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As Significant Tariff Increases Loom, Time is Limited for Importers to Request Exclusions

On May 9, 2019 the United States Trade Representative (USTR) released updated guidance relating to tariff increases on so-called List 3 imports from China. List 3 products, with a total import value of $200 billion, now carry an additional 25 percent ad valorem duty upon entry to the U.S., an increase from the 10 percent rate that had been in effect since September 2018. USTR intended for the List 3 tariff increase to occur on January 1, 2019 but progress in trade negotiations between China and the U.S. twice delayed implementation—first through March and again until May.

USTR has granted a grace period relating to enhanced List 3 tariffs: List 3 imports that were exported before May 10, 2019 are exempt from the recent increase so long as the goods enter the U.S. before June 1, 2019. List 3 products exported to the U.S. on or after May 10, or that enter the U.S. on or after June 1, will become subject to the increased 25 percent rate. These increased rates are in addition to the regular import duties.

The increase to List 3 import duties follows identical duty increases involving List 1 and List 2 imports—those relating to the $34 billion trade action and the $16 billion trade action, respectively—that were imposed in the summer of 2018. Understanding the potentially harsh economic impact on U.S. stakeholders, USTR established an exclusion-request process under which it accepted requests to exclude particular products from the List 1 and List 2 imports subject to enhanced tariffs. Though the deadlines for List 1 and List 2 exclusion requests have passed, USTR continues to evaluate submissions and release up-to-date exclusion lists (the May 14, 2019 update is available here: https://ustr.gov/sites/default/files/enforcement/301Investigations/84_FR_21389.pdf).

USTR anticipates implementing a similar process for List 3 goods whereby impacted U.S. importers (among others) may seek to exclude certain products from the enhanced-tariff regime. Though USTR has not yet released formal framework for the List 3 exclusion-request process, forms and procedures are expected to resemble those relating to the earlier Lists 1 and 2 and could be released any day.

On May 13, 2019, days after its announcement regarding List 3 tariffs, USTR followed up with a proposal to impose an additional 25 percent tariff on so-called List 4 goods. List 4—consisting of products such as footwear, apparel and textiles—carries an import value of approximately $300 billion and covers almost all Chinese imports not already subject to enhanced ad valorem duties. A public hearing relating to the List 4 proposal is currently scheduled for June 17, with requests to appear due June 10 and submissions to exclude certain products due June 17. Additional duties on List 4 goods could become effective as early as June 24 if the proposal becomes operative. Whether USTR will actually proceed with imposing additional duties on List 4 imports remains unanswered and depends, in large part, on whether China and the U.S. are able to resume productive trade talks.

© 2019 Varnum LLP

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About this Author

Dennis M. Devaney, labor and employment lawyer, Varnum
Partner

For more than 30 years, Dennis has represented clients in labor and employment disputes, on international trade issues, in litigation and on legislative and regulatory matters. His labor and employment practice focuses on traditional labor law, including representation of clients with respect to matters arising under the National Labor Relations Act. He also represents employers in defense of discrimination claims and with respect to collective bargaining agreement negotiation and administration. He acts as trial counsel in arbitration hearings for his clients throughout...

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Andrew J. Newton corporate lawyer Varnum LLP
Associate

Andrew is an associate currently working with a variety of practice teams. Within the corporate team, he assists with mergers, acquisitions and general corporate governance matters, and he also provides support on trademark-related matters. Within the litigation team, he assists with commercial and regulatory disputes.

Andrew’s legal background includes judicial externships with the Honorable James S. Jamo of the Ingham County 30th Circuit Court and the Honorable David W. McKeague of the U.S. Sixth Circuit Court of Appeals.

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Katie K. Roskam, Michigan, tax attorne
Associate

Katie is an associate in the firm’s tax practice team. She focuses on federal income tax matters for both foreign and domestic clients and issues pertaining to employee benefits and executive compensation. Katie's previous work experience includes researching and writing appellate briefs while clerking at Even & Franks PLLC in Muskegon for several summers. She also worked as a tax research assistant at Loyola University School of Law. She served as an extern for Judge Ronald A. Guzman in U.S. District Court for the Northern District of Illinois and has worked as an...

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