United States: USTR Grants First Product Exclusion Requests From Section 301 Tariffs

Key Points

  • Late on Friday, December 21, 2018, the United States Trade Representative (USTR) quietly announced that it has granted the first product exclusions for products covered by "List 1" of the Section 301 tariffs, effective December 28, 2018. The announcement came three days after the product exclusion requests for products covered by the "List 2" tariffs were due.
  • The granted exclusions cover all products within seven 10-digit subheadings (covering 918 separate product exclusion requests) and 24 specially prepared product descriptions (covering 66 product exclusion requests).
  • Since the exclusions are retroactive to July 6, 2018, and cover all imports of an excluded product regardless of importer, we recommend that importers carefully review the list of excluded products to see whether the exclusions cover any of their imported merchandise.
  • USTR indicated that it will "continue to issue decisions on pending requests on a periodic basis."

Introduction and Background

In March 2018, following its investigation under Section 301 of the Trade Act of 1974 (19 U.S.C. § 2411) ("Section 301"), USTR determined that China's acts, policies and practices related to technology transfer, intellectual property and innovation were unreasonable, discriminatory, and burdened U.S. commerce. Consequently, USTR determined that the United States would impose additional ad valorem duties on certain goods imported from China equivalent in value to the burden or restriction being imposed by China on U.S. commerce.

USTR implemented the additional duties in three stages. First, in June 2018, after a public comment period, USTR imposed an additional duty of 25 percent on 818 product lines covering approximately $34 billion worth of imports from China ("List 1"). U.S. Customs and Border Protection (CBP) began collecting these additional duties on July 6, 2018. Then, in August 2018, after another public comment period, USTR imposed an additional duty of 25 percent on 279 product lines covering approximately $16 billion worth of imports from China ("List 2"). Finally, in October 2018, after an additional public comment period, USTR imposed an additional duty of 10 percent on 5,745 product lines covering approximately $200 billion worth of imports from China. ("List 3"). The duty for the List 3 product lines was initially set to increase to 25 percent on January 1, 2019, but USTR postponed this increase to March 2, 2019, in order to provide additional time for the United States and China to negotiate an agreement to end the Section 301 dispute.

USTR implemented product exclusion processes for products covered by Lists 1 and 2 through which stakeholders could request that USTR exclude particular products classified within a covered Harmonized Tariff Schedule (HTS) subheading from the additional duties described above. USTR asked requestors to specifically address:

  • Whether the particular product is only available in China and specifically whether the particular product and/or a comparable product is available from sources in the United States and/or third countries.
  • Whether the imposition of additional duties on the particular product would cause severe economic harm to the requestor or other U.S. interests.
  • Whether the particular product is strategically important or related to "Made in China 2025" or other Chinese industrial programs.

The deadline to submit exclusion requests for products covered by List 1 was October 9, 2018, and the deadline for List 2 was December 18, 2018. USTR has not implemented a product exclusion process for products covered by List 3.

Overview of USTR Action Granting List 1 Product Exclusion Requests

On December 21, 2018, USTR posted an advanced copy of a Federal Register "Notice of product exclusions" on its website ("Notice") (available here), which announced that USTR granted approximately 1,000 separate exclusion requests under List 1, covering products covered by (i) seven 10-digit tariff subheadings (which cover 918 product exclusion requests), and (ii) 24 specially prepared product descriptions (which cover 66 product exclusion requests). USTR released these exclusions from the List 1 duties for publication three days after the product exclusion requests for relief from the List 2 duties were due. The Notice was published in the Federal Register on December 28, 2018, and is effective as of that date.   

 USTR did not provide specific reasoning for each exclusion; rather, it restated the three factors listed above from its original notice that announced the exclusion process. Notably, USTR's Notice also states that each determination also took into account "advice from advisory committees and any public comments on the pertinent exclusion requests."

USTR granted exclusions from the Section 301 duties for the following seven 10-digit tariff subheadings from the Section 301 tariffs:

  • 8412.21.0075, which covers certain hydraulic power engines;
  • 8418.69.0120, which covers certain drinking-water coolers;
  • 8480.71.8045, which covers certain injection molds;
  • 8482.10.5044, which covers certain single-row, radial ball bearings having an outside diameter of 9 mm but not over 30 mm;
  • 8482.10.5048, which covers certain single-row, radial ball bearings having an outside diameter over 30 mm but not over 52 mm;
  • 8482.10.5052, which covers certain ball bearings having an outside diameter over 52 mm but not over 100 mm; and
  • 8525.60.1010, which covers certain CB radio transceivers.

USTR also created exemptions for 24 specially prepared product descriptions, which it lists in an annex to the Notice. These exemptions cover, among other products, certain spark-ignition marine engines, salad spinners, winches, elevators, belt conveyors, stainless steel products, radiation therapy systems and thermostats.

USTR's Notice creates a new subheading, 9903.88.05, to the Harmonized Tariff Schedule of the United States (HTSUS) to implement the exclusions. Notably, these exclusions are retroactive to July 6, 2018 (which was the effective date of the List 1 duties), and extend for one year after the publication of the exclusion determination in the Federal Register, which was December 28, 2018. 

On December 31, 2018, CBP issued a Cargo Systems Messaging service (CSMS) notice confirming that it will issue instructions on entry guidance and implementation of the product exclusions "[a]t the conclusion" of the current government shutdown. CBP specified that any updates to the Automated Customs Environment (ACE) (e.g., to accept subheading 9903.88.05) will not be implemented until 10 business days after the shutdown has ended and that any entries referencing 9903.88.05 before the ACE updates will be rejected.

Recommendations and Next Steps

  • Importers should carefully review the list of exclusions to determine whether any exclusions may apply to products that they import.
  • For importers who import products covered by the exclusions, we recommend reviewing entries of covered products since July 6, 2018, and identifying those that are eligible for retroactive refunds. Once CBP has updated ACE to accept the new subheading 9903.88.05, importers and brokers can file Post Summary Corrections (PSCs) for unliquidated entries of covered merchandise to obtain retroactive relief (or protests should there be any liquidated entries).
  • Similarly, for entries of covered products filed on or after the effective date, December 28, 2018, importers and brokers should be prepared, in the interim, to post applicable Section 301 duties and then file PSCs for refunds retroactive to July 6, 2018 after CBP updates ACE 10 business days after the end of the government shutdown.

In addition, USTR indicated that it will continue to issue decisions on pending exclusion requests "on a periodic basis," so importers should continue to advocate for exclusions, despite earlier speculation that the exclusion process would not be fruitful for most who applied.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions