A comprehensive list of the 21-covered product tariff subheadings is included in Annex A of the Federal Register Notice announcing the action. Examples of products subject to the additional tariff include cosmetics, beauty products, soaps and handbags.

The imposition of tariffs follow USTR’s July 2019 investigation and December 2019 finding that France’s digital services tax is unreasonable or discriminatory and burdens or restricts U.S. commerce. USTR held hearings in January 2020 to seek comment and input on the proposed application of 100 percent duties on a proposed list of 63 products from France. The final list of products subject to an additional 25 percent tariff is a subset of the proposed list. Notably, the final retaliatory list excludes Champagne, cheese and fine dinnerware, which were among the proposed products.

According to the announcement, USTR issued the 180-day suspension to allow additional time for bilateral discussions and multilateral negotiations that could potentially lead to a satisfactory resolution of the dispute. USTR further advises it could decide to impose tariffs at an earlier date and would issue a subsequent notice amending the effective date if it makes that determination.

USTR had initially determined to withhold taking action under this investigation in exchange for France’s agreement to delay collection of its digital services tax pending multilateral negotiations through the OECD to determine consensus on how to tax the activities of digital companies offering services outside a taxing jurisdiction. Those negotiations, however, have experienced setbacks as some OECD members have proceeded to enact and implement digital services taxes notwithstanding ongoing discussions, and it remains unclear whether calls for continued global talks will result in an outcome where the U.S. proceeds with or drops its proposed 301 tariffs.

For additional information about the investigation or proposed tariff implementation procedures please contact Jennifer McCadney.

In the notice initiating that investigation, USTR proposed imposing additional ad valorem duties of up to 100 percent on certain imports from the EU. USTR also provided a list of proposed tariff headings covering an estimated $21 billion in trade value that might be subject to increased duties.

In May, USTR solicited comments and held a hearing concerning the list of products to be subject to retaliatory duties and the level of duties to be applied, among other issues. A number of commenters urged USTR to consider retaliatory duties on additional products not included on the April 12 list.

Pursuant to these comments, USTR has proposed a second list of products covering an estimated trade value of $4 billion. The new list covers a variety of food items, including meats, cheeses, olives, fruits, coffee, pasta, waffles, and whiskey. It also covers certain chemicals, including ammonia, urea, as well as metals, including ferrovandium, cast iron pipes and tubes, copper and copper based alloys.

USTR is again seeking public comment concerning the new list of products, the level of ad valorem duties that should be applied, and whether duties on products covered by the new list might have an adverse effect upon U.S. stakeholders. The notice, which will be published in the Federal Register in the coming days, provides the following deadlines:

• Requests to appear at an August 5, 2019 public hearing, as well as a summary of the testimony must be submitted by July 24, 2019;
• Written comments are due on August 5, 2019;
• The public hearing will be held on August 5, 2019 at U.S. International Trade Commission in Washington, DC; and
• Post-hearing rebuttal comments are due on August 12, 2019.

The Trump administration has not yet announced the additional duty rates. This latest trade action, announced on April 8, 2019, is pursuant to Section 301 of the Trade Act of 1974, the same provision used in 2018 for the 10-25% additional tariffs on $250 billion of Chinese products imported into the U.S.

The administration will be holding a public hearing on the proposed list of products at the International Trade Commission in Washington, DC. on May 15, 2019. Requests to appear must be submitted by May 6, 2019. Written comments may also be submitted by May 28, 2019.

The trade dispute dates back to a 2004 U.S. challenge in the World Trade Organization (WTO) to EU subsidies of Airbus which had “adverse effects” on the U.S. According to the USTR, the final list of products will be announced and go into effect this summer once the WTO issues its final findings on the dispute settlement proceedings. According to the USTR, once in place, the tariffs will be applied until the EU removes the Airbus subsidies.

A complete list of products – covering 818 tariff lines – currently subject to the new tariffs (at a rate of 25%) is available here. USTR will consider excluding a particular product within a subheading (but not the tariff subheading as a whole) from the tariffs. Note that USTR is currently considering / accepting public comment on an additional 284 proposed tariff lines. Once finalized, the additional tariffs will likely be accompanied by a similar exclusion process.

In announcing the exclusion process, USTR indicated it received comments that specific products “were only available from China, that imposition of additional duties on the specific products would cause severe economic harm to a U.S. interest, and that the specific products were not strategically important or related to the ‘Made in China 2025’ program.” The new exclusion process was designed to address those concerns.

Criteria: USTR will accept requests from all interested persons, including trade associations. Each request must specifically identify a particular product and provide supporting data as well as the rationale for the exclusion request. Entities wishing to exclude more than one product must submit a separate request for each product.

In making its determination on each request, USTR may consider whether a product is available from a source outside of China, whether the additional duties would cause severe economic harm to the requestor or other U.S. interests, and whether the particular product is strategically important or related to Chinese industrial programs including “Made in China 2025.” USTR is unlikely to grant a request that would undermine the objective of the Section 301 investigation.

USTR will consider each request on a case-by-case basis. Exclusions will be granted on a product basis, meaning any individual exclusion will apply to all imports of that particular product (not just to products imported by the requestor).

Process / Timeline: According to USTR’s notice:

• The public will have 90 days to file a request for a product exclusion; the request period will end on October 9, 2018.
• Following public posting of the filed request on Regulations.gov, the public will have 14 days to file responses to the request for product exclusion. After the close of the 14 day response period, interested persons will have an additional 7 days to reply to any responses received in support of or opposition to the request.
• Exclusions will be effective for one year upon the publication of the exclusion determination in the Federal Register, and will apply retroactively to July 6, 2018.
• USTR will periodically announce decisions on pending requests.

Requirements: Each request must include:

• Identification of the particular product in terms of the physical characteristics (e.g., dimensions, material composition, or other characteristics) that distinguish it from other products within the covered 8-digit subheading. USTR will not consider requests that identify the product at issue in terms of the identity of the producer, importer, ultimate consumer, actual use or chief use, or trademarks or tradenames. USTR will not consider requests that identify the product using criteria that cannot be made available to the public.
• The 10 digit subheading of the HTSUS applicable to the particular product requested for exclusion.
• Requesters also may submit information on the ability of U.S. Customs and Border Protection to administer the exclusion.
• Requesters must provide the annual quantity and value of the Chinese-origin product that the requester purchased in each of the last three years. (Trade associations should provide such information based on members’ data.) If precise annual quantity and value information are not available, USTR will accept an estimate with justification.

• Whether the particular product is available only from China. In addressing this factor, requesters should address specifically whether the particular product and/or a comparable product is available from sources in the United States and/or in third countries.
• Whether the imposition of additional duties on the particular product would cause severe economic harm to the requester or other U.S. interests.
• Whether the particular product is strategically important or related to “Made in China 2025” or other Chinese industrial programs.
• Requesters may also provide any other information or data that they consider relevant to an evaluation of the request.

Technical Notes: Business confidential information may be submitted, but applicants must also include a public version for posting.

The proposed tariffs will be an across the board 25 percent ad valorem duty on covered products. Following the release of the proposed list, the public will have thirty days to comment. Importing and exporting companies should file comments to ensure that certain products either remain on or are removed from the proposed list. Unlike the steel and aluminum tariffs recently imposed under Section 232, there is not a process, other than the filing of comments, to get specific products excluded. The notice will also announce the date for a public hearing. USTR, with the assistance of the interagency Section 301 Committee, will review all comments and then publish the final determination in the Federal Register and implement the new tariffs.