Section 301 Tariffs on Imported Chinese Products: A Quick Update

Despite the federal government shutdown, there have been a couple of recent developments regarding the Section 301 tariffs imposed by the Office of the U.S. Trade Representative (“USTR”) on a broad range of products imported from China.

First, on December 28, 2018, USTR published its determination for the first batch of exclusion requests granted for the 25% tariffs imposed on $34 billion worth of Chinese imports (List 1). USTR granted exclusions for 984 separate requests. Based on the USTR’s index of product exclusion requests, USTR also rejected around 1,000 exclusion requests. Thus far, USTR has made decisions on only about 20% of the 10,000 exclusion requests for the first tranche of China products, with the remaining exclusion requests still being considered.

Importers will be eligible to apply for refunds of the 25% tariffs paid on the List 1 products entered after their July 6, 2018 effective date. The product exclusions will remain in effect for one year, expiring on December 28, 2019.

USTR indicated that the product exclusions will be applied on a product basis, meaning all imports of the product will be excluded regardless of whether the importer filed an exclusion request. This is different from the steel/aluminum tariff exclusion request process which limited the exclusions only to the specific products identified by the specific requesting party.

Second, on January 11, 2019, USTR replied to eleven Democratic senators who had asked why an exclusion process had not yet been established for the $200 billion of Chinese products (List 3) subject to a 10 percent tariff similar to the exclusion request process already in place for the prior list of Chinese products (List 1 – $34 billion; List 2 – $16 billion). USTR stated that an exclusion process for the List 3 products would not be established unless negotiations fail to resolve the US-China trade dispute by President Trump’s March 1, 2019 deadline. If no US-China resolution is achieved,  tariffs on List 3 will increase from 10 to 25 percent on March 2, 2019.

These developments show that although some progress is being made on the Section 301 tariff exclusion requests, that process is going to be slow.  USTR has barely made a dent in the thousands of exclusion requests for the first two lists of Chinese products and it has deferred starting the exclusion request process for the much bigger $200 billion list of products. U.S. importers in the meantime will be required to continue paying the 10 or 25 percent tariffs while waiting for USTR to slog through the outstanding exclusion requests or for the U.S. and China to find a way to end the trade dispute. The companies for which my firm’s international trade lawyers filed exclusion requests are incredibly frustrated at not yet hearing back.

If Presidents Trump and Xi reach some agreement by March 1, 2019 the tariffs will likely be immediately lifted, but if they do not reach such an agreement by March 2, the U.S. will then increase tariffs on the $200 billion of List 3 Chinese products from 10 percent to 25 percent and very likely impose 25 percent tariffs on all remaining Chinese imports (about another $260 billion).

More to come. A lot more.

We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.