Manufacturers in the U.S. should take note of a new request for comment from the United States Trade Representative as a lack of support may lead to removal of the tariffs and surge in unfairly priced imports.
What Are the Section 301 Duties?
In 2018 and 2019, the Trump administration placed 25% duties (301 duties) on approximately $250 billion worth of Chinese imports. These duties remain in place today and are reviewed every four years as required by the Trade Act of 1974.
Section 301 of the Trade Act of 1974 allows the Office of the United States Trade Representative to enforce U.S. rights under trade agreements and address unfair foreign barriers to U.S. exports. Section 301 authorizes USTR to take various actions, including increased tariffs on goods imported into the U.S. from the country under investigation. The Trump administration conducted a Section 301 investigation into China’s economic practices and imposed tariffs on Chinese goods imported into the U.S. market for (1) forced technology transfer requirements; (2) cyber-enabled actions to acquire U.S. IP and trade secrets illegally; (3) discriminatory and nonmarket licensing practices; and (4) state-funded strategic acquisition of U.S. assets.
However, recent statements by officials seem to suggest that the Biden administration is considering lifting the 301 duties or allowing them to expire.
U.S. Trade Representative’s Request for Comments
The four-year review of the Section 301 tariffs on China begins this summer. USTR published a notice in the Federal Register on May 5, 2022, requesting comments from U.S. manufacturers for the first two tranches of products to continue the tariffs. The deadline for comments is July 5 for tranche 1 and August 22 for tranche 2. Any products for which USTR does not receive comments will not advance to the second stage of review. Put another way, any product for which there are no comments from a U.S. manufacturer supporting the Section 301 tariffs, USTR will likely remove the tariff later this fall.
Impact of Removing the Section 301 Duties
The Biden administration is exploring modifying or terminating the Section 301 tariffs in part to help with inflation. However, should the duties be removed then Chinese imports will become 25% cheaper virtually overnight and U.S. manufacturers will likely face a surge in imports.
China has also imposed lockdowns on Shanghai and Beijing to help combat COVID-19. A side effect of the lockdowns has been a slowdown in the internal Chinese supply chain and exports, along with congestion at Chinese ports. As the lockdowns end, Chinese factories will be looking to make up for lost time by increasing production and exports.
Filing comments to support Section 301 tariffs with USTR by July 5 may provide meaningful relief for U.S. manufacturers that have previously been injured due to competition with unfairly priced Chinese imports.
Buchanan has a coordinated team of international trade and national security attorneys ready to help U.S. manufacturers who are concerned about competition from Chinese imports – either with comments on Section 301 tariffs or otherwise.