Trade Tidbits – May 2, 2025

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SPECIAL EDITION #5: Trade Tidbits - Friday, May 2, 2025

ON DECK: 

    • Breaking down Commerce’s steel and aluminum derivative inclusions process regs
    • De minimis eliminated on China, Hong Kong; OMB (in theory) sends its procurement report to White House; threats of secondary tariffs for purchases of Iranian and Russian oil; Mexico fixes the water dispute
    • Trump Administration announces tariff stacking changes for automakers
    • China kinda maybe possibly creaking the door open on talks? Maybe?
    • Negotiation framework has six countries coming in per week on a three-week rotating basis
    • EU to table offer while continuing to work on retaliation; lots of happy talk on India; Japan says U.S. resisting talks on Section 232 tariffs on autos and steel, 10% IEEPA universal tariff
    • Senate resolution to turn off emergency for IEEPA reciprocal/universal tariffs fails
    • Amazon goes through the wringer

DISCLAIMER: The below is intended to inform, not to be construed as an official statement from the office of Rep. Yakym

Tidbits

A quick correction from last week’s edition, which had flagged a story that Mazda would halt production in Huntsville, AL effective May 12. That wasn’t quite right: Per a statement from Mazda, some production shifts were announced, but they yielded no net change in its Huntsville operations. My bad!

Getting Reacquainted with an Old Frenemy

The inclusions process for the Section 232 steel and aluminum derivatives tariffs was due May 10, but the Commerce Department isn’t being like College Mike and waiting until the last minute to write its assignment. In fact, it got delivered over a week early. And with so many other pending Section 232 investigations, this is probably a dynamic worth getting used to.

At any rate, let’s dive into the inclusions process regulations, which you can find here and became official today. First off, this is an Interim Final Rule (IFR) and is open for comment. Comments are due in 45 days (June 16) and can be submitted here, whenever the link goes live. Second, this IFR rescinds all previous IFRs relating to the Section 232 steel and aluminum exclusions process. RIP.

Since this is the first (potentially of many) inclusions process, it’s worth spending some time digging into this. I’ll start with the process itself, and then I’ll add some comments and observations.

The inclusions process will be open for submissions during three windows throughout the year – May, September, and January. Windows appear to open the first of the month and are open for two weeks. The first window opened May 1.

Requestors must submit a PDF with a host of information (limited to 30 pages) to an email affiliated with “Defense Industrial Base Programs.” Commerce will review requests to ensure they’re complete and will give requestors 48 hours to remedy deficiencies. Requestors may be either a producer of the article in question or an industry association representing one or more producers of the article.

Requests will be posted and open for comment for 14 days at https://www.regulations.gov/docket/BIS-2025-0023.

Commerce will evaluate requests as to 1) whether the request covers something considered a derivative and 2) whether imports of the derivative “have increased in such a manner that threatens to impair the national security or otherwise undermine the objectives” of the Section 232 steel and aluminum tariffs.

A decision will be rendered within 60 days, and the date on the signature “must be prior to the close of the respective 60-day derivative inclusion processing period.” If approved, tariffs on the derivative “will take effect shortly thereafter.” 

And now some assorted comments and observations:

