On November 1, 2022, the Office of the United States Trade
Representative ("USTR") took the next step in its
statutory four-year review of the duties levied on Chinese-origin
goods pursuant to Section 301 of the Trade Act of 1974
("Section 301"). Following its earlier notice announcing the process by which it will
conduct this review, USTR published a questionnaire seeking public comments
regarding the effectiveness of the tariffs in achieving the
objectives of the Section 301 investigation.
The questionnaire is split into three sections addressing the
effects of the Section 301 tariffs at the economy-wide level,
sector/industry level, and tariff heading level. Among other
things, USTR is seeking input on the impact of the tariffs on
supply chain resilience, domestic manufacturing, and technological
innovation, in addition to whether the tariffs should be continued,
modified, removed, or extended to new products.
Section A asks for views on the effectiveness of the tariffs at
the economy-wide level to counteract China's
discriminatory policies and practices related to technology
transfer and intellectual property, their impact on the U.S.
economy (including on domestic manufacturing, capital investment,
industry pricing and profits, workers' jobs and wages, small
businesses, U.S. technological leadership, and critical supply
chains), how the tariffs could be modified to be more effective,
and whether any additional actions could be taken under Section 301
that would be more effective.
Section B allows parties to comment on the effectiveness of the
tariffs on eliminating China's discriminatory practices with
respect to specific sectors or industries,
identified at the level of the North American Industry
Classification System ("NAICS") code. Section B seeks
information on which goods within the industry or sector are
covered by the tariffs. This section also requests comment on the
tariffs' effectiveness regarding China's practices and
their impact on specific elements of the sector or industry:
domestic manufacturing, capital investment, industry pricing,
profits, and product availability, workers' jobs and wages,
small businesses, and supply chain resilience.
Section C asks for parties' views on specific
Harmonized Tariff Schedule ("HTS") subheadings
subject to the Section 301 tariffs and whether those tariffs should
be maintained, eliminated, or modified. Section C also seeks
detailed information on, including quantification of, the impact of
the tariffs on specific HTS subheadings with respect to many of the
same topics identified in Sections A and B. In addition, Section C
asks about whether the HTS codes being described cover inputs used
for additional manufacturing in the United States, and whether
tariff inversion is occurring (where the duties on inputs are
higher than the duties on the finished good incorporating those
inputs). The second part of Section C allows comments on whether
the tariff program should be modified to cover additional goods not
currently covered by 301 tariffs, and the likely effectiveness and
impact of such additions.
Interested parties can submit responses to one or more of the three
sections and can also supplement their responses with attachments,
including business confidential attachments.
The questionnaire will go live on USTR's public
portal on November 15, 2022, and interested parties will have
until January 17, 2023, to submit written comments. USTR will post
the submissions on its docket for public inspection (except
business confidential information) and parties can view the
submissions through docket number USTR-2022-0014. While there is
currently no indication of whether parties will be allowed to
submit rebuttal comments, USTR has indicated it will evaluate
whether to provide the opportunity for additional written comments
or public hearings.
Background
Section 301 grants USTR the authority to investigate and take
action to enforce U.S. rights under trade agreements and respond to
certain foreign practices. Pursuant to this authority, President
Trump directed USTR to take action against China's "unfair
and harmful acquisition of U.S. technology." After initiating
a Section 301 investigation in 2017, USTR announced on April 6,
2018, its determination that China's acts, policies,
and practices related to technology transfer, intellectual
property, and innovation are unreasonable or discriminatory and
burden or restrict U.S. commerce.
USTR's determination notice listed Chinese imports that would
be subject to a proposed tariff of 25 percent. Beginning in July
2018, USTR imposed four rounds of tariffs on billions of dollars of
annual imports of Chinese goods. The first three rounds (List 1,
List 2, and List 3) impose duties of 25 percent and the fourth
round (List 4A) imposes duties of 7.5 percent. For each round of
tariffs, USTR established a process by which U.S. stakeholders
could request the exclusion of particular goods subject to the
tariffs. Currently, the tariffs cover over $300 billion in annual
imports of Chinese goods.
In May 2022, USTR initiated its statutory four-year review of
the Section 301 tariffs. The statute provides that the tariffs must
terminate after four years unless requests for continuation are
made by domestic companies that benefit from the tariffs. When USTR
receives requests for continuation, it is required to maintain the
tariffs while performing a "review of necessity" that
examines the effectiveness of those tariffs. On September 8, 2022,
USTR announced a continuation of the Section 301 tariffs on
Chinese goods after receiving requests for continuation from
domestic industries that benefit from the tariffs.
As part of its "review of necessity" USTR is seeking
comments from the public regarding the effectiveness of the Section
301 tariffs and parties may submit such comments in response to the
questionnaire discussed above.
Conclusion
The Biden administration has been considering easing the Section
301 tariffs to curb inflation, but plans to announce tariff cuts
have been repeatedly postponed in favor of the regular statutory
review process that is playing out now. There is some thinking
within the Administration to reconfigure the tariffs to be more
strategic, including by raising tariffs on industrial machinery and
transportation equipment, while lowering tariffs on consumer
goods.
Additionally, a new set of products could be subject to the Section
301 tariffs as the White House is considering a Section 301 investigation into China's
industrial subsidies on high technology, robotics, and
biopharmaceutical items (the beneficiaries of China's Made in
China 2025 industrial strategy). The comments USTR receives in this
review process are likely to inform and shape those ideas.
Beyond the broader policy considerations, USTR's questionnaire
presents an important opportunity for parties to impact the future
of the Section 301 tariffs as they affect U.S. companies on a
day-to-day basis. The list-specific exclusion procedures are long
closed, and without new exclusion opportunities on the horizon,
this comment period offers the next best chance for those seeking
removal of tariffs to affect the status quo. For others, USTR's
review presents an opening to advocate for the value of the tariff
program to domestic production and technology, and to urge its
maintenance. In addition, companies or industries that have not
previously benefitted from Section 301 tariffs also have an
opportunity to identify additional products not currently covered
by the tariffs – a signal that the Administration is open to
expanding the existing tariffs or substituting certain covered
goods for others.
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