US Trade Representative to Assess Reinstatement of Certain Item 301 Tariff Exclusions | Dorsey & Whitney LLP
As part of the Biden administration’s comprehensive review of US policy toward China, Katherine Tai, the US Trade Representative (“USTR”), asked for public comment on whether the USTR should reinstate certain product-specific exclusions from tariffs on imports from China that were imposed under Section 301 of the Trade Act 1974 (“Section 301”). USTR’s new public comment period will run from October 12 to December 1, 2021. USTR invites comment only on product-specific exclusions that the USTR previously granted and extended but that the USTR has since been allowed to expire (with the exception of a handful of exclusions that have been extended for relief from COVID-19). The relevant exclusions which are under consideration for reinstatement are listed here. US importers, buyers, and manufacturers may wish to consider these product exclusions for potential benefit or adverse effect on their business interests.
Tariffs of article 301 on products of Chinese origin.
Under Section 301, the United States currently imposes punitive tariffs of up to 25% on more than $ 300 billion in annual imports from China, and these Section 301 tariffs’ add to regular import duties. The USTR imposed these tariffs after investigating China’s intellectual property and forced technology transfer policies and practices and released a report in early 2018. The USTR imposed Section 301 tariffs in four brackets to from July 2018, which remain in effect today. These slices are called List 1 (25%), List 2 (25%), List 3 (25%) and List 4A (7.5%).
With each of these successive listings, the USTR expanded the scope of Chinese imports that became subject to Section 301 tariffs. These products are identified by the codes of the United States Harmonized Tariff List (“HTSUS”) that importers use to classify their imports for tariffs. The USTR also announced a 4B List, which includes items that may still be subject to Section 301 tariffs in the future (covering almost all remaining Chinese imports not already subject to Section 301 tariffs). However, the USTR has held List 4B in abeyance and has not implemented these tariffs and has also committed that the United States will suspend the imposition of any new tariffs because its trade negotiations with the United States. China had led to the “Phase One Accord” in January 2020, which we have already discussed.
To what extent will the USTR reinstate these Section 301 exclusions or consider further tariff relief may well depend on the USTR’s assessment of China’s progress (or lack of progress) in its commitments under the Phase One Agreement. China had agreed, as part of this interim arrangement, to make large purchases of US exports and to grant other regulatory approvals to certain US companies seeking access to the Chinese market. In a speech accompanying the announcement of what the Biden administration calls its “new” approach to China, USTR Tai particularly noted commitments to purchase agricultural products from China that have yet to be met. under this phase one agreement.
Exclusions of previous products.
The USTR is now seeking comments on a total of 549 exclusions that the USTR previously granted for specific products in order to mitigate the potential harm of Section 301 tariffs on US interests. The list includes a wide variety of items such as carry bags, cleaning solutions, electronics, manufacturing equipment, medical equipment, motors, plastics, wire and ray imaging products. X to name just a few examples. Initially, over a two-year period, the USTR granted over 2,000 one-year product exclusions. When these exclusions gradually expired, the USTR elected to extend 549 of these exclusions due to their continued importance to U.S. interests while allowing all other exclusions to expire. However, the USTR allowed even these 549 exclusions to expire on December 31, 2020 due to potential trade policy changes under the new Biden administration. (USTR has separately granted a temporary extension of 99 product exclusions for COVID-19 relief, which expire on November 14, 2021.) The newly announced USTR process is designed to consider the potential reinstatement of all or part of these 549 exclusions.
Importantly, the USTR will not apply any new product exclusions from the Item 301 tariffs at this time. In addition, the current USTR request for comments does not cover any product exclusions that the USTR previously had. refused to expand. Therefore, the vast majority of Chinese-origin imports still subject to the tariffs in Item 301 of Schedules 1, 2, 3 and 4A will not be eligible for exclusion under the current USTR process.
Factors USTR will consider for product exclusions.
The USTR will consider reinstating product exclusions for imports “available only from China.” As part of its analysis of this primary criterion, the USTR will examine imports of the article or comparable articles from China and non-Chinese sources, the US domestic production of the article or comparable articles, changes in the global supply chain since 2018 for the item, changes in the supply chain to avoid sourcing from China, and domestic capacity to produce the item or comparable items. As secondary factors, the USTR will also consider the potential impact on U.S. interests, such as any potential harm to small businesses, U.S. employment, and manufacturing, as well as any potential effect on U.S. USTR’s ongoing trade negotiations with China. The USTR has created a specific form that requires the submission of certain information along with any comments on a particular item that would be proposed for such an Item 301 tariff exclusion, which is available here.
Retroactive application of any reinstated exclusion.
If any of these Section 301 tariff exclusions are ultimately reinstated, the USTR will make those exclusions retroactive to October 12, 2021. Thus, US importers seeking reinstatement of the exclusions will likely also want to consider asking the US Customs and Border Protection (“CBP”) for extensions to CBP’s final assessment of import duties on these imports (a process called “clearance”), or to protest against the clearance by CBP of imports that are subject to the tariffs of article 301 but may be eligible for the reinstatement of an exclusion. Any such protest to CBP must be submitted within 180 days of liquidation. In previous cycles of USTR exclusion reviews, CBP has advised importers that they can preserve their rights to reimbursement of these tariffs, either by requesting liquidation extensions or by protesting the successful liquidation. the finalization of the rights of Article 301 for an import eligible for an exclusion. If an importer does not request such extensions or file such protests, the finalization of duties by CBP through liquidation would generally prevent that importer from recovering the Section 301 duties that it had paid if and when l ‘USTR was to reinstate the exclusions for these imported goods.
Future prospects for tariff relief.
As noted above, the latest exclusion process announced by the USTR is limited only to the hundreds of items made in China for which a tariff exclusion had already been granted and extended. Many US importers and manufacturers had hoped that the USTR would also consider reintroducing exclusions for items that were previously in effect but had not been extended or perhaps even that the USTR could consider entirely new exclusions. To date, the USTR has chosen not to do so, although USTR Tai has said the Biden administration will consider additional exclusion processes “as warranted.”
The US Senate had also passed legislation with broad bipartisan support in May 2021 that would require the USTR to consider exclusions for imports from China, although it still leaves it wide latitude in determining when the exclusions are appropriate. . This legislation has not yet been passed by the United States House of Representatives. However, it seems likely that the US House will consider and pass some form of trade legislation that could incorporate Senate provisions into a final bill that will be presented to the President for signature. Importers may therefore have yet another subsequent opportunity, either as a result of an act of Congress or an action by the USTR, to request further exclusions to escape the current Section 301 tariffs which remain in effect. .
Finally, the USTR said it would also continue to fight “state-centric, non-market business practices that were not addressed in the Phase 1 agreement.” By fulfilling this pledge, the Biden administration will likely confront China with its industrial policies through a series of measures. The USTR and major agencies such as the State, Commerce and Treasury Departments will continue to lobby through bilateral diplomacy with their Chinese counterparts. The USTR has previously indicated that it may conduct further Section 301 investigations that could lead to even more punitive tariffs in the absence of changes in Chinese policies and practices. The USTR will also seek to enter into multilateral agreements with other close trading partners such as the European Union, the United Kingdom and Japan to act in concert vis-à-vis China. The USTR can also engage in formal dispute resolution at the World Trade Organization. With such a variety of factors that could affect the Biden administration’s trade policy toward China, it’s hard to predict what will happen to those U.S. tariffs in the months to come.
Dorsey has experienced attorneys to assist U.S. importers, buyers, and manufacturers with the Section 301 tariff exclusion process.