Congress Speaks to Require a Product Exclusion Process for List 3

Congress, in its Joint Explanatory Statement (JES) that accompanied the legislation signed today by President Trump to fund the government, has voiced its intention that the United States Trade Representative (USTR) implement a product exclusion process for products on List 3 of the Section 301 duties intended to retaliate against China’s unfair trade practices. In its JES, Congress requires USTR to initiate the exclusion process by March 17, 2019, “following the same procedures as those in [Lists 1 and 2] ....”

Importantly, the JES is not part of the bill signed by the president, and the language requiring USTR to implement the exclusion process for List 3 products is not in the final text of the bill. As such, the language in the JES is not binding. However, the JES is informative as it explains the intent of the House and Senate Conference Committee on a particular aspect of a bill. Therefore, as Congress has voiced its intention that there be an exclusion process for List 3 products, Congress believes that USTR will implement an exclusion process similar to that for Lists 1 and 2. We will be closely monitoring this development over the next few weeks and issue an alert as soon as new information emerges.

In the event that USTR does implement an exclusion request process for List 3, as with Lists 1 and 2, USTR is likely to require parties requesting an exclusion to identify whether 1) the product is only available in China; 2) imposition of these additional duties would cause severe economic harm to the requestor or other U.S. interests; and 3) the product is strategically important or related to the “Made in China 2025” policy. Further, USTR would likely seek the following information for any exclusion request:

• Identification of the particular product as defined by its physical characteristics that distinguish it from other products within the covered eight-digit HTSUS subheading.

• The 10-digit subheading of the HTSUS that is being requested to be excluded.

• The annual quantity and value of the Chinese-origin product that the requester purchased in each of the last three years.

• Information on the ability of U.S. Customs and Border Protection to enforce the exclusion.

List 3 includes duties on approximately $200 billion of imports from China, impacting a large number of importers and other stakeholders who would be eligible to request exclusions of their products. Further, assuming that USTR will shortly implement an exclusion process for List 3 imports, it is important that potential requestors immediately begin analyzing available support, sourcing options, and gathering pertinent information to support an exclusion request.