Gantry cranes and containersstand at the Yangshan Deepwater Port, operated by ShanghaiInternational Port Group Co. Photo: QilaiShen/Bloomberg

With the deadline fastapproaching for submitting tariff-exemption requests for $200billion worth of Chinese imports, trade lawyers say they have beenbusy helping U.S. companies navigate the opaque requestprocess. 

Exemption requests for productscovered under Section 301 List 3 tariffs on China, which casts anet over a wide range ofgoods, from food andfurniture to tools and electronics, are due by September 30. TheOffice of the U.S. Trade Representative (USTR) has provided someguidance by stating, forinstance, that requests should address whether the import inquestion can be sourced from outside China.

"Now's the time to be ramping upyour effort" to obtain exclusions, said Jason Waite, a partnerat Alston & Birdwho leads the firm's internationaltrade and regulatory group in Washington, D.C. But he warned thatthere are "still a lot of unknowns." 

"It remains to be seen whatsways [the USTR], but this is the process," headded. 

Waite was hopeful that the USTRwill do a better job of developing and clarifying its methodologyfor exemption requests as the tariff lists expand and more requestsroll in—the first round of List 4 tariffs on$300 billion of Chineseimports is slated to take effect September 1. Tariffs on a secondbatch of goods are scheduled for December 15. 

"It's one thing to be stingyabout exclusions when you're talking about $50 billion worth ofimports of a certain type, but as this list becomes almosteverything, I think it's in the interest of policy and the USTR tohave a broad-based analysis of appropriate exclusions," hesaid. 

At the moment, companies wouldbe wise to avoid basing their exemption petition on the assertionthat it will cost too much to make a product on the tariff list inthe U.S. or anywhere else outside China, according to Adams Lee, aninternational trade lawyer at Harris Bricken in Seattle.

"We try to tell them [clients]that the USTR is trying to identify products that really can onlybe sourced from China," he said. "It then goes to the issue oftrying to define the product that you're asking to beexcluded." 

Define the product too broadlyand a company risks undermining the argument that the good cannotbe made beyond China's borders, according to Lee. He said adetailed definition of the product helps bolster the assertion thatit's so unique that it can only continue to be made inChina. 

"The flip side of the productdescription issue is if you define it too narrowly the danger iscustoms officials aren't going to be able to recognize the productat the port and administer the exclusion," Lee noted. "You alsocan't define it by its end use. You can't say, 'This is a screw tobe used in this unique application.' Customs is only going to see ascrew."

Waite added that the "big thing to think through is 'Do we havea case on the merits?'

"The core element of that has been the lack of availability ofthe product in the United States and, secondarily, outside ofChina," he said. "That's the thing that deserved to be analyzedfrom a few different angles. What is the product? What's uniqueabout the product? Where is it available, and why might it not beavailable elsewhere?"

Companies also should beprepared for a long wait—six months to a year—before they learnwhether their requests have been granted ordenied. 

"The bad news is that theprocess will take a long time to resolve itself," Waite said. "Thegood news is: If you get your exclusion, it's retroactive. Butthat's often very little solace to companies whose cash flow iscrimped by the tariffs."   

One company that is feeling atariff crimp, JSW Steel USA Inc., which initially applauded the Trump administration's aggressive tradetactics, has challenged the Commerce Department's denial of itsrequest to be excluded from a 25 percent tariff under Section 232on steel imported from Mexico and India.

The Baytown, Texas-based companyargues in a complaint filed July 30 at the U.S. Court ofInternational Trade that the steel in question "is not available inthe U.S. market in the quality and quantities that JSW USArequires.

"Despite the foregoing, theDepartment of Commerce ignored the record evidence establishingthat the steel slab JSW USA imports is not presently available inthe U.S. market, and instead issued the same boilerplate denial toeach and every one of JSW USA's exclusion requests. As a result,JSW USA has paid tens of millions of dollars in tariffs from whichit should have been exempted," the company writes in itscomplaint. 

Devin Sikes, an internationaltrade lawyer at AkinGump Strauss Hauer &Feld in Washington, D.C., noted that because the exclusion requestprocesses for Section 232 and 301 tariffs are structurallydifferent, there shouldn't be any spillover effects from the JSWcase. 

"But big picture, this is a caseof first impression," he said. "The court will first have tograpple with whether it has jurisdiction over the dispute. If itdoes, it will get into the merits for the first time ever forwhether the Commerce Department's decision comports with acceptedadministrative law principles."  

From: Corporate Counsel