Get Going on Your China Tariff Exclusion Requests Now

The U.S. Trade Representative (USTR) officially announced an exclusion request process for specific products on the $200 billion (List 3) of Chinese products. These are the products that recently had their tariff rate increased from 10% to 25% starting on May 10, 2019.  Any exclusion requests granted for the List 3 products will be effective from September 24, 2018, when the 10% tariffs were first applied.  Any granted exclusions will be valid for one year from the date the exclusion grant is published in the Federal Register.

The key dates for the List 3 product exclusion requests are as follows :

June 30, 2019, noon EDT – USTR will open a web portal for exclusion requests to be filed.  One new wrinkle – USTR is requiring parties to register through the portal before filing their exclusion request.

September 30, 2019 – Deadline to submit List 3 product exclusion requests.

In other words, you must file your exclusion request between June 30 and September 30, 2019. You must file your product exclusion request via the USTR’s web portal, which does not actually become operational until noon Eastern Time on June 30.

After a product exclusion request is posted on USTR’s web portal, interested parties will have fourteen (14) days to comment on that request, either by expressing their support for or their opposition to it.  Replies to responses must then be filed within seven (7) days of the posting of the response.

If your product exclusion is granted, it will be effective for one year from the date your exclusion is published in the Federal Register and it will be retroactive to September 24, 2018.

A List 3 product exclusion request will be similar to that used for the prior two lists of tariffed Chinese products (List 1 – $34 billion, List 2 – $16 billion), but it will require additional and more detailed information.

Exclusion requests are to cover only a single product, and must include the following information:

• the 10 digit subheading of the HTSUS applicable to the particular product requested for exclusion.
• the physical characteristics (e.g., dimensions, material composition, or other characteristics) of the product that distinguish it from other products within the covered 8-digit subheading.
  • USTR will not consider requests that identify the product with criteria that cannot be made available to the public.
• The product function, application, and principal use.

Unlike prior exclusion requests, USTR will ask submitting parties to provide more detailed sales and financial information, including the following:

• The company’s gross revenue for fiscal year 2018, first quarter 2018, and first quarter 2019.
• The percentage of the company’s 2018 total US gross sales that were accounted for by the Chinese products.
• The quantity and value of the company’s purchases for 2017, 2018 and first quarter 2019, not only for the Chinese imports, but also from domestic and third-country suppliers.
• Whether the Chinese product is a final product or an input.  If an input, companies will need to report the percentage of the total cost of the finished product that is accounted for by the imported Chinese input.
• Whether your company is a “small business,” as defined by the Small Business Administration.
• Your relationship to the product. Whether you are an importer, U.S. producer, purchaser, industry association, or “other.”

Exclusion requests also should address the following factors:

• Whether the particular product is available only from China.  In addressing this factor, requesters should address specifically whether the particular product and/or a comparable product is available from sources in the United States and/or in third countries.
  • Requestors are asked to discuss any attempts to source the product from the United States or third countries.
• Whether imposition of additional duties on the particular product would cause severe economic harm to the requester or to other U.S. interests.
• Whether the particular product is strategically important or related to “Made in China 2025” or to other Chinese industrial programs.
• Requesters may also provide any other information or data that they consider relevant to an evaluation of the request.

As you can tell from the above, this latest round of exclusion requests will require a lot more work and a lot more expertise and knowledge (especially regarding China) than the previous exclusion requests. Even with the easier previous exclusion requests, my firm’s international trade lawyers had to turn down a rash of companies seeking our assistance only days before the filing deadlines. Do NOT let that happen to you, especially this time around. Instead, line up your international trade lawyer now (it would be good if that lawyer can read Mandarin or if some other lawyer in that attorney’s firm can do so) to start gathering up key information and preparing your exclusion request now.

It is hard to predict what the chances of prevailing on a tariff exclusion will be (maybe 20-25% overall), but if you do prevail, your economic windfall can be huge, especially since it will mean your tariffs going back to September, 2018 will be retroactively rescinded. No matter what though, do not wait to submit your China tariff exclusion request.

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.