2019-20442. Notice of Product Exclusions, Amendment to the Exclusion Process, and Technical Amendments: China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation

AGENCY:

Office of the United States Trade Representative.

ACTION:

Notice of product exclusions and technical amendments.

SUMMARY:

In September of 2018, the U.S. Trade Representative imposed additional duties on goods of China with an annual trade value of approximately $200 billion as part of the action in the Section 301 investigation of China's acts, policies, and practices related to technology transfer, intellectual property, and innovation. The U.S. Trade Representative initiated a product exclusion process in June 2019, and interested persons have submitted requests for the exclusion of specific products. This notice amends the exclusion process by establishing August 7, 2020 as a uniform expiration date for all exclusions granted under the $200 billion action. This notice also announces the U.S. Trade Representative's determination to grant certain exclusion requests, as specified in Annex A. As specified in Annex B, this notice also makes technical amendments to the $200 billion action and to the $300 billion action announced in August 2019.

DATES:

The product exclusions announced in this notice will apply as of the September 24, 2018, effective date of the $200 billion action, to August 7, 2020. The technical amendments in Annex B to the $200 billion and $300 billion actions are effective as of the respective effective date of those actions. U.S. Customs and Border Protection will issue instructions on entry guidance and implementation.

FOR FURTHER INFORMATION CONTACT:

For general questions about this notice, contact Assistant General Counsels Philip Butler or Megan Grimball, or Director of Industrial Goods Justin Hoffmann at [phone]. For specific questions on customs classification or implementation of the product exclusions identified in the Annex A to this notice, contact [e-mail].

SUPPLEMENTARY INFORMATION:

A. Background

For background on the proceedings in this investigation, please see the prior notices issued in the investigation, including 82 FR 40213 (August 23, 2017), 83 FR 14906 (April 6, 2018), 83 FR 28710 (June 20, 2018), 83 FR 33608 (July 17, 2018), 83 FR 38760 (August 7, 2018), 83 FR 47974 (September 21, 2018), 83 FR 49153 (September 28, 2018), 83 FR 65198 (December 19, 2018), 84 FR 7966 (March 5, 2019), 84 FR 20459 (May 9, 2019), 84 FR 29576 (June 24, 2019), 84 FRN 38717 (August 7, 2019), and 84 FR 46212 (September 3, 2019).

Effective September 24, 2018, the U.S. Trade Representative imposed additional 10 percent duties on goods of China classified in 5,757 full and partial subheadings of the Harmonized Tariff Schedule of the United States (HTSUS), with an approximate annual trade value of $200 billion. See 83 FR 47974, as modified by 83 FR 49153. In May 2019, the U.S. Trade Representative increased the additional duty to 25 percent. See 84 FR 20459. On June 24, 2019, the Trade Representative established a process by which U.S. stakeholders may request exclusion of particular products classified within an 8-digit HTSUS subheading covered by the $200 billion action from the additional duties. See 84 FR 29576 (the June 24 notice).

Under the June 24 notice, requests for exclusion had to identify the product subject to the request in terms of the physical characteristics that distinguish the product from other products within the relevant 8-digit subheading covered by the $200 billion action. Requestors also had to provide the 10-digit subheading of the HTSUS most applicable to the particular product requested for exclusion, and could submit information on the ability of U.S. Customs and Border Protection to administer the requested exclusion. Requestors were asked to provide the quantity and value of the Chinese-origin product that the requestor purchased in the last three years. With regard to the rationale for the requested exclusion, requests had to address the following factors:

• Whether the particular product is available only from China and specifically whether the particular product and/or a comparable product is available from sources in the United States and/or third countries.
• Whether the imposition of additional duties on the particular product would cause severe economic harm to the requestor or other U.S. interests.
• Whether the particular product is strategically important or related to “Made in China 2025” or other Chinese industrial programs.

The June 24 notice stated that the U.S. Trade Representative would take into account whether an exclusion would undermine the objective of the Section 301 investigation.

The June 24 notice required submission of requests for exclusion from the $200 billion action no later than September 30, 2019, and noted that the U.S. Trade Representative would periodically announce decisions. In August 2019, the U.S. Trade Representative granted an initial set of exclusion requests. See 84 FR 38717. This set of exclusions is set to expire on August 7, 2020, one year following the publication of the exclusion determination in the Federal Register. The Office of the United States Trade Representative regularly updates the status of each pending request and posts the status within the web pages for the respective tariff action they apply to at https://ustr.gov/​issue-areas/​enforcement/​section-301-investigations/​tariff-actions.

On August 20, 2019, the U.S. Trade Representative determined to impose additional 10 percent duties on two lists of goods of China classified under 8-digit subheadings in the HTSUS, with an approximate annual trade value of $300 billion. See 84 FR 43304. The U.S. Trade Representative subsequently increased the rate of the additional duty to 15 percent. See 84 FR 45821. The additional duties became effective on September 1, 2019, for goods on list 1 and will become effective on December 15, 2019, for goods on list 2.

B. Amendment to the Exclusion Process

The June 24 notice announced that the exclusions granted for the $200 billion trade action would be effective starting from September 24, 2018, and extend for one year after the publication of the exclusion determination in the Federal Register. This policy, however, would have resulted in disparities in the effective periods between exclusions granted early in the exclusion process and those granted later. Accordingly, the Trade Representative is amending the exclusion process so as to adopt a uniform expiration date for exclusions granted for the $200 billion trade action, subject to special circumstances. In particular, all exclusions from the $200 billion action will be effective from September 24, 2018, to August 7, 2020.

C. Determination To Grant Certain Exclusions

Based on the evaluation of the factors set out in the June 24 notice, which are summarized above, pursuant to sections 301(b), 301(c), and 307(a) of the Trade Act of 1974, as amended, and in accordance with the advice of the interagency Section 301 Committee, the U.S. Trade Representative has determined to grant the product exclusions set out in Annex A. The U.S. Trade Representative's determination also takes into account advice from advisory committees and any public comments on the pertinent exclusion requests.

As set out in Annex A, the exclusions are reflected in 38 specially prepared product descriptions, which cover 46 separate exclusion requests.

In accordance with the June 24 notice, the exclusions are available for any product that meets the description in Annex A, regardless of whether the importer filed an exclusion request. Further, the scope of each exclusion is governed by the scope of the product descriptions in Annex A, and not by the product descriptions set out in any particular request for exclusion.

Paragraph A, subparagraphs (3)-(5) are conforming amendments to the HTSUS reflecting the modification made by Annex A.

As stated in Section B above, the exclusions will apply from September 24, 2018, to August 7, 2020. U.S. Customs and Border Protection will issue instructions on entry guidance and implementation.

The U.S. Trade Representative will continue to issue determinations on pending requests on a periodic basis.

D. Technical Amendments to $200 Billion and $300 Billion Actions

Annex B make technical amendments to the $200 billion and $300 billion trade actions. These amendments provide that the additional duties do not apply to entries under certain subheadings if the applied rate of duty for an entry is derived from another subheading, and if the entry for this reason already is subject to the additional duties.

Joseph Barloon,

General Counsel, Office of the U.S. Trade Representative.