USTR Sets First Batch of Product Exclusions on Section 301 Chinese Tariffs

The Office of the U.S Trade Representative issued its first list of product exclusions from the 25 percent Trade Act Section 301 tariffs on Chinese imports, granting full or partial exemptions for nearly two dozen 10-digit Harmonized Tariff Schedule subheadings, said a notice posted Friday at the agency’s website. The exclusions apply retroactively to July 6, the date the first tranche of tariffs took effect, and will remain in effect until one year after the USTR’s notice is published in the Federal Register.

The newly exempted subheadings are all drawn from the initial list of tariffs on $34 billion worth of Chinese goods. Unlike exclusions from Section 232 duties, all importers may take advantage of the Section 301 tariff exemptions, not just those that filed the exclusion requests. The notice said Customs and Border Protection will “issue instructions on entry guidance and implementation.”

Fully exempt from Section 301 duties are imports in the HTS subheadings 8412.21.0075, 8418.69.0120, 8480.71.8045, 8482.10.5044, 8482.10.5048, 8482.10.5052 and 8525.60.1010, said the notice. The subheadings cover, among other things, CB radio transceivers.

USTR also created partial exemptions for products of 15 other 10-digit subheadings, said the notice. Partially excluded, among other things, are some thermostats for heating and air-conditioning systems of subheading 9032.10.0030, not including thermostats that connect to the internet. Duties on smart thermostats were imposed in a later round of tariffs, and remain in force.

New subheading 9903.88.05 will be used for the newly exempted products, said the notice. The exemptions stem from about 1,000 exclusion requests, and about 8,550 more requests are pending, according to a USTR list. About 1,250 requests were denied. Docket USTR-2018-0025 opened July 11 for the filing of exclusion requests, which were due Oct. 9 (see 1807130017).

“We are encouraged that the USTR finally issued a notice granting certain exclusions to the Section 301 tariffs,” emailed trade lawyer David Cohen with Sandler Travis. “We hope that this is the first notification of many exclusions to be granted,” he said.

Many of the products on which tariffs were imposed “are those which are not related to the stated intent of the Section 301 action which is safeguarding technology and apply, in some cases, to products that utilize decades old commonly available technology,” said Cohen. “Moreover, the breadth of the coverage unfortunately sweeps in many products that in no way help China achieve her 2025 goals," he said in reference to the Chinese government's "Made in China 2025" industrial policy that the Trump administration has singled out for criticism. "We hope the Administration continues to review the pending petitions and permit many other products to enter the US commerce free from the Section 301 duties.”

Release of the exemptions list is “a positive development that shows that the standard for granting product exclusion petitions is not prohibitively high,” said customs lawyer Ted Murphy of Baker McKenzie in an emailed update. “Given the nature of the Section 301 dispute, it was not clear how high the USTR would hold the bar for approval (i.e., whether any exclusions would actually be approved),” he said. “This action shows that approval is possible (for at least certain products), which is a positive development for all those companies who have pending petitions (whether for List 1 or List 2).”