Over the past nine months, Michael Best Strategies’ trade team – including myself, Denise Bode, and Alex Nichols have been working with numerous small businesses across the United States to navigate the U.S.-China trade war, particularly on the Section 301 tariffs placed on products imported from China. Many of these small businesses are the epitome of the American dream, as they made ideas flourish into successful and growing companies over decades of hard work and innovation.
In today’s global economy, they source their products from China because there is no manufacturing capacity for those products in the U.S. Unfortunately, the Section 301 tariffs have been more or less a nightmare for these small businesses as they have sought relief from the millions of dollars in tariffs in order to have the resources to innovate and make new investments, retain their workforce, or, worst, keep their doors open. One of the primary avenues for relief is for companies to request that the United States Trade Representative (USTR) exclude their products from the tariffs. As our team led these small businesses through the exclusion process, we could not be more proud to have some of their exclusion requests granted.
In July 2018, USTR began implementing what is now $250 billion worth of goods imported from China. The tariffs were in response to USTR’s investigation and finding that China’s laws and practices resulted in unfair, discriminatory, and predatory trade practices that harmed American intellectual property, innovation, and technology development. The administration did not take a targeted approach to which products it would implement tariffs on to curb China’s practices; rather, the tariffs were imposed on American companies manufacturing pet products, clocks, home and industrial electrical components, musical instruments, breast pumps, and food packaging equipment, amongst thousands of other products.
If American companies have products on USTR’s first two of three lists, then USTR provided an opportunity for them to request their products be excluded from the 25% tariffs. Products on USTR’s third list are not afforded such an opportunity unless the administration increases the tariff to 25% from 10%.
In USTR’s exclusion process, a requestor has to prove three elements – their products cannot be sourced from anywhere outside of China, the tariffs must result in severe economic harm to them or others, and their products are not included in China’s “Made in China 2025” plan. In its ongoing review of the over 14,000 applications that have been filed, USTR has released three rounds of exclusions while denying thousands of other applications. USTR’s exclusions include over 1,000 requests that cover ten ten-digit HTS categories and 75 descriptions of products.
The exclusions are retroactive to July 6, 2018, and extend for one year from the date USTR announced the product was excluded. USTR will make additional exclusion announcements in the near future.
Strategies’ trade team has helped some of these small businesses receive exclusions because, fortunately, USTR rightly determined and recognized the tariffs should not be placed on their products. Now, they can go back to focusing on their core business rather than being distracted by harmful trade policies that would have cost them millions of dollars. Our Strategies’ team congratulates them and celebrates with them.