Government Watchdog Finds Inconsistencies in USTR China Tariff Exclusion Process

SFIA filed numerous petitions seeking to have industry products excluded from the China Tariff list in 2019. The USTR routinely rejected exclusion petitions for consumer goods included on List 3 and List 4A with little explanation and regular inconsistencies in the decision making process. “The USTR provided very little explanation for denying exclusion petitions on consumer goods and even reversed course in some instances with not justification.” Explained Bill Sells, SFIA SVP for Government and Public Affairs “Helmets were granted an exclusion from List 3 tariffs only to reappear and remain on List 4A with no explanation for the change in USTR policy.” Overall approximately 94 percent of consumer goods petitions seeking exclusions from China Tariffs were rejected. SFIA has sought to re-open the exclusion process while the Administration reviews its China tariff policy and indications are the tariffs will remain in place for now.

A recent U.S. Government Accountability Office (GAO) report on the China Exclusion process will help make the process more consistent and transparent when it is re-opened. The report found inconsistencies in granting exclusions and a lack of information to justify rulings on denied petitions. More than $460 billion in tariffs on Chinese imports were collected between 2018–2020. The USTR received 53,000 petitions between 2018 and 2020 and rejected 46,000 for an 87 percent rejection rate. Roughly 1 in 3 petitions for exclusions from List 1 & List 2 tariffs (non-consumer goods) were approved but the success rate dropped to single digits for List 3 and List 4A consumer goods. The report cited USTR for failing to fully document its procedures in handling exclusion petitions and recommended providing additional information in future reviews to ensure consistency in process.

“Without appropriately documenting the roles and responsibilities of reviewers and each step in its decision processes, USTR lacks reasonable assurance that it consistently followed its processes”

A USTR spokesperson responded “USTR embraces the recommendations in the report and intends to fully document all internal procedures used in the exclusion processes.” USTR is under pressure to re-open the exclusion process but has not announced plans to do at this time. SFIA will keep members informed on plan to re-open exclusion process as it becomes available.

Link to GAO Report: https://www.gao.gov/products/gao-21-506