Congressional Republicans and Democrats, U.S. business, and other stakeholders have been vocal in their concerns about the adverse impacts of the China Section 301 tariffs on U.S. supply chains and manufacturing operations. On October 5, 2021, USTR issued a Notice and Request for Comments to consider the reinstatement of expired product exclusions from the China Section 301 tariffs. The USTR process, which could impact 549 lapsed tariff exclusions, is scheduled to open for submissions for a 50-day period via the USTR comment portal starting on October 12 at 12:01 AM EDT and extending through December 1, 2021 at 11:59 PM EST. Companies with lapsed exclusions to the China Section 301 tariffs should promptly contact the Hogan Lovells trade team to assess whether their imports from China are eligible for renewed exclusions.
In August 2017, USTR initiated an investigation pursuant to Section 301 of the Trade Act of 1974 into alleged unfair trade practices by the Chinese government that are alleged to have harmed U.S. interests. To date, the USTR has imposed additional tariffs on selected Chinese import goods in several tranches (or Lists):
25 percent ad valorem rate of tariffs on US$34 billion of Chinese goods listed in List 1.
25 percent ad valorem rate of tariffs on US$16 billion of Chinese goods listed in List 2.
25 percent ad valorem tariffs on nearly US$200 billion of Chinese goods listed in List 3.
7.5 percent ad valorem tariffs on nearly US$300 billion of Chinese goods listed in List 4a.1
For each list, USTR permitted U.S. stakeholders to request product exclusions from the Section 301 tariffs. USTR subsequently extended product exclusions as follows:
137 exclusions covered under List 1.
59 exclusions on List 2.
266 exclusions on List 3.
87 exclusions on List 4.2
All of these 549 exclusions have expired, with the exception of certain exclusions related to the COVID-19 pandemic. Exclusions for most of these products expired by December 31, 2020, and the remainder on March 25 and April 18, 2021.3
Key factors of consideration
USTR will evaluate reinstating each exclusion on a case-by-case basis. USTR’s focus will be whether the excluded product remains available only from China, notwithstanding the imposition of the Section 301 tariff. In addressing this factor, commenters should address specifically:
Whether the particular product and/or a comparable product is available from sources in the United States and/or in third countries.
Any changes in the global supply chain since September 2018 with respect to the particular product or any other relevant industry developments.
The efforts, if any, the importers or U.S. purchasers have undertaken since September 2018 to source the product from the United States or third countries.
Domestic capacity for producing the product in the United States.
USTR will also consider whether reinstating an exclusion will impact or result in severe economic harm to the commenter or other U.S. interests, including the impact on small businesses, employment, manufacturing output, and critical supply chains in the United States. USTR also will assess whether reinstatement will impact its goal of eliminating China’s acts, policies, and practices covered in the Section 301 investigation.
Impact on imports
Exclusions reinstated pursuant to this review would be retroactive for merchandise entered, or withdrawn from warehouse, for consumption on or after October 12, 2021, for which the entries are not liquidated at the time the claim to apply the reinstated exclusion is made to U.S. Customs and Border Protection.
The schedule outlined in the Federal Register notice (i.e., a 50-day comment period ending on December 1, 2021) suggests that USTR’s exclusion decisions will not be made any sooner than the New Year, but exclusions would be retroactive to October 1, 2021. Companies with lapsed exclusions to the Section 301 tariffs China should promptly contact the Hogan Lovells trade team to assess whether their imports from China are eligible for renewed exclusion from the Section 301 tariffs.
1 See 83 FR 28719 (June 20, 2018); 83 FR 40823 (August 16, 2018); 83 FR 47974 (September 21, 2018), as modified by 83 FR 49153 (September 28, 2018); and 84 FR 43304 (August 20, 2019), as modified by 84 FR 69447 (December 18, 2019); and 85 FR 3741 (January 22, 2020).
3 See 85 FR 15849 and 85 FR 20332.
Authored by Craig A. Lewis, Chandri Navarro, and Kelly Ann Shaw.