August 19, 2019

August 19, 2019

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August 16, 2019

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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.

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About this Author

Douglass Heffner, International trade lawyer, Drinker Biddle
Partner

Douglas J. Heffner litigates customs and international trade matters including antidumping duty, countervailing duty and safeguard cases. He represents foreign companies in Canada, Europe, Japan and Mexico, as well as domestic producers in industries that range from high-tech to heavy industry, to consumer and industrial goods. He also represents trade associations, government agencies and embassies in a broad range of matters.

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Kathleen Murphy, International trade Lawyer, Drinker Biddle
Partner

Kathleen M. Murphy counsels clients on maximizing trade benefits, making informed global procurement decisions and developing domestic and international trade compliance programs. She represents clients in duty-recovery initiatives and customs challenges concerning tariff classification, valuation, Free Trade Agreements and country of origin determinations, among other areas. She guides clients through compliance audits and validations, as well as penalty investigations conducted by U.S. or foreign customs authorities. She also represents clients in deliberations with the Centers of Excellence and Expertise and with Customs Headquarters personnel.

312-569-1155
James Sawyer, Drinker Biddle Law Firm, Chicago, Trade Law Attorney
Partner

James L. Sawyer counsels clients in all areas of U.S. import laws and regulations, including tariff classification, valuation, origin determination and marking, Free Trade Agreements, and duty preference programs. He chairs the firm’s Customs and International Trade Team and is the Regional Partner in Charge of the firm's Chicago office.

James represents clients in enforcement proceedings and investigations, Focused Assessment audits, and other verification proceedings conducted by U.S. Customs and Border Protection (CBP). He frequently assists clients craft...

312-569-1156
William Rucker, Drinker Biddle Law Firm, International Trade and Customs Specialist
Partner

William R. “Randy” Rucker assists clients with all aspects of U.S. Customs law, including the classification and valuation of merchandise, country of origin and marking determinations, quantitative import restraints, duty-preference and savings programs, understanding and receiving the benefits of free trade agreements, compliance audits, enforcement actions and other trade-related matters.

In order to assist clients with their compliance efforts and satisfy "reasonable care" requirements, Randy frequently performs reviews of companies' internal...

312-569-1157
Luke Karamyali, Drinker Biddle Law Firm, Chicago, International Trade Law Attorney
Associate

Luke J. Karamyalil assists his clients in all aspects of international trade laws and regulations, including import and export compliance. He also assists clients in ensuring their internal processes meet Customs’ “reasonable care” standard. Luke has experience helping clients navigate specific trade laws and regulations, including those that arise under the Foreign Agents Registration Act, the Trade Adjustment Assistance Program, anti-boycott compliance, Foreign Ownership, Control, or Influence (FOCI) mitigation, and anti-dumping and countervailing duties.

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