Background

As the Biden administration comes under increasing pressure to reinstate Section 301 tariff exclusions and resume a process for granting additional exclusions, a government watchdog report says any such process needs to be more transparent than the one that resulted in the rejection of the vast majority of previous exclusion requests.

According to a Government Accountability Office report, from 2018 to 2020 U.S. stakeholders submitted about 53,000 requests to the Office of the U.S. Trade Representative to exclude specific products from the Section 301 tariffs on imports from China. USTR evaluated each request on a case-by-case basis using several factors, including product availability outside of China and the potential economic harm of the tariffs. However, USTR officials said no one factor was essential to grant or deny a request. USTR ultimately denied about 87 percent of the exclusion requests submitted, primarily for failure to show that the tariffs would cause severe economic harm to the requesters or other U.S. interests.

GAO said USTR documented some internal procedures for reviewing the requests but did not fully document all of its procedures, including roles and responsibilities for each step in its review process. As a result, GAO found inconsistencies in USTR’s reviews. For example, USTR did not document how reviewers should consider multiple requests from the same company, and the GAO found that USTR performed these steps inconsistently. Another case file lacked documentation to explain USTR’s final decision because the agency’s procedures did not specify whether such documentation was required.

GAO called on USTR to fully document the internal procedures used to make Section 301 tariff exclusion and extension decisions, noting among other things that doing so will help the agency administer any future exclusions and extensions. While USTR has not announced any such actions, GAO said, it has committed to reexamine the existing tariffs and exclusion process as part of its broader review of U.S.-China trade policy.

In the meantime, the Senate has approved legislation to establish a new exclusion process and require USTR to reinstate previously expired exclusions, and more than 150 business groups recently urged the House of Representatives to follow suit. GAO said these efforts amplify the need for consistency and transparency in USTR’s exclusion process, noting that by fully documenting its internal procedures USTR can retain institutional knowledge and create a blueprint for successfully implementing any exclusion programs it may choose to administer in the future.

Click here for more information on strategies importers can use to mitigate the impact of Section 301 and other tariffs.

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