A New Tariff Exclusion Process For Some, But Not For All
On Monday, October 4, US Trade Representative Katherine Tai gave a speech outlining the Biden Administration’s approach to the US-China trade relationship. While the speech was light on specifics, it provided for the first time a framework through which to view President Biden’s trade policies on China. From SPB’s perspective, the speech contained two notable takeaways for US businesses.
First, and perhaps most notable for importers, Ambassador Tai confirmed that the Administration would launch a new “targeted tariff exclusion process” for the tariffs imposed under the Trump Administration and that remain in place today. On Tuesday, USTR released further details on this new product exclusion process (here). The process announced by USTR does not apply to all products impacted by the Section 301 tariffs, but rather is an opportunity to comment for or against reinstating 549 previously granted exclusions, most of which expired in December 2020. The public comment period will open on October 12 and close on December 1, 2021. The full list of exclusions being considered for reinstatement can be found here.
Second, Ambassador Tai said that the United States plans to maintain the “architecture” of the Phase One agreement, which was signed by the two countries in January 2020. An abandonment of the Phase One agreement could result in increased tariffs and would reduce the already limited number of venues for bilateral engagement. But while the Phase One agreement remains, Ambassador Tai emphasized the need to adjust certain policies, such as those relating to steel production and semiconductors, and noted her plans to discuss with China “in the coming days” its performance meeting the commitments made under the agreement.
Monday’s speech was the Biden Administration’s first step in outlining its China trade policy, and there are many questions yet to be answered. For example, when will Ambassador Tai meet with her Chinese counterpart, what will she ask for, and how hard will she press? How far will other countries be willing to go in taking multilateral actions against China? And importantly for US importers, is the new tariff exclusion process the only action the Biden Administration plans to take on tariff relief, or is it just the first step?
We anticipate these questions will begin to be answered in the coming weeks and months, but for now, uncertainty remains.