ILMA Compoundings - October 2018 - 50

COUNSEL COMPOUND

Lubricants and
Additives: Exclusion
from Chinese Tariffs?
I
By Jeff Leiter

LMA members have been watching,
and are potentially affected in different
ways by, the trade dispute between the
United States and China. I have been
asked more than a few times how this
trade dispute erupted and whether there
is any relief for U.S. companies.
Procedurally, in August 2017, the
Trump administration initiated an
investigation under Section 301 of the
Trade Act of 1974 into whether Chinese policies and practices threatened
U.S. intellectual property and trade
secrets. The U.S. Trade Representative
(USTR) found a number of unfair
practices by China, leading the Trump
administration to announce this past
March that it intended to impose
trade penalties on Chinese products.
Under the first tranche, the Trump
administration imposed additional tariffs of 25 percent on some $34 billion
worth of Chinese imports, effective
July 6, 2018. A second tranche of 25
percent tariffs on an additional $16
billion in Chinese imports, including
lubricants and additives, took effect
on Aug. 23, 2018. As I write this
column, if negotiations with Beijing
falter, a third tranche of tariffs as high
as 25 percent has been threatened on
an additional $200 billion in imports
from China. Beijing has responded
with retaliatory tariffs on about $50
billion in U.S. goods and has threatened to add tariffs on an additional
$60 billion of U.S. products if the
Trump administration goes ahead with
the third tranche of tariffs.
In an effort to mitigate the impact
of the additional Section 301 tariffs,

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OCTOBER 2018

| COMPOUNDINGS | ILMA.ORG

the USTR has announced an exclusion
process under Section 301 for products covered by the newly imposed 25
percent additional duties on Chinese
imports. Under this process, U.S.
companies or their trade associations
may request that specific products be
excluded from the additional duties.
Importantly, any exclusion granted by
the USTR will be retroactive to the
effective date of the additional tariffs
and will extend for one year after the
publication of the exclusion determination in the Federal Register. The
USTR requires that any request for a
Section 301 exclusion must include:
* identification of the product in
terms of the physical characteristics (e.g., dimensions, material
composition or other characteristics) that distinguish it from five
other products within the covered
eight-digit subheading;
* the 10-digit tariff schedule
(HTSUS) subheading most applicable to the particular product
requested for exclusion;
* annual quantity and value of the
Chinese-origin product purchased
in each of the last three years;
* whether the product is available
only from China and whether
the product and/or a comparable
substitute is available from sources in the U.S. and/or in third
countries;
* whether the imposition of the
additional duties on the product
will cause severe economic harm

to the requestor or other U.S.
interests; and

* whether the particular product is
strategically important or related
to "Made in China 2025" or other Chinese industrial programs.

It's important to note that the
USTR's exclusion process is datedriven. Right now, USTR is giving
companies 90 days from the effective
date of the additional tariffs to file a
request for a product exclusion. USTR
will post the filed requests on regulations.gov, and the public will have 14
days to file responses to the requested
product exclusion, followed by a sevenday response period. USTR then
makes a final decision and, if granted,
the exclusion will be effective for
one year upon the publication of the
exclusion determination in the Federal
Register, and it will apply retroactively
to the initial tariff date. The Government will refund any of the additional
tariffs actually paid. USTR said, "[A]
particular exclusion will apply to all
imports of the product, regardless of
whether the importer filed a request."
To the extent that your company is
directly affected by these new duties,
there are steps that should be taken to
prepare an exclusion request for each
product: Identify the specific, distinct
products that are subject to the Chinese
tariffs based on country of origin and
classification. Also, compile the following information for each product:
* A detailed description of the
product and information that
distinguish the product from other
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