As you likely heard, the president signed the Consolidated Appropriations Act, 2019 (H.J. Res. 31) earlier today and avoided another government shutdown. That spending bill included an “Explanatory Statement” submitted by the Chairwoman of the House Committee on Appropriations that contains a number of interesting provisions. Most notably with regard to Section 301, it contains a clear instruction from Congress that USTR establish within 30 days, a “Section 301 Exclusion Process” for goods included on List 3. How this instruction will be implemented by USTR—and whether it will applied retroactively to the original effective date of the List 3 duties— however, remains to be seen.
USTR has stated that it would not create an exclusion request process for List 3 Section 301 duties as long as those duties remain at the current 10% level. At present, those duties are scheduled to increase to 25% on March 2, 2019 unless an agreement with China is reached (or the president pushes the deadline back further, which is more likely). As a result, importers of articles on List 3 have not been able to apply for a product exclusion (unlike importers of articles on List 1 and/or 2).
The Explanatory Statement (relevant portion attached), however, provides as follows:
USTR shall establish an exclusion process for tariffs imposed on goods subject to Section 301 tariffs in round 3. This process should be initiated no later than 30 days after the enactment of this Act, following the same procedures as those in rounds 1 and 2, allowing stakeholders to request that particular products classified within a tariff subheading subject to new round 3 tariffs be excluded from the Section 301 tariffs.
While we believe that Congress likely intended that USTR create an exclusion process for List 3 articles within 30 days (i.e., by March 17, 2019), the inclusion of the phrases “same procedures” and “new round 3 tariffs” might be read to support USTR’s existing plan of creating an exclusion process for List 3 only if the duties increase to 25% (i.e., does “new round 3 tariffs” mean when the List 3 duties increase to 25%, any List 3 duties paid after the date of enactment of the spending bill, or something else?).
Regardless, the expectation that USTR will create an exclusion process within 30 days is clear. Exactly what it will cover and how it will be implemented is less so.
We hope this is helpful. We will continue to monitor the situation and provide further updates as more information becomes available. In the meantime, please let us know if you have any questions.