China First Time Released Exemption Lists Of U.S. Goods From Retaliatory Tariffs.

Phase Two Exclusion Process

For the exclusion applications of Phase Two, applicants can submit their requests from this point through 18 October 2019. As described below, CTC largely adopted the same standards and requirements of tariff exclusion process of Phase One.

• Qualified applicants – Interested parties, including entities located in China, industrial associations or chambers of commerce that engage in import, production or use of goods listed in the List 2, are eligible to apply for a Chinese tariff exemption. Although U.S. exporters, trading companies or manufacturers are not qualified for a direct applicant, it is recommended that US interested parties work and coordinate with your Chinese counterpart contacts to have them apply for the tariff exemption.

• Submission requirements – Requests need to identify the HS customs code (8-digit numbers) for the product. If the application contains multiple items under one 8-digit HS code, each type of item (10-digit HS code) would require a separate form. For a same 8- digit HS code, if the industrial association has compiled information and submitted applications on behalf of relevant entities, such entities then cannot submit a request for the same item to CTC.

However, when one HS code product involves multiple applicants, each applicant can submit its own application.

• Form contents and criteria – Similar to the exclusion procedure for Phase One, the request form is composed of several major parts: product information such as product name, HS customs code, usage, import data (volume and value) of 2017-2019, impact of proposed tariff on entities and exclusion reasons. The form also asks whether alternative product is available in China or third countries, whether imposition of additional tariffs would cause severe economic harm to the requester, and whether the additional tariffs would cause material negative structural impact on industry development, technology development, employment, environmental protection and etc. Although CTC has a limit of no more than 800 words on the exclusion reason, it does allow applicant to submit photos and illustrative description materials to demonstrate how representative its product is in the industry.

• Scope of exemption – Based on the scope of products that were applied under the HS code, exemption upon approval will be applicable to either entire group of products or certain product items under one 8-digit HS code. Once an item gets exempted from the Chinese tariffs, the relevant interest parties in the industry even without submitting an exclusion application can be eligible for a same treatment.

   

Reviewing the timeline of CTC's review of Phase One exclusion applications, CTC spent two months before it released its first batch of exemption decision on products contained in the List 1A and List 1B. We anticipate that the Chinese government could exempt more U.S. products from its tariffs to ease tensions with the United States as part of the ongoing negotiations. Submitting a request is likely worthwhile for businesses that have already paid tariffs or expects to in the near future, as the process involves meaningful review and could result in a significant refund of tariffs already paid and an exemption of future tariffs.

Hogan Lovells International Trade and Investment group has extensive experience with the U.S. Section 301 process and the associated Chinese duty and duty exclusion process. Our team includes experienced private practitioners, several of whom also have experience in government service.