China’s Retaliatory Tariffs Exclusion Program for U.S. Products
When China announced its further increase of tariffs against U.S. originated products as a counter measure against Trump Administration’s decision to increase tariffs for $200 billion China originated products on May 13, 2019, China also first time announced a program (“Exclusion Program”) to exclude certain products from the retaliatory tariffs in order to protect key industries from being impacted as the trade war seems to stay for a while (“Bulletin #2”). Similar to U.S. Exclusion Program, however, China’s Exclusion Product does not particularly target another country’s industrial development policies. Through the Exclusion Program, the interested parties may apply for exempting certain products from the retaliatory tariffs. Here are the rules:
Who can apply
Any interested parties, including all importers, manufacturers, other undertakings and their industrial associations or chambers located in China who uses products originated from U.S. that are subject to retaliatory tariffs. All companies, whether domestic invested or foreign invested, are qualified to file applications. The purpose of exclusion of products from retaliatory tariffs seems to help China’s domestic companies to continue their normal production without being impacted by the punitive tariffs. The information collected from all interested parties would help Chinese government to determine which products from U.S. should be excluded since the trade war will continue for a while.
What products could be excluded
Bulletin #2 does not provide based on what criteria a product should be excluded. But final list for exclusion will be determined by China’s Customs Tariff Committee (“CCTC”) after reviews from the effective applications filed by the interested parties. The excluded products shall be in the product list of retaliatory tariffs currently in effect but not include those that have temporarily or already been stopped from levying the retaliatory duties.
How and when to apply
Through a web portal on Ministry of Treasury’s website, the applicants can fill forms to file the applications. In order to have a product to be excluded, all applicants must include the facts and data to explain why a specific product should be excluded: (1) the difficulties in sourcing substitute products; (2) severe economic impairment to the applicant to be caused by increased tariffs; (3) negative impacts to the economic structure or society caused by increased tariffs to the relevant industries, including industrial development, technology advancing, employment, environmental protection, etc. Unlike U.S., China’s criteria in determining one product to be excluded from the tariffs are not for purpose of targeting a specific country’s industrial policy, but for actual needs for domestic economic development.
To meet the application deadline, all applications must be filed as of June 3, 2019 and by July 5, 2019 for the first group (listed in $50 billion products in the first round tariffs), and as of September 2, 2019 and by Oct. 18, 2019 for the second group (listed in $60 billion products in the second round tariffs).
Publication of Exclusion List and its tax effect
After reviewing all effective applications filed by the interested parties, CCTC will publish the result, a list of products (“Exclusion List”) that are excluded from the retaliatory tariffs. Within 1 year after the Exclusion List has been published and become effective, subject to further review, China will no longer levy the retaliatory tax on the products in the Exclusion List. If qualified for tax rebate, China will refund tax that was previously levied under retaliatory tariffs. The request for tax rebate must be filed within 6 months from the effective date of the Exclusion List.