Nov 7, 2019

Investigating Product Exclusion Requests for Section 301 Tariffs: A Tranche Three Update

Many firms believe they will be negatively impacted by proposed tariffs and have filed for relief
Christine McDaniel Senior Research Fellow , Joe Brunk Staff writer

On September 30, 2019, the Office of the United States Trade Representative (USTR) closed the public docket for interested parties to request an exclusion from tranche three of the Section 301 tariffs. Under Section 301(B) of the Trade Act of 1974 (commonly called “Section 301”), President Trump has authorized tariffs on approximately $250 billion of US imports from China, equivalent to nearly half of the value of US imports from China in 2018. 

In administering these tariffs, the USTR has authority to grant relief to qualified US importers. Interested parties or trade associations may submit a product exclusion request to USTR, which it will then review and either approve or deny.

Earlier this year, we compiled an update to our data on product exclusion requests for the first two tranches through July 30, 2019.  In this essay, we include new data on the product exclusion requests for tranche three of the Section 301 tariffs as of October 2, 2019.

The window to request an exclusion for tranche three closed at midnight of September 30, 2019. Interested parties filed a total of 30,335 requests, with an influx of requests near the end—the day the online portal closed, USTR received 5,326 requests (17.5 percent). In the week leading up to the deadline, starting on September 23, USTR received 13,870 requests (46 percent).

As of October 2, there were 29,895 (99 percent) still pending a USTR decision. We will update these figures periodically.

Table 1 reports the breakdown of the final list of products on which a tariff was imposed and exclusion requests for tranche three by broad economic category.  The totals refer to the total number of products on which a tariff was imposed and to the total number of exclusion requests received. For some products with a tariff, multiple firms asked for an exclusion.

The fact that the number of exclusion requests outstrips the number of tariffed products reflects the vast number of US firms that import the intermediate inputs, capital goods, and consumer goods from China that were on the tranche three tariff list. These firms are requesting a tariff exclusion to avoid the economic harm that the tariff would cause their firm. 

For the exclusion requests, capital goods represent five percent of the number of products on the final list but 11 percent of the number of product exclusion requests filed. In other words, by this crude measure, capital goods are over-represented in the exclusion requests. In contrast, consumer products represent 21 percent of the final list but just 14 percent of the exclusion requests. Intermediate goods are relatively equally represented, with 72 percent in the final list and 75 percent in the exclusion requests.

We will continue to track and update the data as more decisions are made. The request portal for tranche three closed and no further requests will be filed. In the next update, we will focus on the USTR decisions for these product exclusion requests by broad economic categories. With the late influx of nearly 14,000 requests, however, it will be interesting to track the outcomes of this largest ever product exclusion request cohort. 

Photo credit: MARK RALSTON/AFP via Getty Images

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