Exclusion from New Tariffs on Chinese Goods

August 24, 2018 - J. Philip Land

Companies whose margins depend on costs of importing goods are watching new tariffs closely.

On May 29, 2018 the White House released Steps to Protect Domestic Technology and Intellectual Property from China’s Discriminatory and Burdensome Trade Practices, which stated, “the United States will impose a 25 percent tariff on $50 billion of goods imported from China, containing industrially significant technology, including that related to the ‘Made in China 2025’ Program.”

The United States Trade Representative (USTR) subsequently published a list of goods to which this tariff applies. The list is organized by the Harmonized Tariff Schedule of the United States (HTSUS), a comprehensive list of 10-digit codes for any goods imported into the United States. These tariffs went into effect on July 6, 2018. If a company determines one or more of the goods it imports from China are on the list, the company can request exclusion from the tariff.

Both the form and substance of the exclusion request is critical for the request to be considered by USTR. In form, even seemingly minor deviations from USTR requirements can cause an application to be rejected without consideration of the underlying merits. In substance, the request must address 1) how the imposition of the tariff could create severe economic harm to United States’ interests 2) where else the product could be purchased 3) whether the product is strategically important to the “Made in China 2025” initiative and 4) a number of other important considerations. USTR will reject applications, without consideration of the underlying merits, for omitting or including certain information.

The deadline to apply for the exclusion is October 9, 2018. Legal, tax and customs professionals can assist to ensure conformity with USTR standards and optimize the substance of the request in order to make a compelling argument for exclusion.

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