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More Section 301 Tariff Exclusion Requests Denied Than Approved to Date

The Trump administration has received nearly 13,000 requests for exclusions from the additional tariffs it has imposed on imports from mainland China, according to information made available by the Office of the U.S. Trade Representative. Some have been granted and more have been denied but most are still at various stages of review.

Following a Section 301 determination that mainland China’s acts, policies and practices related to technology transfer, intellectual property and innovation are unreasonable and discriminatory, the Trump administration has levied higher tariffs on mainland Chinese goods in stages. The first phase imposed a 25 percent additional tariff on US$34 billion worth of imports as of 6 July 2018 and exclusion requests were due by 9 October 2018. The administration extended that tariff to another US$16 billion worth of goods as of 23 August 2018 and accepted exclusion requests through 18 December 2018.

A ten percent additional tariff was imposed on so-called List 3 goods (valued at about US$200 billion) as of 24 September 2018 and is scheduled to increase to 25 percent on 2 March 2019. Administration officials have said they will not provide any exclusion request process for these goods unless that increase occurs. The White House has also warned of an as-yet-unspecified tariff hike on an additional US$267 billion worth of mainland Chinese goods if Beijing “takes retaliatory action against our farmers or other industries.”

Spreadsheets recently made available by USTR indicate that nearly 11,000 exclusion requests were submitted for List 1 goods. USTR has denied 1,730 of these requests and granted 984. The remainder are listed as being at one of four stages: only 31 are still open for public comment, 6,350 are undergoing an initial review of whether the request should be granted based on specified criteria, and 1,728 are being reviewed with U.S. Customs and Border Protection to determine whether the requested exclusion would be administrable. None are currently listed as being in stage 4, in which the exclusion has been granted and is being prepared for publication in the Federal Register.

USTR has also received 2,799 exclusion requests for List 2 goods. Of these, 1,157 are still open for public comment and 1,640 are undergoing substantive review.

In other Section 301-related news of potential interest, the World Trade Organisation has established a dispute settlement panel to hear a complaint by mainland China that U.S. tariff increases on its products are in violation of WTO rules. However, the WTO’s ability to render a final judgment is unclear given the dwindling number of Appellate Body judges.

Beijing is alleging that the additional tariffs imposed under Section 301 violate a WTO rule requiring member countries to provide the same tariff treatment to all other members. According to press sources, mainland Chinese officials told the WTO this week that the U.S. tariffs are “posing a systemic challenge to the multilateral trading system” and that if the WTO allows them to continue without consequences “the future viability of this organization is in dire peril.”

However, the United States responded that “it is China, and certainly not the United States, that is threatening the overall viability of the WTO system” by bringing a case that “seeks to use the WTO dispute settlement system as a shield for a broad range of trade-distorting policies and practices not covered by WTO rules.” The United States also accused mainland China of being “entirely hypocritical” by complaining about the United States’ uni-lateral measures while adopting its own “in connection with the very same issue.”

While the WTO panel could render a decision in this case later this year, that decision would likely be appealed by one or both parties to the Appellate Body, at which point the issue could become stalled. The Appellate Body currently has only three judges to hear appeals from dispute settlement panels, which has already pushed back decisions in a number of on-going cases. By the end of the year only one judge will remain, leaving the body incapable of further work and delaying any future decisions indefinitely. The United States has blocked the appointment of new judges in an effort to resolve complaints about the operation of the Appellate Body, but no resolution of those concerns appears to be imminent.

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