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USTR Announces Exclusion Request Process for Tariffs on Chinese Products

As detailed here, on June 15, 2018, the U.S. Trade Representative (USTR) announced its decision to impose 25 percent tariffs on imports of various products from China classified under 818 separate Harmonized Tariff Schedule (HTSUS) subheadings. The tariffs are part of the Trump administration’s response to “China’s acts, policies and practices related to technology transfer, intellectual property, and innovation” that USTR has found to be “unreasonable and discriminatory, and to burden U.S. Commerce.” The tariffs went into effect on July 6, 2018, and will impact approximately $34 billion in annual imports from China. Simultaneously, USTR has announced a procedure for interested parties to request that certain imported products be excluded from the tariffs.

Exclusion Information Required by USTR

USTR is seeking specific information with any request for exclusion. To that end, the following information is required to be added in 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. USTR will not consider a request that identifies the product at issue in terms of the identity of the producer, importer, ultimate consumer, actual or chief use, or trademarks or tradenames.
  • 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. If precise annual quantity and value information is not available, requesters should provide an estimate and explain the basis for the estimation.
  • Whether the particular product is available only from China, or whether the product and/or a comparable product is available from sources in the U.S. and/or a third country.
  • Whether the imposition of additional duties on the particular product would cause severe economic harm to the requester or other U.S. interests.
  • Whether the particular product is strategically important or related to China’s “Made in China 2025” program.
  • Requesters should also submit information on the ability of Customs to enforce the exclusion.

Each request must specifically identify a particular product, and provide supporting data and the rationale for the requested exclusion. If a party wishes to exclude two or more products, it must submit a separate request for each product. USTR will then evaluate each request on a case-by-case basis, taking into account whether the exclusion would undermine the objective of the Section 301 investigation. Any exclusion that is granted will be effective retroactive to July 6, 2018.

Note that USTR has not yet released the official form that it recommends requestors use, but that form is expected soon.

Opposition and Rebuttal Comments

Interested parties, which are likely U.S. companies that produce competitive U.S. products, can oppose an exclusion request, but must do so within 14 days of the date that the exclusion request was posted on Regulations.gov. The company submitting the exclusion then has seven days to rebut the opposition comments.

Deadline for Submitting Exclusion Requests

The deadline to submit exclusion requests for this group of products is October 9, 2018.

Main Themes

USTR’s notice implies that the decision on whether to exclude a product will revolve around whether China is the only source of supply for the product for which an exclusion request is being submitted. Therefore, it is important that all requestors develop a strategy to be able to address this issue, especially where there may be some small U.S. or third-country producers of a product for which an exclusion is being requested.

In addition, for U.S. producers that want to continue to have tariffs applied, it is extremely important that – given the very short 14-day deadline to oppose exclusion requests – they monitor whether exclusion requests are being submitted for a product that they produce.

©2018 Drinker Biddle & Reath LLP. All Rights Reserved

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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.

202-230-5802
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
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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