  • The first request window opened May 1 despite no information being available unless you subscribe to BIS’ pre-publication alerts. I wonder if the initial two-week deadline gets extended.
  • I see two notable procedural differences from the exclusions process:
    • Inclusions will have three defined windows to accept requests, whereas exclusions was always open. Defined windows should help focus efforts for all involved. USTR had done this for its Section 301 China tariff exclusions process, I think in recognition of how chaotic the steel and aluminum exclusions process had gotten.
    • Trade associations can request inclusions, whereas they couldn’t for exclusions. This had been a Day One ask of the exclusions process, and I could go on a more extended diatribe but won’t, not least because since Jackie Walorski’s website is no more, I can’t link to the assorted letters sent on the topic.
  • I guess there’s no standardized request or objection form? So that’s fun. The exclusions process had an Excel doc at first and the Portal later.
  • The inbox that you submit your request to appears to be the email address used for requesting a Section 232 investigation. The 2020 expansion to derivatives did hold up in court as not requiring a new investigation, but I guess maybe this adds a layer of procedural/legal security. Or I’m reading too much into it. That’s always a possibility too.
  • This inclusions process could end up being very broad:
    • First and most simply, because eight- and ten-digit HTS codes are eligible for submission.
    • Second, because this doesn’t define HTS chapters eligible or ineligible for submission. (Which is to say, anything is in play)
    • Third, because, based on the language of the IFR, this process will essentially be laying down track in front of the derivative train. One of the requirements of the requestor is to explain “why the article is a steel or aluminum derivative article.” (emphasis mine) And the first thing Commerce is going to do in rendering a decision is determine “whether the described product…is a derivative steel or aluminum article.” (emphasis mine) How much steel or aluminum content is required to be considered a derivative product? We’ll find out over time. Recall, for example, that iPhones and other electronics only got a reprieve from the IEEPA reciprocal tariffs because they were being moved to the Section 232 “bucket” as potential derivatives product under the semiconductor investigation.
  • For objectors, it’s not clear what arguments will resonate most. Heck, there isn’t even a defined format for an objection.
  • One of the biggest problems the exclusions process faced was rosy timelines that were not always met, especially if there was an objection, and especiallier in complex cases. Will Commerce be able to adhere to its 60-day timeline for decisions? The IFR has a “must” in there. But it’s also easy to see them getting slammed early on and needing some leeway, at least based on the exclusions experience.
  • Relatedly, Commerce estimates it’ll only have 100 inclusion requests and that it’ll take eight hours to write and file a request. Those numbers are bracketed, though, so I’m not sure if those are final.
  • I guess I’ll be getting reacquainted with regulations.gov again. OGs know, but the steel and aluminum exclusions process was run through regulations.gov for the first 15-ish months, and, again to avoid an extended diatribe, it was the bane of my existence and is essentially why this newsletter got started in the first place.
  • Is a granted inclusion forever or time-limited?
  • If your inclusion request is denied, can you resubmit?
  • Are there circumstances for an inclusion to be rescinded?
  • Will inclusions apply to certain countries or all countries?
  • Is there a perverse incentive, based on the toggle with the IEEPA reciprocal/universal tariffs, to have a product classified as a derivative instead of at its reciprocal rate?

Miscellaneous Tariff Threats

A few other miscellaneous tariff deadlines and threats worth mentioning up top before getting into the rest of the update:

  • De Minimis: It’s May 2, which means de minimis for China and Hong Kong has ended.
  • OMB Report…?: April 30 was the deadline for the Office of Management and Budget to submit its report on distorting impacts of foreign subsidies on U.S. government procurement programs, as required by the America First Trade Policy memo. I haven’t seen confirmation if it was delivered.
  • Iranian Oil: President Donald Trump truthed yesterday that “all purchases of Iranian Oil, or Petrochemical products, must stop, NOW! Any Country or person who buys ANY AMOUNT of OIL or PETROCHEMICALS from Iran will be subject to, immediately, Secondary Sanctions.” This reads similar to the active threat to impose tariffs on countries buying Venezuelan oil, and expansion to Iran and Russia was something that had been raised as a possibility when that announcement rolled out.
  • Russian Oil: Speaking of Russia, Sen. Lindsey Graham (R-SC) has a veto-proof number of cosponsors on a bill that would, among other things, slap a 500% tariff on goods from countries purchasing Russian oil, gas, uranium, and other products.
  • Mexican Water: The U.S. Department of Agriculture announced that Mexico agreed to transfer water to the U.S. as required under a 1944 treaty. President Trump had threatened tariffs on Mexico a few weeks ago if Mexico didn’t deliver the water.

A-U-T-O Spells Relief

The Trump Administration announced a few measures to bring some relief to automakers and give them time to relocate supply chains. The Executive Order “Addressing Certain Tariffs on Imported Articles” (available here) made a clarification on the stacking of tariffs, effective retroactively to March 4:

  • An article subject to the Section 232 auto and auto parts tariffs won’t stack on the IEEPA fentanyl/border tariffs on Canada and Mexico or the Section 232 steel and aluminum tariffs
  • An article subject to the IEEPA fentanyl/border tariffs on Canada and Mexico tariffs won’t stack on the Section 232 steel and aluminum tariffs

It appears (if I’m reading correctly) that it also clarifies that there are circumstances in which the steel and aluminum tariffs can stack. And it makes clear that the Section 301 China tariffs and IEEPA fentanyl tariffs on China do still stack on the Section 232 auto and auto parts tariffs.

