Nearly half seeking exclusions from new Trump tariffs on China get preliminary OK

The roughly 46.5 percent success rate is a sign trade officials are open to company arguments requesting relief from tariffs

A container ship sits docked at the Port of Oakland on May 13, 2019 in Oakland, California. China retaliated to U.S. President Donald Trump's 25 percent tariffs on $250 billion of Chinese goods entering the United States with a 25 percent tariff on $60 billion of U.S. goods entering China. The U.S. Trade Representative’s Office has given preliminary approval to 40 percent of companies seeking exclusions. (Justin Sullivan/Getty Images)

Companies hoping to sidestep the recent increase in tariffs on many imports from China may take heart from data released by the U.S. Trade Representative’s Office: More than 40 percent of those seeking exclusions for specific products have won at least a preliminary thumbs-up.

Of the 13,757 requests for exclusions of specific products from tariffs as of May 10, the USTR has reached a preliminary decision on 13,007, granting 1,957 and giving 4,089 approval in an initial substantive review. Almost 7,000 requests were denied.

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“It’s not automatic dismissal,” said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics. “The fact that the numbers are as high as this may cause more firms to step forward and seek the exclusion.”

The 46.5 percent success rate among those already adjudicated in full or in part is a sign that trade officials are open to company arguments that the product is available only from China, or that the tariff would cause “severe economic harm.” Both are key issues USTR looks at it in adjudicating cases.

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The exclusions handed down so far are on the first round of $50 billion in affected imports and are generally retroactive to July 6, 2018. They apply for one year after the date when the approval is published in the Federal Register. Each exclusion applies not just for the company that seeks it but for any identical product, regardless of the importer.

Hufbauer, who has written extensively on trade, said it was difficult to evaluate the impact on the economy without data on the dollar value of the exclusions granted, but he added that the data may encourage more firms to take a chance and file for the exclusions.

USTR’s approach is especially relevant after the Trump administration announced last week that it would tighten the screws by increasing tariffs to 25 percent from 10 percent on $200 billion in imports from China, opening the door to exclusion requests for the products affected. No exclusions were available on the initial 10 percent tariff on those $200 billion in imports.

USTR didn’t say what the ground rules for such exclusions would be and when it would accept requests. Attempts to obtain details from USTR were unsuccessful.

The office on Monday published a notice seeking public comment on a proposal to impose another 25 percent tariff on some $300 billion of imports from China that have not yet been subject to tariffs, with a public hearing scheduled for June 17.

The exclusion process has been underway since the first round of tariffs was imposed in July 2018. The trade office reviewed exclusion applications on the first $34 billion of tariffs on Chinese-origin imports and the $16 billion added later. Both rounds have been closed to further requests and USTR released the latest decisions Friday.

The 4,089 requests that have reached Stage 3 approval on the merits await only a green light on the issue of being administrable, with U.S. Customs and Border Protection input the key. It is unclear from the data what proportion fail on the administrability test. Only 748 requests remain at Stage 2 in which the substantive review is still underway.

Brad Miller, director of advocacy and sustainability at BIFMA, a Michigan-based trade association representing office furniture producers, said a few of his members have sought exclusions relief already, with mixed results. He lamented the added burden on manufacturers.

“It’s one of the additional, unintended consequences of the trade war,” Miller said. “When you look at the economy overall, it doesn’t strike me as a productive activity.”

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