While the US has imposed additional tariffs on Chinese imports in the course of the US-China trade war, beneath the headlines, the Office of the US Trade Representative (USTR) has put in place a tariff exclusion process to exempt certain Chinese imports from additional tariffs.
Chinese goods in either one of the following four Section 301 lists are allowed to apply for tariff exemption through the USTR.
So far, the exclusion process for products on all four lists have been completed and a total of 37 batches of exemptions have been granted. Currently, the USTR is still reviewing requests from List 4A and considering extensions and amendments to exclusions granted to items in Lists 1, 2, 3, and 4A.
However, statistics show that the US government is not generous in granting tariff exclusions to avoid undermining the enforcement of Section 301. The exemption rate for Lists 1 and 2 are around 36 percent on average, while the exemption rate for List 3, which covers more consumer goods and assembled goods, was only five percent.
According to Congressional Research Services (CRS), the public policy research institute of the US Congress, until January 31, 2020 – the USTR received a total of 52,746 exclusion requests, pertinent to all four trade actions (lists). Of these, 44,252 (84 percent) requests have been denied, 6,537 (12 percent) have been granted, and 1,957 (4 percent) are still under review as of July 16, 2020.
On March 20, 2020, the USTR announced it would work with the US Department of Health and Human Services to “ensure that critical medicines and other essential medical products were not subject to additional Section 301 tariffs.” Consequently, the US did not impose tariffs on certain medical items, such as ventilators, oxygen masks, nebulizers, facemasks, surgical drapes, medical gowns, and gloves.
With the COVID-19 pandemic worsening in the US, the USTR recently prioritized the review of exclusion requests related to medical products, resulting in new exclusions for some personal protective equipment (PPE), as the demand for these products soar.
Separately, the USTR recently invited public comments on whether to remove additional products covered by any of the four trade actions that are necessary to the US response to COVID-19. Comments could be submitted concerning any medical items subject to Section 301 tariffs – whether or not it was subject to a pending or denied exclusion request. They had to explain precisely how the product relates to the response to the COVID-19 pandemic.
So far, 37 exclusion lists and six extensions for exclusions have been released on the USTR website.
For List 1 (US$34 billion trade action) – ten batches of exclusions and six extensions for exclusions have been granted. You may check the details on https://ustr.gov/issue-areas/enforcement/section-301-investigations/section-301-china/34-billion-trade-action.
For List 2 (US$16 billion trade action) – five batches of exclusions have been granted. You may check the details on https://ustr.gov/issue-areas/enforcement/section-301-investigations/section-301-china/16-billion-trade-action.
For List 3 (US$200 billion trade action) – 15 batches of exclusions have been granted. You may check the details on https://ustr.gov/issue-areas/enforcement/section-301-investigations/section-301-china/200-billion-trade-action.
For List 4A (US$120 billion trade action) – seven batches of exclusion have been granted. You may check the details on https://ustr.gov/issue-areas/enforcement/section-301-investigations/section-301-china/300-billion-trade-action.
The tariff exclusion process enabled interested persons in the US, including third parties (such as law firms, trade associations, and customs brokers) to submit requests for exemption from additional duties at the USTR website https://exclusions.ustr.gov. Businesses would be asked to identify a specific product, the supporting data, and the rationale for the requested exclusion.
The USTR evaluates the exclusion application case-by-case and regularly updates the status of each pending request on the Exclusions Portal at https://exclusions.ustr.gov/s/PublicDocket .(You may search here for the status of your tariff-exclusion request).
The US government considers the following factors when processing tariff exemption requests:
In addressing each factor, the requester needed to provide support for their assertions.
Any tariff exemption on the product(s), if granted, would be retroactive and be valid for one year starting from the imposition of the additional duties.
Compared with China’s own exemption procedures, the US tariff exclusion process additionally involves seeking opinions from other relevant interested parties.
The USTR also requires a more detailed description of the particular product, including its physical characteristics, function, application, principal use, and any other unique physical features that distinguish it from other products.
Editor’s Note: This article was originally published on July 2, 2019 and was updated on March 12 and July 22, 2020. See here for our article explaining China’s tariff exclusion process. Read our ongoing coverage on China’s tariff exemptions on US imports in our articles China Unveils Tariff Exemption Lists for US Imports – Full Lists Included and China’s Tariff Exemptions for US Imports: New Lists Announced in February.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at firstname.lastname@example.org.
We also maintain offices assisting foreign investors in Vietnam, Indonesia, Singapore, The Philippines, Malaysia, Thailand, United States, and Italy, in addition to our practices in India and Russia and our trade research facilities along the Belt & Road Initiative.
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