More Exclusions from China Tariffs: Do You Have a Potential Refund Waiting?

The U.S. Trade Representative (USTR) has issued several new lists of products excluded from its Section 301 tariffs on Chinese imports. The exclusions are retroactive to the date that the tariffs were implemented and are effective for one year from when they were published in the Federal Register.

If your company has imported goods from China, you should check whether any of those products are on the latest exclusion lists. If they are, you can apply for a refund.

The USTR initiated the exclusion process in July 2018 and has so far issued 13 exclusion lists since December 2018. The exclusions are issued according to the previously issued product lists. The latest exclusion lists were issued on September 20, 2019 and on October 2, 2019 and include products on Lists 1-3.

  • List 1: $34 billion in goods at 25%. These exclusions are retroactive to July 6, 2018. The exclusions issued on September 20, 2019 last until September 20, 2020, and the exclusions issued on October 2, 2019 last until October 2, 2020.
  • List 2: $16 billion in goods at 25%. These exclusions are retroactive to August 23, 2018. The exclusions issued on September 20, 2019 last until September 20, 2020, and the exclusions issued on October 2, 2019 last until October 2, 2020.
  • List 3: $200 billion in goods at 25%. These exclusions are retroactive to September 24, 2018 and last until August 7, 2020.

Exclusion Process

Under the USTR’s exclusion process, individual firms can request to have a particular product excluded from the tariff lists. The deadlines for exclusion requests for items from List 1 and List 2 have passed, but you have until September 30, 2019, to request exclusions from List 3. The USTR, however, continues to review submitted requests and announces the exclusions periodically. The exclusion request process for List 4 items has not been announced.

Required Information and Rationale

The USTR has published exclusion request procedures, which require firms to submit both product information and the reasons why that product should not be subject to the tariff.

  • Required information: An exclusion request must include:
    • Description of physical characteristics that distinguish it from other products within the relevant 8-digit HTSUS subheading
    • The 10-digit HTSUS subheading most applicable to the product
    • Information on the ability of the U.S. Customs and Border Protection (CBP) to administer the requested exclusion
    • The annual quantity and value of the Chinese-origin product that the requestor purchased in each of the past three years (or an estimate with explanation if precise data is unavailable).
  • Rationale for request: Requests must address the following factors:
    • Whether the product is available only from China and whether it and/or a comparable product is available from U.S. or third-country sources
    • Whether the imposition of additional duties on the product would cause severe economic harm to the requestor or other U.S. interests
    • Whether the product is strategically important or related to “Made in China 2025” or other Chinese industrial programs.

Requestors may provide any other information they deem relevant. In making a decision, the USTR will also consider whether the requested exclusion would undermine its larger Section 301 objectives.

Three Things to Do Now

If you import goods from China, watch for new tariff exclusions and opportunities for a tariff refund. There are three basic steps:

  • Check exclusion lists of excluded products to see if any products you import from China are covered.
  • Monitor exclusion announcements for Lists 1-3 to so you know when new exclusions have been added. When the process for requesting exclusions to Lists 4A and 4B, consider submitting a request for any products you regularly import.
  • Apply for refunds if you’ve paid tariffs on any excluded products since the tariff effective date. The U.S. CBP has issued guidance on how to obtain refunds for Section 301 tariffs for each of the first eight rounds of exclusions. Generally, an importer can apply for a refund by submitting a post summary correction to the CBP. An importer can also protest a “liquidation” if the period for the CBP’s final tariff assessment has passed and the entries have been liquidated (finalized).

Tariff Product Exclusions

Customs Guidance

Date Issued

List

Effective Date

End Date

Round 1

December 28, 2018

List 1

July 6, 2018

December 28, 2019

Round 2

March 25, 2019

List 1

July 6, 2018

March 25, 2020

Round 3

April 18, 2019

List 1

July 6, 2018

April 18, 2020

Round 4

May 14, 2019

List 1

July 6, 2018

May 14, 2020

Round 5

June 4, 2019

List 1

July 6, 2018

June 4, 2020

Round 6

July 9, 2019

List 1

July 6, 2018

July 9, 2020

Round 7

July 31, 2019

List 2

August 23, 2018

July 31, 2020

Round 8

August 7, 2019

List 3

September 24, 2018

August 7, 2020

Round 9

September 20, 2019

List 3

September 24, 2018

August 7, 2020

Round 10

September 20, 2019

List 1

July 6, 2018

September 20, 2020

Round 11

September 20, 2019

List 2

August 23, 2018

September 20, 2020

Pending

October 2, 2019

List 1

July 6, 2018

October 2, 2020

Pending

October 2, 2019

List 2

August 23, 2018

October 2, 2020

 

If you have questions on the several new lists of products excluded and how you could be affected, contact Weaver today and we can help.

© 2019

Brad Jay

Brad Jay

Partner-in-Charge, Middle Market Manufacturing, Distribution and Technology Services

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Brad Jay, CPA, CGMA, has more than 20 years of public accounting experience, with a focus on financial reporting, auditing…

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Jody Allred

Jody Allred

Partner-in-Charge, Large Market Manufacturing, Distribution and Technology Services

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Jody Allred, CPA, CISA, CITP, CGMA, has more than 18 years of experience in public accounting, a deep background in…

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