July Update on China Section 301 Tariffs; Latest from China-US Talks
There has been no formal announcement by the White House or Office of the US Trade Representative (USTR) on when negotiations would resume yet.
Provided below is a summary of the current status of the Section 301 List 4 Goods and the List 3 product exclusion process that commenced on June 30, 2019.
Section 301 List 4 Goods
President Trump’s announcement indicates that tariffs on the List 4 Goods would not be assessed at least for the time being while negotiations resume between the United States and China. The US Government just held seven days of hearings where dozens of witnesses spoke on the impact of the tariffs on their businesses. Transcripts of the hearings have been posted on the USTR website. According to USTR, the List 4 tariffs would cover approximately $300 billion in goods imported from China and would cover a wide range of consumer goods.
However, if the past is any guide, the tariffs could be put into place quickly if ordered by the President – essentially any time after the rebuttal/surrebuttal period from the hearings are over on July 10. US Trade Representative Lighthizer has previously indicated there would be an exclusion process if List 4 tariffs were put into place.
Section 301 List 3 Exclusion Process Now Underway Until September 30
On June 20, 2019, USTR published a notice outlining the procedure for requesting exclusions from List 3 of the Section 301 tariffs on Chinese imports via a new web portal.
The portal opened for submissions on June 30, and submissions will be due by September 30, 2019. Granted exclusions will be retroactive to the Section 301 effective date of September 24, 2018. Please see our previous alert for additional information on how to preserve your rights to refunds. The notice includes a sample of the new exclusion request form to facilitate the preparation of exclusion request information prior to the June 30 opening of the web portal.
Section 301 List 3
Section 301 List 3 covers $200 billion worth of Chinese goods and 5,745 product lines defined at eight-digit level of the Harmonized Tariff Schedule of the United States (HTSUS). Major product categories include, amongst other things, automotive, chemicals, base metals, textiles, machinery, electronics, tooling, wood, and paper. Pursuant to a May 9, 2019 notice published by the USTR, the tariff rate applicable to List 3 was increased from 10 percent to 25 percent on May 10, 2019. Please see our previous alert for additional information on List 3.
Dates and Deadlines
- Opening of web portal for submission of exclusion requests: June 30, 2019.
- Deadline for submission of exclusion requests: September 30, 2019.
- Deadline for responses to individual requests: 14 days after the request is posted to the public on the online portal.
- Deadline for replies to responses to individual requests: Seven days after the close of the 14-day response period, or seven days after the posting of a response (whichever is later).
Preparing for the Implementation of the List 3 Exclusion Process
Companies are urged to be strategic in considering a request for exclusion as there are several factors to be considered apart from the data required, including the number of exclusion requests to be made and product groupings within each exclusion request. Our experience with the List 1 applications is that the USTR will create a “carve out” for specific products within a 10-digit subheading based on the product description provided in a granted exclusion request.
Companies should also provide as much information as possible when submitting exclusions – including product drawings, specific information on the number of jobs and location in the US of jobs impacted by the tariffs, and information on likelihood (or even document attempts) to obtain domestic sourcing for the products. There are “business confidential” fields to provide proprietary and sensitive information.
Arent Fox has developed an internal process to help clients efficiently apply for List 3 exclusions, as well as a program to determine the impact from Section 301 tariffs on companies and assist them in developing strategic duty mitigation alternatives.