A separate Proclamation, “Amendments to Adjusting Imports of Automobiles and Automobile Parts into the United States,” (available here) establishes a process for automakers to apply for a refund on Section 232 auto parts tariffs on autos that undergo final assembly in the U.S. There’s a complex set of calculations I won’t get into, but you can read it in the Proclamation if you’re curious. The Commerce Department has 30 days to establish this process.

The Commerce Department also sent to the Office of Management and Budget (OMB) for review procedures to identify the amount of U.S. content in autos that qualify for USMCA. These regs were required under the Section 232 auto and auto parts announcement. And vehicle carriers are trying to secure an exemption from USTR’s Section 301 ship fees, which apply to all vehicle carriers, whether or not there’s a China connection.

And there was a bunch of news on individual automakers, so I figured I’d pull that off the broader company-by-company news at the end. Mercedez-Benz is adding a new vehicle to its Alabama plant. Ford is delaying price increases. GM anticipates a $5 billion hit from tariffs. Steelmaker Gerdau canceled plans for a Mexico plant, citing uncertainty about auto supply chains. China’s restrictions on dysprosium are causing problems in EV supply chains.

The Opposite of that Motif in TV Shows Where Two Characters Say “No You Hang Up” Over and Over

China-to-U.S. shipments are cratering as the situation remains in substance relatively static. However, it *seems* like we’re *maybe* starting to see some green shoots. There was overnight news that China is evaluating trade talks with the U.S. but only on the condition that the U.S. “correct its wrong unilateral tariff measures.” It’s not clear if that encompasses only the 20% IEEPA fentanyl and 125% IEEPA reciprocal tariffs or the Section 301 China tariffs as well. There’s also late news that China is working on a fentanyl offer to start talks. But, as has been the feature of this whole thing, no one can bring themselves to say who reached out to who: a post on Weibo, China’s X equivalent, said, “The U.S. has proactively reached out to China through multiple channels.”

Obviously, there’s plenty of focus on the U.S. stock market and guidance being pulled by U.S. companies, but it’s worth noting there’s evidence the tariffs are weighing on China too. It quietly drew up a list of exemptions from its 125% retaliatory tariff that likely covers almost a quarter of its U.S. imports. Chinese manufacturers are scrambling to find new buyers, scaling back on shifts and jobs, and asking Indian firms to fill orders as a gauge of manufacturing growth hit its lowest reading since COVID and companies. Lest you think China’s cowed, though, diplomats are still fanning across the world on a charm offensive. It’s also seeking ways for state-owned drugmakers and hospitals to reduce reliance on American inputs.

On the U.S. side of the ledger, Commerce Secretary Howard Lutnick seems to have deputized Treasury Secretary Scott Bessent as the chief China negotiator, saying, “I’m relying on…Bessent, as we all are, to get a deal done with China.” So what’s Bessent said this week? Still no talks (we knew that). But he also told Fox Business that hypothetical negotiations with China would probably be a “multi-step process.” As he laid it out: “I think first there will need to be a de-escalation…[Next,] we will likely revisit the purchase agreements that were…put together in the first China trade agreement in January of 2020 to make sure that the Chinese are honoring those agreements. And then we are going to push for fair trade with China.” More ominously, though, he said in a CNBC interview, “I do have an escalation ladder in my back pocket, and we’re very anxious not to have to use it.”

As for Bessent’s boss, President Donald Trump, he seems content to not blink first, telling reporters that China tariffs just mean little Suzy’s gonna only have two dollies rather than 30.

A few other stories of note on the China beat:

  • David Perdue was confirmed as Ambassador to China on a 67-29 vote.
  • Chinese e-retailer Temu appears to be passing the tariffs almost completely through to consumers.
  • China seized a disputed reef in the South China Sea.
  • China argued at the WTO that the body should focus on the U.S., not its overcapacity.

Negotiation Station

Before getting into the country-by-country update on negotiations, let’s do a quick look at the macro situation. U.S. officials have tried to bring some structure to the large amount of ongoing negotiations, using a three-week rotation for talks with 18 countries (Countries 1-6 in Week 1, Countries 7-12 in Week 2, Countries 13-18 in Week 3, Countries 1-6 in Week 4, etc.). USTR also prepared a broad list of categories up for negotiation: “tariffs and quotas; non-tariff barriers to trade, such as regulations on U.S. goods; digital trade; rules of origin for products; and economic security and other commercial issues.”

