Ivan W. Bilaniuk

US Proposes Tariffs on $300B Imports from China and Other Developments in the US-China Trade Dispute

May 17, 2019Legal Alerts

USTR proposes List 4 Section 301 tariffs on $300B U.S. imports from China, limits List 3 goods in transit that will avoid the increased 25 percent tariff, and makes progress on backlog of List 1 and List 2 exclusion requests

The U.S.-China trade dispute escalated this week -- the Office of the U.S. Trade Representative (USTR) proposed tariffs of up to 25 percent on the estimated $300 billion balance of U.S. imports from China not already subject to Section 301 tariffs.  The USTR also limited the List 3 goods in transit that would remain subject to the original 10 percent tariff rather than the increased tariff of 25 percent. Finally, the most recent USTR weekly exclusion request updates for List 1 and List 2 reveal progress on the backlog of pending requests.  

(1) USTR Announces Proposed Section 301 Tariffs on $300B of US Imports from China (List 4) and Requests Public Comment. 

The USTR announced proposed tariffs of up to 25 percent on an estimated $300 billion of U.S. imports from China (List 4) on May 13, 2019 on its website, and the notice was published in the Federal Register on May 17, 2019. This list represents the balance of U.S. imports from China other than the estimated $250 billion (Lists 1 to 3) already subject to tariffs levied pursuant to Section 301 of the Trade Act of 1974.1  The summary chart below shows all four Section 301 tariff lists.   

While representing the balance of U.S. imports and covering 3,805 full and partial tariff subheadings, the USTR noted that List 4 excludes pharmaceuticals, certain pharmaceutical inputs, select medical goods, rare earth metals, and critical minerals. Products covered by exclusion requests that the USTR has already granted are also excluded from List 4.

This List 4 proposal followed China’s May 13th announcement it would impose retaliatory tariffs on $60 billion of U.S. goods in response to the May 10th increase in Section 301 tariffs from 10 to 25 percent on an estimated $200 billion of Chinese goods (List 3). See our alert here about the List 3 tariff increase. While making these moves, both the US and China pledged to continue to negotiate.

As with previous proposed Section 301 tariff lists, the USTR announced a public comment period and a public hearing date. Interested parties may file a request to appear at the public hearing and a summary of expected testimony by June 10, 2019, and submit written comments by June 17, 2019, which is also the date on which the public hearing will start. Post-hearing rebuttal comments will be due seven days after the public hearing ends. The USTR is seeking comment on any part of the proposed List 4 tariff action, and specifically listed a few topics:

  • the tariff subheadings to be included in List 4;
  • the tariff rate to apply, if any;
  • the aggregate level of trade that would be affected;
  • whether the increased tariffs on a particular product would be effective in leading China to change its policies and practices; and
  • any disproportionate economic harm to U.S. interests, including small or medium-size businesses and consumers, by tariff increases on specific products
Tariff List  – 
Value of Imports
from China
Number of
Tariff Subheadings
on List
Date tariff Levied Tariff Exclusion Request Deadline
List 1 – $34B 818 July 6, 2018 25% Oct. 9, 2018
List 2 – $16B 279 Aug. 23, 2018 25% Dec. 18, 2018
List 3 – $200B 5,769* Sept. 24, 2018 10% Deadline not yet announced

Jan. 1, 2019 (postponed)

Mar. 2. 2019 (postponed)

May 10, 2019

List 4 – $300B 3,805

None levied yet

June 2019 deadline for
submitting public comments
and public hearing 
on proposed tariffs

Up to 25% Not applicable

*Number of tariff subheadings as stated in the USTR List 4 notice published in the Federal Register today May 17th.

(2) USTR Limits List 3 Goods in Transit that Will Still Qualify for the 10% Tariff instead of the 25% Tariff. 

The USTR notice announcing the List 3 tariff increase to 25 percent effective May 10th provided that Chinese goods that were exported to the U.S. and in transit before May 10th would not be subject to the increased tariffs. Such “in-transit” goods were to be subject to the original 10 percent Section 301 tariff. In a notice published in the Federal Register on May 15th, however, the USTR limited the “in-transit” goods that would qualify for the lower tariff --  not only did the goods need to be in transit before May 10th, they also need to be entered into the U.S. by June 1, 2019.

(3) The USTR Made Progress on the Backlog of List 1 and List 2 Exclusion Requests It is Processing.

The exclusion request process for Lists 1 and 2 as well as the USTR’s progress inform expectations for the List 3 process that the USTR will announce in the coming days. See our alert here for a discussion. The USTR’s May 3, 2019 update had indicated significant progress by the USTR, but as of that update, the nearly 2,919 exclusion requests for List 2 had remained pending. The USTR’s next weekly update on May 10, 2019, however, showed significant progress with List 2 – the USTR issued decision letters – all denials – for one-third of all requests. While there have been no List 2 requests yet granted, most pending requests have already met substantive criteria and are being reviewed to confirm that Customs will be able to administer the exclusion -- only 383 or 13 percent are still in a substantive review. Processing of List 1 requests also showed an incremental increase – 1,957 or 18 percent of the total 10,837 submitted have now been granted. Substantive review of List 1 requests is also nearly completed with only 365 or three percent in that stage of review. See the updated chart below summarizing the status of the exclusion request process for Lists 1 and 2.

Status of Exclusion Requests for Lists 1 and 2

Tariff List List 1 – $34B List 2 – $16B
Date Tariff Levied Jul. 6, 2018 Aug. 23, 2018
Date Exclusion Request Process Announced Jul. 11, 2018 Sept. 18, 2018
Exclusion Request Deadline Oct. 9, 2018 Dec. 18, 2018
Total Number of Exclusion Requests 10,837 2,919
Requests in Stage 1 (Public Comment Period) 0 2
Requests in Stage 2 (Initial Substantive Review) 365 (3%) 383 (13%)
Requests in Stage 3 (Administrability Review) 2510 (23%) 1578 (54%)
Requests in Stage 4 (Granted and publication in progress) 0 0
Granted 1957 (18%) 0
Denied 6005 (55%) 956 (33%)

Note: Exclusion request data compiled from the most recent weekly USTR exclusion request index updates for List 1 and List 2 dated May 10, 2019.

Dinsmore & Shohl LLP continues to work with its clients during this U.S.-China trade dispute to evaluate options and develop strategies to mitigate the effects of these tariffs, including reviewing tariff classifications on the Harmonized Tariff Schedule, reviewing country of origin of imported products, evaluating potential changes to product supply chains and the possibility of setting up a foreign-trade zone (FTZ), and preparing product exclusion requests. For more information, contact the author or your Dinsmore attorney.

1 The US imposed these Section 301 tariffs after the USTR investigated and determined that China’s policies and practices with respect to technology transfer and intellectual property were unreasonable and discriminated and burdened U.S. companies.