Section 301 Tariffs on China

There have been several new trade developments recently, specifically with China. In an effort to maintain an accurate timeline and representation of these events, we have gathered the below information to relay a better understanding of the progressions.

 

What is Section 301 and How Does it Work?

“Sections 301 through 310 of the Trade Act of 1974, as amended, are commonly referred to as “Section 301”. It is one of the principal statutory means by which the United States enforces U.S. rights under trade agreements and addresses “unfair” foreign barriers to U.S. export.

Section 301 procedures apply to foreign acts, policies, and practices that the United States Trade Representative (USTR) determines either (1) violate, or are inconsistent with, a trade agreement; or (2) are unjustifiable and burden or restrict U.S. commerce. The measure sets procedures and timetables for actions based on the type of trade barrier(s) addressed. Section 301 cases are initiated as a result of a petition filed by the USTR. Once the USTR begins a Section 301 investigation, it must seek a negotiated settlement with the foreign country concerned, either through compensation or elimination of the particular barrier or practice.

For cases involving trade agreements, such as those under the Uruguay Round (UR) agreements in the World Trade Organization (WTO), the USTR is required to use the formal dispute proceedings specified by the agreement. For Section 301 cases (except those involving a trade agreement or an IPR issue) the USTR has 12-18 months to seek a negotiated resolution. If one is not obtained, the USTR determines whether or not to retaliate (which usually takes the form of increased tariffs on selected imports) at a level equivalent to the estimated economic loss incurred by U.S. firms from the foreign barrier or practice (Morrison, 2019)”.

 

Initiation

August 18, 2017

The Office of the USTR initiated an investigation under Section 301 of the Trade Act of 1974 into the government of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation.

March 22, 2018

Pursuant to Section 301 of the Trade Act of 1974, the President issued a Presidential memorandum directing USTR to consider whether to increase tariffs on imported goods from China.

 

List 1

June 20, 2018

The USTR published a Notice of Action and Request for Public Comment Concerning Proposed Determination of Action Pursuant to Section 301, imposing an additional 25% ad valorem rate of duty on a list (Tranche 1) of 818 eight-digit HTSUS numbers, representing $34 billion of imports from China, effective July 6, 2018.  Click here to download List 1.

 

List 2

August 16, 2018

USTR published a Notice of Action providing for the imposition of 25% additional import duties on a second list (Tranche 2) of 279 eight-digit HTSUS numbers, representing $6 billion worth of imports from China, effective August 23, 2018. Click here to download List 2.

 

List 3

September 21, 2018

The USTR published a Notice of Modification of Action providing for the imposition of 10% additional import duties on a third list (Tranche 3) of 5,745 HTSUS numbers representing $200 billion of imports from China effective September 24, 2018. Click here to download List 3.

The rate of additional duties was initially 10%. Those additional duties were effective starting on September 24, 2018, and are currently in effect. Under Annex B of the September 21 notice, the rate of additional duty was set to increase to March 2, 2019.

December 19, 2018

The USTR published a Federal Register notice changing the effective date of the duty increase for Tranche 3 to March 2, 2019.

May 9, 2019

The USTR published a Notice of Modification Act (84 FR 20459) in the Section 301 Tranche 3 investigation increasing the duty rate to 25% on imports from China on the 5,745 full and partial eight-digit subheadings of the HTSUS listed in Annex A to the USTR’s September 21, 2018 Notice, as amended.

 

List 4

May 5, 2019

The President issued a tweet threating to “shortly” put a 25% tariff on all remaining Chinese imports.

May 13, 2019

The USTR released a list with an import value of approximately $300 billion on which USTR is proposing to impose Section 301 additional tariffs of up to 25%.

USTR will hold a public hearing on this proposal on June 17 and requests at this hearing are due June 10. Written comments, including input on the specific tariff levels that should be imposed and requests to exclude specific subheadings from the proposed tariff increase, are due June 17. The tariff hike could be implemented any time after June 24 in any amount up to 25%, on top of the regular rate of duty.

June 29, 2019

Following a meeting with China, the US determined it would suspend any plans to impose the additional tariffs on the 4th list as trade negotiations continued between the United States and China.

August 1, 2019

The President announced that beginning September 1, 2019, he will impose a 10% additional tariff on the $300 billion dollars of goods (Tranche 4). Click here to download List 4.

This list of 3,805 full and partial HTSUS subheadings covers essentially all products not already subjected to Section 301 additional tariffs. It includes all apparel, footwear, and manufactured textile products, among others, but excludes pharmaceuticals, certain pharmaceutical inputs, select medical goods, rare earth materials, and critical minerals.

A Federal Register notice providing additional clarifying details is expected prior to September 1.

Following the President’s announcement, it remains to be seen: (1) if the Administration will launch an exclusion process for List 4 (a process was only launched for List 3 once the tariff rate was increased from 10% to 25%), or (2) if there will be any changes to the tariffs included on List 4 following the public comment process.

 

 

Last modified: August 2, 2019

 

References:

Morrison, W. (2019). Enforcing U.S. Trade Laws: Section 301 and China. Retrieved from https://fas.org/sgp/crs/row/IF10708.pdf

Section 301 Trade Remedies to be Assessed on Certain Products from China. (2019). Retrieved from https://www.cbp.gov/trade/remedies/301-certain-products-china

Section 301Update: US-Chine Trade War – List 4 Tariffs to Begin on September 1, 2019. (2019). Retrieved from https://www.natlawreview.com/article/section-301-update-us-china-trade-war-list-4-tariffs-to-begin-september-1-2019

Tariff Actions Resource Page. (2019). Retrieved from https://www.strtrade.com/f-tariff-actions-resources.html#china301