U.S. Trade Representative Accepting Comments Regarding the Section 301 Duties on China

I. Background on the Section 301 China Duties and Product Exclusions

In August 2017, the USTR initiated an investigation under Section 301 of the Trade Act of 1974 (Trade Act) into China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation.¹ In March 2018, the USTR published a report, which concluded that China’s practices are unreasonable or discriminatory and burden U.S. commerce.² Based on those findings, the United States imposed additional duties on various China-origin products through a series of lists. By September 2019, the United States had imposed additional duties ranging from 7.5% to 25% on approximately $370 billion of China-origin products (i.e., nearly 70% U.S. imports from China became subject to significant additional duties). These additional duties remain in effect today.

A significant portion of global supply chains had consolidated in China during the two decades leading up to the imposition of the Section 301 duties. As a result, the sudden increase in duties on China-origin products was a shock to many companies. To help companies adapt, the USTR conducted a product exclusion process whereby companies could request that specific products be temporarily excluded from the Section 301 duties. The USTR approved more than 6,000 product exclusion requests and published more than 2,100 product exclusions designed to cover the products in those requests. Of those published exclusions, only 352 remain in effect today. These remaining exclusions are scheduled to expire on December 31, 2022.

II. Four-Year Review of the Section 301 Duties — Part 1: Request for Continuation

The Trade Act provides that Section 301 duties will automatically terminate after four years unless a request that the duties be continued is filed within the 60-day period immediately prior to expiration. If the USTR receives a request to continue the duties from “any representative of the domestic industry which benefits from” these actions, then the actions will be continued (i.e., the duties will not terminate).³ On September 8, 2022, the USTR announced that it “received numerous requests to continue [the Section 301] actions ... submitted by a range of domestic industries,” and, as a result, the Section 301 duties will remain in effect (i.e., the tariffs did not terminate as of their four-year anniversary dates).⁴ There is otherwise no other termination date specified in the statute (i.e., the duties could remain in effect indefinitely).

III. Four-Year Review of the Section 301 Duties — Part 2: Effectiveness of the Actions

If requests to continue the Section 301 duties are filed (as they were here), then the Trade Act requires the USTR to conduct a review of the actions. As part of this review, the USTR is seeking comment from the public on the effectiveness of the actions.⁵ The docket for submitting comments opened on November 15th and closes January 17, 2023.

The docket includes a list of questions for filers to address. The questions are divided into three sections. Sections A and B ask the filer to comment on the effectiveness of the Section 301 duties at an economy-wide level and at a sector/industry level, respectively. Section C includes questions relating to whether specific 8-digit subheadings should be removed from the Section 301 duties, in addition to whether subheadings that are not currently covered should be covered. Filers are not required to respond to every question in order to submit a comment.

Companies impacted by the additional duties will be mostly interested in Section C, which asks the filer to comment on the effects of the Section 301 duties at the 8-digit subheading/tariff code level. Section C provides an opportunity for companies to identify specific subheadings that they want removed from (or added to) the Section 301 duties and to explain why the duties on those subheadings should be removed (or added).

Unlike the questions in the product exclusion processes (which were product specific), the questions in Section C are tariff-subheading specific (i.e., they are broader than the product-specific questions companies responded to in product exclusion requests). Also, several questions are exceptionally broad, which, at first glance, makes them seem difficult to respond to because they ask for information that companies generally would not have. For example, one question asks whether the additional duties on the specific 8-digit subheading identified by the commenter has “impacted the U.S. economy, including consumers” (filers might know how the additional duties on a certain subheading have impacted their company, but be less sure how the duties on that subheading impacted the U.S. economy as a whole). As a result, responding may involve taking some liberty with the questions — that is, answering the questions that should have been asked, so the USTR gets the benefit of companies’ experiences.

The statute does not require the USTR to take any action as a result of this review (it could; it is just not required to do so). Nevertheless, companies that are still paying the Section 301 duties should consider submitting a comment to make the case why the additional duties should be removed from specific subheadings (e.g., products still cannot be sourced from third countries). The same applies to companies currently importing products covered by a reinstated Section 301 product exclusion, as these exclusions are scheduled to expire on December 31, 2022, and the USTR has, thus far, not indicated that it intends to take any action to further extend those exclusions.  This process may very well be the last opportunity companies will have to formally advocate for relief from the Section China 301 duties.

If your company is considering whether to submit comments or has any questions regarding the Section 301 duties on China-origin products (including mitigation strategies), please reach out to the authors of this alert or your Sidley contact.