US seeks comments on Section 301 tariffs on imports from China

Instituted by the Trump Administration and continued by President Joe Biden, Section 301 tariffs, which apply to over $350 billion in annual imports from China, recently marked their fourth anniversary.  Now, as part of its statutorily mandated four-year review, the Office of the US Trade Representative (USTR) is seeking input from companies and importers on whether, and how, they should continue, modify or rescind the tariffs.

Separately, US Customs and Border Protection (CBP) is increasing enforcement of the Section 301 tariffs and is actively seeking out importers believed to have underpaid, circumvented or otherwise incorrectly reported the tariffs on their imports.  Companies with an interest in Chinese products subject to the tariffs should use this opportunity to assess their own supply chains and ensure that they are not exposed to potential tariff liability or enforcement actions.

USTR’s review of the Section 301 tariffs is the first comprehensive assessment of the tariffs since they were first put in place in 2018.  Beginning November 15, 2022, USTR will be accepting public comments on the following issues: (1) whether the Section 301 tariffs have eliminated or counteracted acts, policies and practices of the Chinese government that USTR had found to be unfairly burdening or restricting US commerce; (2) whether measures other than tariffs would be more effective in eliminating or counteracting these acts, policies or practices; and (3) the effects of the tariffs on the US economy, including for US consumers.

The period for submitting public comments begins on November 15, 2022 and runs through January 17, 2023.  USTR posted a copy of questions to be addressed in the comments, which cover (1) the effectiveness of the Section 301 tariffs in the context of the overall US economy; (2) the effectiveness of the Section 301 tariffs in the context of specific US industries; (3) comments on the tariff headings currently subject to the Section 301 tariffs; and (4) comments on adding tariff headings not currently covered by the Section 301 tariffs.  The questions can be found here.

Background

On August 24, 2017, USTR initiated an investigation into certain acts, policies and practices of the Government of China related to technology transfer, intellectual property and innovation under section 301 of the Trade Act of 1974.  On April 6, 2018, USTR determined that these acts, policies and practices were unreasonable or discriminatory, and burdened or restricted US commerce.  As a result, USTR imposed 25-percent Section 301 tariffs on imports from China on July 6, 2018 and August 23, 2018. These actions were subsequently modified in September 2018 and August 2019 by imposing additional Section 301 tariffs on supplemental lists of Chinese products.

USTR initiated the statutory four-year review process of the Section 301 tariffs on May 5, 2022.  In the first phase of the process, USTR notified representatives of domestic industries which benefit from the Section 301 tariffs of the possible termination of these tariffs on their four-year anniversary dates, as well as notified them of the opportunity to request continuation of the tariffs.  In response to requests for continuation from domestic industries, USTR announced on September 8, 2022 that the Section 301 tariffs would remain in effect.  At the same time, USTR announced that it would conduct a review of the effectiveness of the tariffs and their impact on the economy.

On October 17, 2022, USTR published a notice in the Federal Register requesting public comments as part of the review and establishing procedures for preparing and filing such comments.  The Federal Register notice can be found here.

Exclusions from the Section 301 tariffs

Since the imposition of the Section 301 tariffs, USTR has established, on a number of occasions, procedures by which parties could seek product-specific exclusion from these tariffs – and has granted a number of exclusions based on these requests.

Because the exclusions were time limited, USTR initiated a process by which they could be extended. Ultimately, USTR extended a total of 549 exclusions. Most of these exclusions expired at the end of 2020, and the remaining ones expired in April 2021.

In October 2021, USTR initiated another process by which previously extended exclusions from the Section 301 tariffs could be reinstated. Most recently, on March 28, 2022, USTR reinstated 352 exclusions from Section 301 tariffs, effective retroactively from October 12, 2021 through December 31, 2022.

Considerations for US importers and other parties

In announcing the reinstated exclusions from the Section 301 tariffs on March 28 of this year, USTR stated that it “may consider further extensions” of the exclusions beyond December 31, 2022.  However, to date, USTR has not provided any indication that it will extend the exclusions once they expire at the end of the year.  Once the exclusions expire, US importers will have to pay section 301 tariffs of up to 25 percent on these products.

Thus, at this time, the comment process as part of USTR’s four-year review of the Section 301 actions appears to be the only opportunity for parties to advocate (1) for the extension of existing exclusions, (2) the granting of new exclusions (3) or the removal of products from the Section 301 actions altogether.  In fact, the USTR questionnaire expressly solicits comments regarding tariff headings covered by the actions and whether they should be removed or continue to be subject to actions.  As a result, US importers should consider filing comments with USTR that reflect their preferences on how the Office should proceed.

The questionnaire also solicits comments on whether to add tariff headings not currently covered by the Section 301 actions and whether other actions may be more effective than the tariffs in countering the Chinese acts, policies or practices targeted by the Section 301 tariffs.  Thus, parties in favor of expanding the tariffs to additional products or taking different or additional steps to address the Chinese act, policies or practices at the heart of the Section 301 actions should consider making their voices heard during the comment process.

Recent increase in customs enforcement actions

Enforcement of duties and tariffs – including the Section 301 tariffs – is a focus area for CBP.  Not surprisingly, US importers are seeing increases in CBP enforcement actions with respect to Section 301 tariffs.  CBP is investigating payment of Section 301 tariffs in risk assessment questionnaires and requests for information targeting specific importations involving the tariffs, alleged circumvention and claimed exclusions.  US importers should be appropriately prepared to respond to such CBP inquiries, including maintaining relevant documentation pertaining to their imports and supply chains.

If you have any questions or would like to discuss your company’s situation, please contact any of the authors.