Minimising Exposure to the Additional US Tariffs Via Exclusion Requests

On 6 July 2018, the day of the imposition of the first tranche of 25% Section 301 tariffs on some US$34 billion worth of mainland-originated imports across 818 tariff lines, the Office of the US Trade Representative (USTR) issued a notice outlining the details of the application process by which interested persons – including non-US importers, exporters, traders and trade associations – could request that particular products classified within one of the affected tariff subheadings should be excluded from the additional tariffs.

Unlike the process in place for requesting exclusions from the global Section 232 tariffs on steel and aluminium, the USTR is allowing any interested persons, including trade associations on behalf of their members, to submit a product-specific rather than petitioner-specific exclusion request in the case of the Section 301 tariffs. Essentially, this means that, once a product has been granted an exemption, all parties importing under the same tariff subheading, providing they meet the written description of the product specific exclusion, are no longer liable for the additional 25% Section 301 tariffs. As of end-August, although some 1,100 exclusion requests[1] have been submitted with regard to the first tranche of the additional Section 301 tariffs, no exemptions have yet been granted.

Dos and Don’ts When Drafting Requests

In order for a product-specific exclusion request to be processed, the requestor must ensure that the US Customs and Border Protection (CBP) can identify and classify the relevant product at the time of entry. As a rule of thumb, the requestors should:

1. follow closely the USTR’s guidelines and avoid using ambiguous terms, clauses or descriptors that the CBP cannot reasonably verify when providing detailed physical descriptions of the product;

2. include an accurate reference to the 10-digit Harmonized Tariff Schedule of the United States (HTSUS) subheading[2] under which the product is classified;

3. state clearly the annual quantity and value of the mainland China-origin product the requestor imported in each of the previous three years[3], and

4. outline how the CBP can enforce the provision by stating that all invoices and relevant shipping documents will include the full description of the item as granted in the exemption; perhaps shipping or packaging said products in a single shipment/container for ease of verification or offering to provide additional back-up upon request from the CBP.

Product exclusion requests must also lay out the rationale for the requested exclusion, including whether (i) the particular product is available only from mainland China (in addressing this factor, requestors should address specifically whether the particular product and / or a comparable product is available from sources within the US and / or from third party nations), (ii) the imposition of additional duties on the particular product would cause severe economic harm to the requestor or other US interests, and (iii) whether the particular product is strategically important or related to “Made in China 2025” or any other mainland Chinese industrial programme. Requestors may also provide any other information or data that they consider relevant to the evaluation. Any request that contains confidential business information should be accompanied by a publicly-distributable version.

Although it is not mandatory, the USTR strongly encourages interested persons to use the request form it has posted on its website. All submissions must be in English and sent electronically via www.regulations.gov. Any exclusion will be effective starting from 6 July 2018, the implementation date of the first tranche of 25% additional Section 301 duties, and extend for one year after the publication of the exclusion determination in the Federal Register.

The USTR intends to periodically announce decisions on the requests under review. The agency has, however, set a 9 October 2018 deadline for the receipt of exclusion requests for products covered in the first tranche of the additional Section 301 duties, with responses (in support or against) to an exclusion request due 14 days after the request is posted with the appropriate docket number (USTR 2018-0025) on www.regulations.gov. Requestors should also note that any replies to such responses will be due within seven days of the close of the 14-day response period.

[1] Also noteworthy is that as of mid-August, the US Department of Commerce (DOC) had posted 27,447 requests (24,834 for steel and 2,613 for aluminium) for the exclusion of a range of products from the Section 232 additional tariffs, but had only come to a decision on some 2,994 (2,770 for steel and 224 for aluminium). In total, it approved 1,820 requests (1,707 (7%) out of the total requests filed regarding steel and 113 (4%) out of the total requests filed regarding aluminium).

[2] Prior CBP rulings on similar products, searchable within the Customs Rulings Online Search System, may be instructive for this purpose.

[3] For trade association requestors, this information should be provided based on their members’ data. If precise annual quantity and value information are not available, an estimate and an explanation of the basis for the estimation should be provided. Exporters, on the other hand, could cite their export numbers in this regard.