we’ll help you evaluate your options.
