US Importers Should ‘Move Quickly’ on Tariff Hike, Advises Covington Trade Practice

The Office of the U.S. Trade Representative soon will publish the terms of a List 3 exclusion process, said Thursday's Federal Register notice making the tariff increase legally binding. A forthcoming notice will include “procedures for submitting exclusion requests, and an opportunity for interested persons to submit oppositions to a request,” said USTR.

Importers pondering a List 3 exclusion request “may opt to start gathering certain information that will likely be required,” said Covington. “Moving forward, companies will need to remain vigilant and responsive to further developments, as bilateral trade talks will likely extend further into the future than previously anticipated.” In keeping with the exclusion processes for Lists 1 and 2, those seeking List 3 exemptions should gather evidence to show how higher duties on the product "would cause severe economic harm" to U.S. interests, it said

The existing exclusion processes for Lists 1 and 2 are “a hot mess!” emailed trade expert David Cohen with Sandler Travis. Cohen has been advising importer clients on tariff-mitigation strategies since before the first duties took effect July 6. With the value and breadth of the goods on List 3 so exponentially larger than those in Lists 1 and 2 combined, Cohen worries USTR won’t be up to the task of handling a third exclusion process, he said.

“Probably not,” Cohen replied when asked if he thinks USTR has the monetary and staff resources needed to launch a List 3 exclusion process. “They are still working on List 1 petitions. They have done nothing on List 2 product exclusions.” Cohen conceded he lacks “specific familiarity” about USTR’s capabilities, “but their ability to process the thousands of submissions expeditiously has been in doubt,” he said.

A USTR notice late Thursday granted exclusions to roughly 40 classifications of products on List 1, based on 515 “separate exclusion requests.” USTR “will continue to issue decisions on pending requests on a periodic basis,” said the notice.

“Unfortunately, I think it will be a very slow process,” said Cohen of List 3 exclusions. The “only solace” is that for petitions that are granted, the exclusions likely will be made retroactive to Sept. 24, when the List 3 duties took effect, he said: “There are some procedural challenges importers need to be mindful of to make sure they preserve their rights to a retroactive refund should their exclusion be granted.” USTR representatives didn’t comment Thursday.

For Chinese goods already on the water destined to the U.S. when the tariffs went to 25 percent early Friday, "the 10 percent duty rate will still apply," said Customs and Border Protection in new "guidance" Thursday. The update was in keeping with USTR's instructions a day earlier giving U.S. importers a reprieve if they could prove their goods already left China when Friday's deadline came and went.

CBP's new guidance was to modify changes the agency made to its Automated Commercial Environment (ACE) portal -- its main repository for all trade data, blogged trade lawyer Paula Connelly Thursday. CBP technicians errantly reprogrammed ACE to duty all Chinese goods at 25 percent if they entered U.S. ports after 12:01 a.m. Friday, regardless of when they left China, in direct contradiction to USTR's instructions, she said, The discrepancy was causing "quite a bit of confusion among the trade community," she said.

Critics of the Trump administration's trade policies were apt to blame the mixed messaging on the haste with which the tariff hike was pushed through. CBP still lacks filing rules for imports still to be dutied at 10 percent, said the agency. It's "working with USTR on additional guidance on the entry filing requirements for these imports," said the agency.

Importers, "in the meantime," can pay the 25 percent duty and seek refunds "when filing instructions are available for the 10 percent duty," said CBP. "Alternatively," importers can delay filing their "entry summary" paperwork within the "standard" 10-day filing period "until additional filing instructions are available," it said.

Asked what Chinese export date importers can use to document claims that their goods qualify for the 10 percent duty rate, a CBP official said there's a "definition of export date for entry summary purposes" in the ACE instructions. The export date in an entry summary will be the first date that CBP will check, but importers should take care to be sure it's consistent with other information, such as from a carrier, for verification purposes, he said.