US Trade Representative Seeks Public Comments in Four-Year Review of Section 301 Tariffs on Products of China
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On October 12, 2022, the Office of the US Trade Representative (USTR) issued a Federal Register notice seeking public comments to inform its ongoing four-year review of the Section 301 tariffs on China-origin goods. Beginning on November 15, 2022, USTR will accept public comments from interested persons regarding the effectiveness of the Section 301 actions in achieving the objectives of USTR’s Section 301 investigation; other actions that could be taken; and the effects of such actions on the United States economy. This process will give interested persons an opportunity to argue for changes to the current tariff lists, including the removal of particular products.
USTR's notice launches the second phase of the agency’s four-year review of the tariffs, as required by Section 307(c) of the Trade Act.1 The first phase of the review, which USTR concluded in September, resulted in the extension of all four Section 301 tariff lists, because “at least one representative of a domestic industry which benefits from each action, as modified, submitted to [USTR] a request for continuation of the action[.]"2 Following receipt of such requests, Section 307(c)(3) requires USTR to conduct a review of "the effectiveness [of the action] in achieving the objectives of section 301;" "other actions that could be taken (including actions against other products or services;" and "the effects of such actions on the United States economy, including consumers."3
On November 15, 2022, USTR will open a docket for interested persons to submit comments with respect to the considerations enumerated in Section 307(c)(3). USTR's notice specifically invites comments on the following factors, among others:
- The effectiveness of the Section 301 actions in obtaining the elimination of China/s acts, policies, and practices related to technology transfer, intellectual property, and innovation (the "investigated practices");
- The effectiveness of the actions in counteracting the investigated practices;
- Other actions or modifications that would be more effective in obtaining the elimination of or in counteracting the investigated practices;
- The effects of the Section 301 actions on the US economy, including US consumers;
- The effects of the actions on domestic manufacturing, US technology, US workers, US small businesses, and US supply chain resilience; and
- "Whether the actions have resulted in higher additional duties on inputs used for additional manufacturing in the United States than the additional duties on particular downstream product(s) or finished good(s) incorporating those inputs[.]"
In a statement accompanying the notice, USTR has indicated that the forthcoming electronic docket will include more detailed questions on these issues, including questions about the impact of the actions on US workers, US small businesses, US manufacturing, critical supply chains, US technological leadership, and possible tariff inversions (i.e., where additional tariffs on goods are lower than additional tariffs on inputs used to produce those goods). USTR intends to post the questions by November 1, in advance of the docket opening. The questions will be posted at https://comments.USTR.gov.
The deadline for submitting comments in this proceeding is January 17, 2023. USTR has indicated that, during the course of the review, it will evaluate whether to provide additional opportunities for public comment through additional written comments or through public hearings. USTR has not specified a date by which it will conclude its review or implement any resulting modifications to the Section 301 actions.
The upcoming public comment proceeding represents a rare and important opportunity for companies to request modifications to the Section 301 actions. USTR has largely ceased its past practice of initiating periodic tariff exclusion processes, and legislation aimed at reinstating the exclusion mechanism has stalled in Congress. As a result, the four-year review process might be the only avenue for companies to seek tariff relief for the foreseeable future.
At this stage, it is unclear whether the four-year review will result in substantial changes to the Section 301 action. Some Biden Administration officials have argued that the Section 301 tariffs were poorly designed and should be recalibrated to better align with US priorities and inflation concerns.4 Other Administration officials have emphasized the importance of maintaining the tariffs, based on the view that they provide “leverage” for future negotiations between the United States and China, or that they could promote supply chain "resiliency".5 In deliberations this summer, Administration officials reportedly discussed capping the value of any Section 301 tariff relief at $10 billion annually – a small fraction of the total value of the Section 301 action, which covers approximately $370 billion in annual trade. Given these dynamics, the process of seeking modifications to the Section 301 action is likely to be highly competitive. Interested persons should begin preparing now to participate in the proceeding and address the factors listed in USTR’s Federal Register notice.
1 19 U.S.C. 2417(c).
2 Request for Comments in Four-Year Review of Actions Taken in the Section 301 Investigation: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, Office of the US Trade Representative, October 12, 2022.
3 19 U.S.C. 2417(c)(3)(A) and (B).
4 "NSC official: China tariffs should be adjusted to fit strategic priorities," Inside US Trade, April 21, 2022.
5 "USTR Tai calls U.S. tariffs on Chinese goods 'significant' leverage," Reuters, June 22, 2022. See also "USTR’s Baltzan: China tariffs part of economic shift from efficiency to resiliency," Inside US Trade, September 28, 2022
6 "Biden considers tiny China tariff relief package," Politico, July 5, 2022
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