USTR Sticks by Decision Not to Reinstate Section 301 Exclusion for Water Coolers on Remand at CIT

The Office of the U.S. Trade Representative stuck by its decision not to reinstate a Section 301 China tariff exclusion for drinking water cooler products, the agency said in Dec. 14 remand results submitted to the Court of International Trade. USTR said that while the availability of these goods from places outside of China is limited, the record shows that sources outside of China have picked up since 2018 with third-country imports growing "significantly in the first six months after the exclusion expired." While these sources, along with domestic production, fail to meet domestic demand, the record does not show that the additional duties are "impacting or resulting in severe economic harm to U.S. companies or other interests" (DS Services of America v. United States, CIT #22-00157).

The case concerns imports of water coolers classified under Harmonized Tariff Schedule subheading 8418.69.01 that were hit with Section 301 duties under secondary subheading 9903.88.01. In December 2018, USTR granted an exclusion of the water coolers, extending the exclusion in December 2019. In October 2021, USTR said it was considering possibly reinstating the duties. The agency opened comments on the item, receiving one from domestic producer Natural Choice Corp. opposing the reinstatement of the exclusion. arguing that it can make the covered water coolers. As a result of the comment, USTR didn't reinstate the water cooler exclusion, prompting a suit over the move.

The plaintiff, DS Services of America, argued that USTR violated the Administrative Procedure Act in not reinstating the exclusion because it didn't explain its decision to not reinstitute it and failed to back up the decision with substantial evidence given that Natural Choice withdrew its comment. USTR then requested a voluntary remand to reconsider the item (see 2209010023). Submitting its remand decision, the agency said that it further decided not to reinstate the exclusion.

USTR first addressed Natural Choice's response, explaining that it declined the company's request to withdraw its comment. In asking for the withdrawal, Natural Choice said it received communications from competitors questioning the company's standing to ask for the duties since it makes a different type of water cooler than those covered by the exclusion. USTR said that its request to withdraw "appears to be based solely on a revaluation of the company's decision" to submit its initial comment "and comes more than seven months after the closing of the public comments docket and several months after the publication of the Trade Representative's final decision."

Turning to the evidence on the record, USTR said that it had enough information to show that the duties were needed. Goods covered by the exclusion are not only available from China with the record showing "at least modest shifts in global supply chains ... with greater availability from third-country and domestic sources" since 2018, the agency said. "In sum, the record shows that while China continues to be the dominant source for imports, there is increasing availability from third country sources and additional capacity in third countries is coming online," the remand results said.

Reinstating the exclusion will not cause "severe economic harm," USTR further argued after looking at comments from importers. "While a few companies reported declines in employment, it is not clear that these declines are attributable to the additional duties," the brief said. "Additionally, the reported gross revenues, which continued to increase for most companies at similar levels before and after the expiration of the exclusion, appear to contradict claims that the additional duties were causing severe economic harm."