In the meantime, Trump Administration officials are talking about all the countries at the table. Treasury Secretary Scott Bessent told CNBC, “We’ve had many countries come forward and present some very good proposals, and we’re evaluating those.” USTR Jamieson Greer told President Donald Trump during a Cabinet meeting that “dozens” of countries have submitted written offers. And he told Fox News, “We’re talking about a matter of weeks and not months to have some initial deals announced.” Anonymous officials from foreign governments cautioned to Politico that these written offers are more “preliminary outlines of what their governments are willing to discuss.”

And two issues I’ll mention here that are also flagged in the country-by-country. The first is that Singapore’s Deputy Prime Minister said in a readout from a conversation with Commerce Secretary Howard Lutnick that “the US is not prepared to lower its 10% baseline tariff.” That raises a question for the non-Annex I countries, which only faced the 10% IEEPA universal tariff and not the variable IEEPA reciprocal tariff, as to what exactly negotiations are for and what the carrot is. I guess we’ll find out soon enough.

The other is that Canada and Mexico aren’t among the 18 countries since they weren’t immediately subject to IEEPA reciprocal/universal tariffs, and since the process for the more formal USMCA review seems likely to kick off ahead of schedule this year.

What’s the Deal-ey Yo?

You know what time it is now – digging into news on negotiations, country-by-country in alphabetical order:

  • Australia: President Donald Trump told reporters that he was open to a call with Prime Minister Anthony Albanese as Aussies hit the polls Saturday.
  • Canada: Canadian Prime Minister Mark Carney’s Liberal Party completed a massive turnaround in elections Tuesday, locking Carney in the driver’s seat of our neighbors to the north. He and President Donald Trump spoke on the phone Tuesday, with the two leaders agreeing to meet “in the near future.” However, Canada isn’t part of the 90-day pause negotiations, so trade talks are in kind of a weird, slow place, especially since the more formal USMCA review is due soon.
  • Chile: Finance Minister Mario Marcel struck a hopeful but cautious tone after talks with Deputy Treasury Secretary Michael Faulkender.
  • Colombia: A USTR delegation was in Colombia this week for talks on labor and auto regulations.
  • The EU: The bloc will table a proposal addressing tariffs, non-tariff barriers, investments in the U.S., purchases of American goods, and cooperation on China next week. It’s also having discussions about making changes to its minimum tax law, while France wants the EU to tackle de minimis. This comes as USTR Jamieson Greer reportedly told Senators that the EU hasn’t been engaging well and Treasury Secretary Scott Bessent flagged digital services taxes as a sticking point. The European Commission presented retaliation options to member states this week. You also had some high-level interactions, first between President Donald Trump and European Commission President Ursula von der Leyen at Pope Francis’ funeral, second between Bessent and Commissioner for Economy and Productivity Valdis Dombrovskis, and third between Bessent and Commissioner for Financial Services Maria Luis Albuquerque.
  • Guyana: USTR Jamieson Greer told Fox News that he was meeting with his counterpart from Guyana Thursday.
  • India: Commerce Secretary Howard Lutnick told CNBC there’s a deal that’s “done, done, done done” but needs Prime Minister and parliamentary approval. Though he wouldn’t name names, Peter Navarro told CNBC in a separate interview that an India deal is “close” and just needs to “go through the prime minister and the parliament.” Treasury Secretary Scott Bessent and VP JD Vance also made comments this week that India would likely be one of the first deals signed. So I think we know which country Lutnick was talking about. That said, an Indian readout from last week’s discussions talked about a pathway for a “first tranche of the mutually beneficial, multi-sector Bilateral Trade Agreement by Fall of 2025.” India has been showcasing its Boeing order pipeline as a selling point in negotiations.
  • Indonesia: Finance Minister Sri Mulyani Indrawati met with Treasury Secretary Scott Bessent last week. Per a Treasury readout, it was a “positive start towards initiating trade discussions.”
  • Israel: Economy and Industry Minister Nir Barkat said the country is prepared to ease import standards for American goods.
  • Japan: Economic Revitalization Minister Akazawa Ryosei was in DC again this week, meeting with Treasury Secretary Scott Bessent for two hours. USTR Jamieson Greer told Fox News that he was meeting with the Japanese delegation this week too. Akazawa said the two sides aim to have a deal by June. However, the U.S. has been reluctant to budge on the Section 232 tariffs on autos and steel, as well as the 10% IEEPA universal tariff. Finance Minister Katsunobu Kato, who met with Bessent in DC last week, noted in remarks that Japan holds a lot of U.S. Treasuries, which could be a card in negotiations.
  • Malaysia: Second Finance Minister Amir Hamzah Azizan said the initial conversations with the U.S. were “received well enough.”
  • Philippines: Trade Secretary Cristina Roque was in DC for meetings and said her country is prepared to bring U.S. tariffs to zero. USTR Jamieson Greer told Fox News he’d be meeting with the delegation today.
  • Qatar: Finance Minister Ali bin Ahmed al Kuwari met with Treasury Secretary Scott Bessent last week.
  • Saudi Arabia: USTR Jamieson Greer told Fox News that he was meeting with his counterpart from Saudi Arabia Thursday.
  • Singapore: Deputy Prime Minister Gam Kim Yong held a call with Commerce Secretary Howard Lutnick, telling local media after that he asked for concessions on pharmaceutical exports. He also said that the U.S. “is not prepared to lower its 10% baseline tariff.”
  • South Korea: A delegation was in the U.S. again this week for “technical discussions.” Senior South Korean officials have told the U.S. a deal isn’t possible before its June 3 election, and even a deal by July could be tough.
  • Switzerland: President Karin Keller-Sutter and VP Guy Parmelin met with Treasury Secretary Scott Bessent last week.
  • Thailand: The country wants to ship more pet food and rice to the U.S.
  • The UK: Treasury Secretary Scott Bessent met with Chancellor Rachel Reeves and Bank of England Governor Andrew Bailey last week for wide-ranging talks. The UK’s been getting tough on China too as it tries to court the U.S.

