USTR Issues First List 2 Tariff Product Exclusions 7 Months After Applications Closed
The Office of the U.S. Trade Representative issued its first set of product exclusions from the List 2 Section 301 tariffs on goods from China, said an agency notice Friday. Though virtually no tech products appeared on List 2, tech companies were monitoring the pace of the List 2 exclusion process for possible clues on how long exemptions might take for List 3, where tech had much more tariff exposure.
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Newly exempt from the List 2 tariffs are 69 "specially prepared product descriptions," said USTR. The exclusions cover 292 separate requests, and apply mainly to various types of plastics, vinyls and other industrial materials, it said. The product exclusions apply retroactively to Aug. 23, the date the 25 percent List 2 tariffs took effect on roughly $16 billion worth of Chinese imports. The exemptions will remain in effect until one year after the notice is published in the Federal Register.
It took USTR seven months and 11 days to issue the first List 2 exclusions after the window for requests closed Dec. 18. IRobot CEO Colin Angle was among tech executives watching the List 2 process for clues on how long it might take USTR to act on his company's List 3 exclusion request, he told investors last week.
List 3 applications opened June 30, and close Sept. 30, and judging from the pace of List 2 exclusions, it could be "reasonably into 2020 before we see progress," said Angle: "We know that the USTR is hiring more people to work these issues, so that there is some reason to believe that List 2 could be less indicative of the timing we take, but that would be putting an optimistic head on." IRobot estimates it will take a $35 million-$40 million hit in “direct tariff cost” this year from the List 3 tariffs rising to 25 percent May 10 (see 1907240031).
IRobot is seeking a tariff exemption on finished robotic vacuum cleaners it imports from China under the Harmonized Tariff Schedule's 8508.11.00.00 product code, said the company's July 1 exclusion request. IRobot began paying 10 percent tariffs on those goods when List 3 took effect Sept. 24, and saw the Trump administration hike the duties to 25 percent May 10 after trade talks broke down with the Chinese.
The exclusion request drew no opposition in the window for comments that closed July 18. iRobot is building a production facility in Malaysia, "with initial production set to begin later this year," said the request. "Set-up and expansion of this new facility is a time-consuming process, and while iRobot is working expeditiously to relocate, it will not be possible for iRobot to fully move its production out of China immediately. A one-year exemption from the tariffs on Chinese-sourced product will assist iRobot in further developing and expanding its Malaysian production capacity, by freeing up capital that would otherwise go toward payment of tariffs."