On September 17, 2018, USTR finalized a list of 5,745 imported products from China (referred to as “List 3”) for which additional tariffs are to be collected starting September 24, 2018 at a rate of 10 percent, rising to 25 percent starting January 1, 2019. The value of List 3 goods is estimated at approximately $200 billion. The Federal Register notice for this announcement was published on Friday, September 21, 2018 and differs somewhat from the Section 301 tariff announcements previously published for List 1 and List 2.
In the previous two rounds of Section 301 tariffs, the Federal Register notices stated “USTR will publish a separate notice describing the product exclusion process, including the procedures for submitting exclusion requests, and an opportunity for interested persons to submit oppositions to a request.” The past two exclusion process notifications were published within a few weeks of the initial announcements.
Significantly, this product exclusion process language is missing from the Federal Register notice regarding the List 3 tariffs. The absence of this product exclusion language leads us to question whether there will in fact be an exclusion process for products included in List 3.
Unofficial discussions with industry and administration officials indicate that dropping the product exclusion language from the Federal Register notice may be due to the large number of requests expected. Scrapping this language may also be a negotiation tactic designed to put maximum pressure on China to engage in meaningful negotiations. Additionally, certain industry and administration officials have indicated that they would only be willing to consider a List 3 product exclusion process if (when) the duty rate increases to 25%.
While we believe that industry pressure and the need for consistency with List 1 and List 2 may ultimately require a List 3 exclusion process, this conclusion is speculative. This new round of tariffs however does specify that, “In the event that further modifications are appropriate, the Trade Representative intends to take into account the extensive public comments and testimony previously provided in response to the July 17 and August 7 notices.”
We will continue to monitor this situation. For more information on the exclusion processes for the Section 301 tariffs, please contact Robert Stang, Jeffrey Neeley, Beau Jackson, or Nithya Nagarajan.