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Senators Request Expansion of Section 301 Product Exclusion Process

Thirty four of the 100 members of the U.S. Senate sent a letter to USTR Lighthizer on 16 November requesting the establishment of a product exclusion process for the third tranche of mainland Chinese products worth some US$200 billion that have faced additional tariffs under Section 301 since 24 September. The 34 senators consist of both Republicans and Democrats and include members of the Senate Finance Committee, which has  jurisdiction over USTR.

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, and exclusion requests were due by 9 October. The administration extended that tariff to another US$16 billion worth of goods as of 23 August and is accepting exclusion requests through 18 December.

A ten percent additional tariff was imposed on so-called List 3 goods (valued at about US$200 billion) as of 24 September and is scheduled to increase to 25 percent on 1 January, but the administration has not yet announced any exclusion request process for these goods. 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.”

A number of the senators pushing for a product exclusion process for List 3 products represent agricultural exporting states, and the letter notes that the Section 301 tariffs have caused significant harm in the form of retaliatory tariffs imposed by mainland China on U.S. exports, including on numerous agricultural products. Other senators represent states with significant manufacturing activities, with the letter noting that American manufacturers should have access to a tariff exemption process so they can continue to source components and materials from mainland China, particularly when there is no alternative supplier.

The lawmakers are requesting the process to be “straightforward so that firms, including American small businesses, do not have to expend significant resources in order for their requests to be considered.” The letter explains that the third tranche of products is more than four times the size of the first two lists combined and contains a much higher percentage of consumer goods relative to intermediate and capital goods, including many products that do not benefit from the “Made in China 2025” policy.

The senators wrote approvingly of other tariff exemption processes established by USTR and the U.S. Department of Commerce even as many importers and elected officials have complained about both processes. In early November, the DOC’s inspector general initiated an audit of the processes and procedures used to review and adjudicate requests to exclude specific products from the Section 232 additional tariffs on imported steel and aluminium.

Content provided by Picture: HKTDC Research
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