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Trump Spending Package Establishes New Section 301 "List 3" Tariff Exclusion Process; Improved Section 232 Exclusion Reviews


The Congressional spending package signed by President Trump on February 15, 2019 requires the U.S. Trade Representative (USTR) to create a new exclusion process for the "third tranche" of Section 301 tariffs on products imported from China, and also allocated an additional $4.55 million to support and expand the ongoing Section 232 tariff exclusion review process.

The Section 301 tariffs, which were imposed on certain products from China after a USTR investigation into China's theft of U.S. intellectual property and forced technology transfers under Section 301 of the Trade Act of 1974, were issued in three sets, or "tranches," separating products into a List 1, List 2, and List 3. A product-based exclusion process was established for List 1 and List 2 products subject to 25 percent ad valorem duties imposed under Section 301. List 3 products have been subject to a 10 percent ad valorem duty since September 24, 2018, and USTR Robert Lighthizer has previously asserted that there would not be an exclusion process established for List 3 products unless ongoing U.S.-Chinese trade negotiations stalled and the 10 percent tariffs were raised to 25 percent, which is currently scheduled to occur on March 2, 2019. The value of List 3 products is estimated at approximately $200 billion and includes a variety of consumer goods.

While the spending bill did not allocate specific funds for the newly-mandated 301 exclusion process, USTR is required to establish an exclusion process that follows the same procedures as the review process that was in place for List 1 and List 2 products within 30 days of the bill's signing.

In addition, the Department of Commerce's Bureau of Industry and Security (BIS), which currently administers the Section 232 tariff exclusion process for imported steel and aluminum products, received additional funding to improve, bolster, and expedite the current exclusion process. In March 2018, President Trump imposed 25 percent tariffs on steel and 10 percent tariffs on aluminum imports, with limited country-based exemptions for Argentina, Australia, South Korea, and Brazil. Businesses can seek exclusions from BIS for applicable Section 232 steel and aluminum tariffs based on the Harmonized Tariff Schedule subheadings for the type of metals you are seeking to import tariff-free with a detailed description of the product, its quantity, and its properties.

We will continue to monitor developments in the ongoing U.S.-China trade talks and will provide an update if and when the new exclusion process is formally implemented. If you have any questions regarding the Section 301 or Section 232 exclusion process or what these updates mean for your business and product imports, please contact Alan Enslen, Julius Bodie, or any member of Baker Donelson's Global Business Team.

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