Turn It Off, Like a Light Switch

There are various ways to turn off the tariffs (or at least in theory). There are the negotiations, which we just discussed, but there’s also Congress, lawsuits, and exclusions – and there’s news on all three fronts.

In Congress, the Senate failed to pass S.J. Res. 49, which would terminate the emergency related to the IEEPA reciprocal/universal tariffs. The vote deadlocked on an, ironically, 49-49 tie, with Sen. Mitch McConnell (R-KY) not voting for unknown reasons (he’d missed a few other votes that day) and Sen. Sheldon Whitehouse (D-RI) in transit back from a climate conference in South Korea (oops!). A motion to table did pass 50-49 with VP JD Vance’s yes vote. I’m not a Senate procedure expert, but I guess this blocks a revote on the resolution once everyone – er well one person – is back on U.S. soil.

On the lawsuit front, a federal district court in Montana ruled that challenges to the IEEPA tariffs need to run through the Court off International Trade (CIT). That decision is being appealed. The NYT did a run-through of the various lawsuits. But there are important questions everyone should be asking themselves as these lawsuits work their way through the system. First: What if they’re successful? And more specifically, what if we were to end up in a scenario where the CIT says yup the IEEPA tariffs aren’t legal, but then that’s reversed on appeal, and then the reversal is reversed by the Supreme Court? (Because regardless of who wins along the way, these will be appealed all the way to the top.) Talk about uncertainty! Second: What if the Supreme Court, in a not-directly-related-to-the-tariffs case, strikes down nationwide injunctions? In that scenario, it’s possible that relief in a successful lawsuit would be limited, potentially to the complainants or the district or circuit of the court making the ruling.

And on exclusions, the U.S. Chamber of Commerce sent a letter to Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and USTR Jamieson Greer urging them to:

  • “[Provide] an automatic exclusion from the new tariffs for any small business importer;”
  • “[Provide] automatic exclusions for all products that cannot be produced in the U.S. or are not readily available from domestic sources;” and
  • “[Establish] a process for businesses to expeditiously obtain exclusions in situations where the company can demonstrate that, as applied, the tariff imposes significant risks to U.S. employment.”

