March 31, 2022

USTR Reinstates 352 Exclusions from Section 301 Tariffs, with Retroactive Effect

Holland & Knight Alert
Andrew K. McAllister | Nasim D. Fussell | Dariya V. Golubkova | Mackenzie A. Zales | Sarah Hubner

Highlights

  • The U.S. Trade Representative (USTR) announced on March 23, 2022, its decision to reinstate 352 product exclusions applicable to certain goods subject to Section 301 tariffs that had expired.
  • The reinstated exclusions will apply retroactively as of Oct. 12, 2021, and extend through Dec. 31, 2022.
  • Congress is debating whether to reinstate all expired Section 301 product exclusions.

The Office of the U.S. Trade Representative (USTR) reinstated 352 product exclusions applicable to certain Chinese-origin goods subject to Section 301 tariffs in a notice published on March 28, 2022. In so doing, USTR reinstated more than half of previously available exclusions, covering a range of manufactured, mechanical and consumer goods.1 As noted in an earlier Holland & Knight alert, USTR weighed several factors in assessing whether to reinstate the exclusions, namely economic harm, impacts on small businesses, employment, manufacturing output, critical supply chains and the impact of the exclusions on the goal of eliminating China's harmful trade policies and practices. A complete list of reinstated exclusions is available in the Annex to the March 28 Federal Register notice.

As with prior exclusion rounds, the reinstated exclusions apply to any product that meets the relevant product exclusion description and do not require the U.S. importer to have previously requested a product exclusion. However, the exclusions continue to be highly specific, meaning importers must carefully consider whether their goods meet the relevant specifications.

The reinstated exclusions are retroactive to Oct. 12, 2021, and are available through Dec. 31, 2022. Thus, importers of qualifying Chinese-origin products can request refunds of Section 301 tariffs paid on entries made on or after Oct. 12, 2021, so long as those entries are unliquidated (utilizing the Post Summary Correction process) or within 180 days of liquidation (utilizing the Protest process). Importers of qualifying goods should therefore act promptly to secure refunds.

Additionally, importers of qualifying Chinese-origin products will not need to pay additional tariffs through Dec. 31, 2022, so long as the proper paperwork is completed.

Reasons for Reinstatement

USTR's decision to reinstate the exclusions is part of the agency's ongoing effort to realign U.S. trade policies toward China under President Joe Biden. In her testimony to the House Committee on Ways and Means on the President's 2022 Trade Policy Agenda, Ambassador Katherine Tai said that it is time to turn the page on the old playbook with China; that rather than seek to change China's behavior, the U.S. must develop new domestic tools to defend its economic interests. Whether such tools will include elements of the "old playbook," such as tariffs, remains unclear. However, some lawmakers are keen to have an established exclusion process available if the tariffs remain for the foreseeable future.

Furthermore, Congress in the coming weeks is expected to convene a conference committee to resolve differences between the Senate's United States Innovation and Competition Act of 2021 (S.1260) (USICA) and the House of Representatives' America COMPETES Act of 2022 (H.R. 4521) (COMPETES). Among many other provisions on science, innovation and trade, USICA would reinstate all expired Section 301 product exclusions and establish a new exclusion process at USTR. COMPETES does not contain any such language and takes a vastly different approach to trade than USICA. It remains an open question whether the chambers can resolve the significant trade differences as part of overall negotiations to reconcile the two bills aimed at strengthening U.S. competitiveness with China.

Conclusion and Considerations

Although the reinstated exclusions are set at the end of this calendar year, USTR remains open to "further extensions[,] as appropriate." The agency, however, would likely prefer to maintain flexibility to adjust the tariff toggle in the ongoing Section 301 dispute with China.

Another avenue of relief available to importers is to participate, as a plaintiff, in the ongoing Section 301 litigation (currently awaiting decision from the U.S. Court of International Trade, before likely being appealed to the U.S. Court of Appeals for the Federal Circuit). Importers not currently party to the litigation may still join the 4,000-plus plaintiff class, so long as they import/imported Chinese-origin products, appearing on the so-called Lists 3 and 4A, and have paid Section 301 duties thereon.

If you have any questions about how USTR's action may impact your business or Section 301 litigation, please reach out to the authors of this alert or another member of Holland & Knight's International Trade Group.

Notes

1 Beginning in 2018, the Trump Administration developed a process to review requests for exclusions from Section 301 tariffs on imports of Chinese-origin goods. In turn, USTR granted 2,200 of the approximately 53,000 requests for exclusion. Once granted, USTR created exclusions for 549 products that were subject of the requests. Most of these exclusions expired on Dec. 31, 2020.


Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.


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