By Richard Bomberger

The U.S.-China trade war started with President Trump announcing tariffs on all imports of steel and aluminum in 2018.[1]  As of September 2019, the trade war appears to only be escalating, which may be why U.S. companies are seeking ways to cut costs.[2]  For example, Harley-Davidson has moved some of its manufacturing overseas to avoid having to pay a tariff.[3]  Previous reporting said that Apple Inc. (“Apple”) was going to move production for its Mac Pro from Houston, Texas to their main production facility in China.[4]  On September 20th, Apple was able to receive ten tariff exemptions for imported parts.[5]  This was due to the cost of importing many of the parts that Apple needed for the Mac Pro.[6]

It appears that this is the route that many technology companies have taken.[7]  Many semiconductor companies also received tariff exemptions along with Apple.[8]  The U.S. government states that the tariff exemptions are based on a three-prong test:

  1. Whether the item is available only from China, and whether it (or a comparable product) is available in the U.S. or a third country
  2. Whether the additional duties on this item would cause severe economic harm to the applicant, or other U.S. interests
  3. Whether this item is strategically important or related to Chinese industrial programs.[9]

 The U.S. government, does not state how these factors will be weighed other than suggesting that proposals for exemptions should address them.[10] Furthermore, the U.S. government does not seem to strictly adhere to this test.[11]  Rather, it appears that the government engages in a more random selection of which products receive tariff exemptions.[12]  For example, Apple was able to get a tariff exemption for the Mac Pro frame, even though metal for a frame is not exclusively available from the Chinese market.[13]  In fact, many of the exempted items can be made by a number of different non-Chinese companies.[14] This further shows how random the process can be since products which can be sourced from various non-Chinese companies do not need tariff exemptions.[15]

Due to the expanding nature and length of the trade war between the United States and China (see figure 1),[16] it is safe to say that there is no end in sight.[17] This long, drawn-out trade war could have downfield effects on attorneys for corporations seeking tariff exemptions.  Big corporations with a large number of employees in the United States may be in a more advantageous position to obtain exemptions because they can follow Apple’s strategy and threaten to move overseas unless they get the exemptions.[18]

Furthermore, if the U.S. government’s selection of products is truly random, as opposed to influenced by the three-prong test, corporate lawyers may start applying for exemptions on every product or part the corporation needs. This might encourage corporate attorneys to apply for a broader spectrum of parts or products that they could either import or produce domestically instead. By filing exemptions for a broader range of products, corporations have a higher chance of obtaining the materials they need. Applying for a broad spectrum of exemptions could also cause more discrepancies in which products are chosen for tariff exemptions because it creates more products for regulators to look at. This trend might have already started given the steep increase in the number of filed exemption applications.[19] Finally, the random selection process for import exemptions could have the effect of creating unequal competition.  For example, if Microsoft and Apple both want a part for their next generation computers to be tariff-exempted, and one company gets the exemption while the other does not, it will impact the costs of the two products, making one cheaper and thus, more desirable for consumers.

The longer this trade war wages, the more likely corporate attorneys will try to exploit the U.S. government’s tariff exemption process. Even if companies decide to move production overseas to offset production costs imposed by the tariffs, doing so could cause inefficiencies from a business model perspective. Eventually, corporate attorneys will need to to find a way to cut costs to offset the expenses from tariffs.

[1] See Gina Heeb & Bob Bryan, The US-China Trade War is in its 18th Month. Here’s a Timeline of Everything That’s Happened So Far, MarketsInsider (Aug. 26, 2019),

[2] See Tim Culpan, Everyone Wins in Apple’s Tariff Deal. Except America, Bloomberg (October 1, 2019),

[3] See Carson Kessler, Why Harley-Davidson Is Moving Production Overseas, Fortune (June 26, 2018),

[4] See Lisa Eadicicco, Apple Says It Will Keep Making the Mac Pro in Texas After Reports Suggested It Was Shifting Production to China, Bus. Insider (Sep. 23, 2019),

[5] See Josh Zumbrun & Anthony DeBarros, U.S. Grants Apple 10 Exceptions From Tariffs on Chinese Imports, Wall St. J. (Sep. 20, 2019),

[6] See id.

[7] See Stephen Nellis, U.S. Trade Regulators Approve Some Apple Tariff Exemptions Amid Broader Reprieve, Reuters (Sep. 20, 2019),

[8] See id.

[9] Tim Culpan, Everyone Wins in Apple’s Tariff Deal. Except America, Bloomberg (October 1, 2019),

[10] Notice of Product Exclusions, 84 Fed. Reg. 49564 (Sept. 20, 2019).

[11] See Culpan, supra note 9.

[12] See id.

[13] See id.

[14] See id.

[15] See id.

[16] See Rajesh Kumar Singh, Explainer: Trump’s China tariffs – Paid by U.S. Importers, not by China, Seeking Alpha (Sep. 7, 2019), (using a bar chart to illustrate the cumulative tariffs collected).

[17] See Peter Coy, Nobody Benefits From a U.S.-China Trade War With No End in Sight, Bloomberg Businessweek (Sept. 13, 2019),

[18] See Lisa Eadicicco, Apple Says It Will Keep Making the Mac Pro in Texas After Reports Suggested It Was Shifting Production to China, Bus. Insider (Sep. 23, 2019),

[19] See Lev Borodovsky, The Daily Shot: Steel Tariff Exemption Requests Are Piling Up, Wall St. J. (Aug. 15, 2018),

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