US Tariff Exemption Process for Chinese Imports
Both US and China have imposed additional tariffs on each other’s imports in the course of their ongoing trade war. However, both countries have put in place a tariff exclusion process to exclude certain products from additional tariffs.
In this article, China Briefing explains the US tariff exclusion process. (See here for our article explaining China’s tariff exclusion process.)
On June 19, the Office of the US Trade Representative (USTR) announced a process by which US interested parties could request the exclusion of certain Chinese products – subject to additional tariffs – as per the September 2018 list (List 3).
This action imposed tariffs on US$200 billion worth of Chinese products.
Tariffs on these products have been in effect from September 24, 2018 and were raised from 10 percent to 25 percent – starting May 10, 2019.
The electronic portal for the submission of exclusion requests for products covered by the September 2018 list will open on June 30, 2019.
Applicants must submit their requests on this website: https://exclusions.ustr.gov.
Background: Six rounds of product exclusion have been granted
Prior to this, similar processes had been launched for 818 products covered by the US$34 billion list (List 1) and 284 products covered by the US$16 billion list (List 2). The submission of exclusion requests for these two lists were closed on October 9, 2018 and December 18, 2018, respectively.
Until now, six rounds of product exclusion affecting items in the US$34 billion list have been granted. The list, shown below, is published on the USTR website.
- December 28, 2018 – the first batch of granted exclusions (83 FR 67463);
- March 25, 2019 – the second batch of granted exclusions (84 FR 11152);
- April 18, 2019 – the third batch of granted exclusions (84 FR 16310);
- May 14, 2019 – the fourth batch of granted exclusions (84 FR 21389);
- June 4, 2019 – the fifth batch of granted exclusions (84 FR 25895); and
- June 9, 2019 – the sixth batch of granted exclusions (84 FR 32821).
The period of exclusion will be valid for one year after the date of approval, which can be understood as the release date of the exclusion list as published in the Federal Register.
Application process for tariffs covering US$200 billion of Chinese imports
The web portal for submitting exclusion requests opened at noon (EDT) on June 30, 2019 and the submission deadline is September 30, 2019.
Businesses can refer to the Federal Register (84 FR 29576) published by the USTR on June 24 to learn the procedures to request the exclusion of products and download the exclusion request form.
Interested persons seeking to exclude two or more products must submit a separate request for each product, that is one product per request.
Who can apply for tariff exclusion?
Interested persons in the US, including third parties (such as law firms, trade associations, and customs brokers) can submit requests for exclusion from additional duties.
Which products are eligible for tariff exclusion?
The products classified within the Harmonized Tariff Schedule of the United States (HTSUS) subheadings in Annex A of the notice published at 83 FR 47974 (the Federal Register published on September 21, 2018) as amended and modified by 83 FR 49153 (the Federal Register published on September 28, 2018).
Major considerations by the US government
- Whether the particular product is available only from China, and whether the company made any efforts to source the product from non-Chinese suppliers.
- Whether the imposition of additional duties (since September 2018) on the particular product has or will cause severe economic harm to the requester or other US interests.
- Whether the particular product is strategically important or related to ‘‘Made in China 2025’’ or other Chinese industrial programs.
In addressing each factor, the requester should provide support for their assertions.
Where and how to apply?
To submit an exclusion request, applicants must first register on the USTR portal at http://exclusions.USTR.gov.
After registration, the applicant can fill out and submit one or more exclusion request forms.
The three major steps during the process include:
- The applicant fills out the Exclusion Request Form and submits requests in the period between the opening of the portal on June 30, 2019 and the September 30 deadline;
- Other interested parties fill out the Exclusion Response Form to respond to those requests indicating their support or opposition and providing reasons for their respective views – within 14 days after the requests are posted online; and
- The applicant fills out the Exclusion Reply Form to reply to a response within seven days after the close of the 14-day response period, or seven days after the posting of a response.
Information and documents that will need to be prepared include:
- Requester information;
- 10-digit HTSUS item number of the product of concern;
- A complete and detailed description of the particular product;
- Requestor’s relationship to the product;
- Product substitutability in the US;
- Product substitutability in the third country;
- Requester’s attempts to source this product from the US or other third countries;
- The value in US dollars and quantity (with units) of the Chinese-origin product of concern that was purchased in 2017, 2018, and the first quarter of 2019;
- The value in US dollars and quantity (with units) of the product of concern that was purchased from any third-country source in 2017, 2018, and the first quarter of 2019;
- The value in US dollars and quantity (with units) of the product of concern that was purchased from US sources in 2017, 2018, and the first quarter of 2019;
- Information regarding the company’s gross revenue in US dollars for 2018, the first quarter of 2018, and the first quarter of 2019;
- If the Chinese-origin product of concern is sold as a final product or as an input used in the production of a final product;
- Whether the imposition of additional duties (since September 2018) on the product has resulted in severe economic harm to the company or other US interests;
- Whether the requester has submitted exclusion requests for the Section 301 – US$34 billion and/or US$16 billion – tariff actions;
- Whether the particular product is strategically important or related to “Made in China 2025” or other Chinese industrial programs;
- Any additional supporting information; and
- Any additional supporting attachments.
Period for an approved exclusion
Any exclusion of the product(s) if granted will be valid for one year after the notice of the exclusion as published in the Federal Register.
Compared with China’s exclusion process, the US tariff exclusion process additionally involves seeking opinions from other relevant interested parties.
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.
USTR will evaluate each request on a “case-by-case basis,” taking into account whether the exclusion would undermine the objective of the Section 301 investigation, and whether the request defines the product with “sufficient precision.”
Editor’s Note: This article was originally published on July 2, and has been updated to include latest developments.
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