Background

Following the investigation on China’s acts under the Section 301 of the Trade Act 1974 (“Section 301”) in March 2018, under which the U.S. President is given the authority to take all appropriate actions, including retaliation, to obtain the removal of any act, policy, or practice of a foreign government that violates an international trade agreement or is unjustified, unreasonable, or discriminatory, and that burdens or restricts U.S commerce. United States Trade Representative (“USTR”) determined that China’s acts, policies and practices posted unreasonable, discriminatory burdens on U.S. commerce. USTR thereby imposed extra tariffs on certain Chinese products that are imported from China as a response to China’s unfair trade practices related to the forced transfer of American technology and intellectual property. However, there are certain categories of goods from China could be exempted from this additional tax.

Three Lists of Additional Duty Rate

As of today, there are three lists (some refer to it as tranches) of products on which additional duties would be imposed after List 1 came in effect on July 6; 2018, List 2 on August 23, 2018, and List 3 on September 24, 2018.

Specifically, List 1 imposed additional duty rate of 25% on $34 billion worth of goods from China; List 2 imposed additional duty rate of 25% on $16 billion worth of goods from China, and List 3 initially imposed additional 10% duty rate on $200 billion worth goods from China, but it was increased to 25% on January 1st, 2019. Meanwhile, it has been announced that there is the possibility of the publication of a List 4, but there is not yet an accurate date of its publication; however, it is estimated to be an additional 25% duty rate on $267 billion worth of goods from China, which will encompass all the rest of goods that were not included in the first three lists.

Exemptions from Additional Tariffs

1st Exclusion on List 1

On December 28, 2018, USTR announced the first batch of products exclusions (one-year exclusion) from section 301 tariffs, these products are either fully or partially exempted. Moreover, this product exclusions apply retroactively as of July 6, 2018, when the first set, the List 1 one that imposed additional 25% tariffs on $34 billion worth of goods, of tariffs came into effect. This granted exclusion apply not only to U.S. importers who requested for the exclusion, but all U.S. importers of the excluded product categories and tariffs code.

The majority of the products that are excluded are under following categories:

1. Single-row radial bearings having an outside diameter between 9mm and 100mm; however, single row radial bearing with a diameter under 9mm, or over 100mm, have not been excluded;
2. injection or compression type molds for rubber or plastics ;
3. linear-acting hydraulic engines and motors ;
4. refrigerating or freezing equipment like ice making machines and drinking water coolers; and
5. Thermostats for air conditioning or heating system.

Furthermore, the fully exempted products are under the following categories:

1. hydraulic power engines;
2. drinking-water coolers;
3. injection molds;
4. single-row, radial ball bearings having an outside diameter of 9 mm but not over 30 mm;
5. single-row, radial ball bearings having an outside diameter over 30 mm but not over 52 mm;
6. certain ball bearings having an outside diameter over 52 mm but not over 100 mm; and
7. CB radio transceivers.

Additionally, partially exempted products are under the categories:

1. outboard marine engines;
2. salad spinners;
3. water filtration apparatus;
4. winches;
5. belt conveyors;
6. papermaking machinery components;
7. workstands for miter saws;
8. radiation therapy systems;
9. thermostats for HVAC system.

2nd Exclusion on List 1

On March 25, 2019, USTR announced the second batch of exclusions to the List 1 of Chinese goods subject to a 25% valorem tariffs on $34 billion worth of goods from China, which went into effect on July 6, 2018. This exclusion applies retroactively on July 6, 2018, and extend for one year after the March 25th, 2019, the publication date.

Following categories are the excluded products in the most recent exclusions:

1. submersible pumps;
2. breast pumps;
3. impellers and impeller housings;
4. salad spinners,
5. water filters for pools,
6. aquariums, etc.;
7. water purifiers;
8. steel bucket elevators;
9. rubber tracks used on construction equipment;
10. automated data processing storage units;
11. self-propelled pavers;
12. check valves;
13. electric motors;
14. electrical transformers;
15. soldering irons;
16. liquid crystal display modules; and
17. musical tuner.

Since USTR is reviewing all the requests on a rolling basis, there are, as of now, 1,004 exclusion requests have been granted; they are, however, 5,312 requested denied and 4,520 requests are still pending. For those that have not apply for exclusion, or whose request was denied, USTR suggested that it is still possible that the products could still be qualified if there is a later filed request that cover the same 10-digit HTS provision is granted.

Exclusion on List 2 & List 3

Despite USTR initiated a similar exclusion procedure on List 2 tariffs (the one went into effect on August 23, 2018 and imposed additional duty rate of 25% on $16 billion worth of goods from China) on September 18, 2018, which was concluded on December 18, 2018, there is no final conclusion/determinations in terms of the dealings with the exclusions request filing for List 2. Meanwhile, there is no proceedings on exclusion for List 3 (imposed additional 10% duty rate on $200 billion worth goods from China, but it was increased to 25% on January 1st, 2019).