All this said, President Donald Trump said in an interview with The Atlantic that “there’s no red line, no ‘certain number’ at which he would feel compelled to change course” on the tariffs.

Company Line

Aaand here’s a bunch of company- and industry-specific stories out there this week.

Companies are pulling guidance due to tariff uncertainty, but retailers are doing their best to stave off price increases.

Amazon took a ride through the wringer this week. Tuesday morning, Punchbowl reported that the company would add a breakout for customers on how much the tariffs were costing them. Later that morning, White House Press Secretary Karline Leavitt blasted the move as a “hostile and political act.” President Donald Trump called Amazon founder Jeff Bezos. Amazon ultimately released a statement saying that it was a thought for the ultra-low-cost Amazon Haul store. However, “This was never a consideration for the main Amazon site and nothing has been implemented on any Amazon properties.”

Apple wants to make most of its iPhones sold in the U.S. in India by the end of 2026. The aviation industry is seeking exemptions from tariffs under the 1979 Civil Aircraft Agreement. Delta routed delivery of a new Airbus plane through Japan to avoid tariffs as Airbus told airlines it wasn’t going to pay the tariffs for its customers. Rivian stocked up on EV batteries ahead of the tariffs. Baby gear prices are rising. Toymakers are scrambling to adjust. Microsoft is raising Xbox prices. IBM will invest $150 billion in the U.S. over the next five years. The textile industry sees positives and negatives in the tariffs. Shein is exploring restructuring its U.S. operations.

Quick Hits

  • The Senate Finance Committee voted to advance the nomination of William Kimmitt to be Under Secretary of Commerce for International Trade on a 14-13 vote
  • The Senate Finance Committee held a nomination hearing for Rodney Scott, who was nominated to be CBP Commissioner
  • The Senate Agriculture Committee held a nomination hearing for Luke Lindberg, who was nominated to be the Under Secretary of Agriculture for Trade and Foreign Agricultural Affairs
  • President Donald Trump truthed that U.S. military and commercial ships should be able to pass through the Panama and Suez Canals “free of charge”
  • CBP walked back a policy on informal entry
  • USTR released the 2025 Special 301 Report
  • The U.S. is continuing to “reflect” on WTO dispute settlement reform proposals
  • USTR and Treasury held the seventh joint U.S.-EU meeting under the Bilateral Agreement on Prudential Measures Regarding Insurance and Reinsurance
  • USTR, the Department of Commerce, and the Small Business Administration participated in the ninth U.S.-UK Small- and Medium-Sized Enterprise Dialogue

Requiem for the 232 Exclusions

This section will be live for one more week.

Let’s walk through the stats and observations (as Sarah McLachlan plays in the background). Final Steel and Aluminum Big Boards, ORS matrices, and yearly volumes, are below. Not all these numbers line up exactly but trying to fix most of them would be like trying to find a needle in a haystack – especially for the unwieldy steel spreadsheet that takes a couple minutes to load. So they’re just gonna be imperfect like that.

    • There were almost 500,000 steel requests between the portal and regulations.gov
      • About 16,000 requests were pending at the time the process was shut down
      • About 60% of portal requests had no objections and were approved
      • Of the portal requests with objections, about 22.7% were approved
      • The ORS matrix, which I developed to track how much rebuttals and surrebuttals mattered, shows that filing rebuttals and surrebuttals didn’t move the needle at all –~23% of requests approved, regardless of whether a requester decided to fight it out
      • Request volume dropped by about 25% after the Biden Administration inked its quota arrangements, but it had started to creep back up in 2024
    • There were 36,000 aluminum requests between the portal and regulations.gov
      • About 4,600 requests were pending at the time the process was shut down
      • About 79% of portal requests had no objections and were approved
      • Of the portal requests with objections, about 23.3% were approved
      • The ORS matrix, which I developed to track how much rebuttals and surrebuttals mattered, shows that filing rebuttals and surrebuttals moved the needle, unlike steel – 41% of requests were approved if a rebuttal was filed but a surrebuttal was not
      • Request volume dropped by about 45% after the Biden Administration inked its quota arrangements but doubled from 2023 to 2024
    • It appears that Commerce essentially put pencils down before the Trump Administration took office
      • Steel and aluminum requests were posted through February 10, but it appears they stopped processing objections, rebuttals, and surrebuttals on or around December 13

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