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Successful Section 301 Exclusions Focus on Lack of Supply Outside China

Even though only 21 percent of the nearly 10,800 Section 301 exclusion requests have been adjudicated, Miller & Chevalier is drawing some qualified conclusions about what worked. The Office of the U.S. Trade Representative approved exclusions to the 25 percent tariff on 984 products from the initial $34 billion in Chinese imports targeted (see 1812240010). The two most important factors, the law firm said in an analysis published Jan. 2, are specificity around why the import could not be sourced outside China and concrete explanations on how the additional duties would hurt the requester.

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The firm gave examples of arguments that worked -- that sourcing from another supplier could take months or years because of capital investment, testing and certification, and that manufacturers lack the know-how to make the product. It said that USTR denied requests that said the tariffs would result in lower profits or additional costs to consumers, but granted those that said they could lead to reduced hiring, less U.S.-based research and development, or losing market share to foreign competitors. Miller & Chevalier said that none of the requests that were granted drew opposition from U.S. industry.

For importers that did not submit requests, but that import some of the items that received exclusions -- such as CB radios, drinking water coolers, injection molds or radial bearings -- the firm suggested seeking binding classification rulings from CBP.

None of the tariff exclusions can go into effect until the federal government shutdown ends (see 1812310007), and these sorts of clarifications are also on hold until the Department of Homeland Security is funded. But once an exclusion is processed, the firm will be able to file for a refund for tariffs back to July.

Miller & Chevalier said the fact that about 40 percent of adjudicated exclusions have been granted "is cause for cautious optimism: if current trends continue, it is reasonable to expect that hundreds more exclusion requests will be granted." But, the lawyers added, it could be that the first requests to reach decisions may not be representative of the ones that are still pending.