There’s no question China “has engaged in unfair trade practices such as forced technology transfer and intellectual property theft,” Sen. Dianne Feinstein, D-Calif., wrote to U.S. Trade Representative Robert Lighthizer June 17, as posted July 16 in docket USTR-2019-0004. “The question is whether the broad-based tariffs imposed and proposed by the current administration are the right approach to addressing such issues,” Feinstein said. “They are not.” The Section 301 tariffs on Chinese imports “threaten U.S. jobs and businesses, including so many of those in California that rely on international trade,” she said. “The ports of Los Angeles and Long Beach, which handle nearly half of the container trade with China, have seen the flow of goods slowed due to the tariffs and the uncertainty surrounding them.” Feinstein has heard from “numerous” California companies “about the pain the tariffs are causing them,” she said. The tariffs are “disrupting their supply chains and raising their costs of doing business in ways that damage their competitiveness and in some cases, threaten their existence,” she said. The “primary impact” of the proposed List 3 tariffs “will be to damage our own citizens, businesses, and economy,” she said. “I urge you to pursue alternative approaches to address real trade issues with China.” Three rounds of 25 percent tariffs remain in effect on roughly $250 billion worth of Chinese imports. President Donald Trump last month delayed putting the threatened List 4 duties into effect on virtually all remaining Chinese goods as the U.S. and China try to restart talks toward a comprehensive trade deal (see 1906290001).
Section 301 Tariffs
Section 301 Tariffs are levied under the Trade Act of 1974 which grants the Office of the United States Trade Representative (USTR) authority to investigate and take action to protect U.S. rights from trade agreements and respond to foreign trade practices. Section 301 of the Trade Act of 1974 provides statutory means allowing the United States to impose sanctions on foreign countries violating U.S. trade agreements or engaging in acts that are “unjustifiable” or “unreasonable” and burdensome to U.S. commerce. Prior to 1995, the U.S. frequently used Section 301 to eliminate trade barriers and pressure other countries to open markets to U.S. goods.
The founding of the World Trade Organization in 1995 created an enforceable dispute settlement mechanism, reducing U.S. use of Section 301. The Trump Administration began using Section 301 in 2018 to unilaterally enforce tariffs on countries and industries it deemed unfair to U.S. industries. The Trump Administration adopted the policy shift to close what it deemed a persistent "trade gap" between the U.S. and foreign governments that it said disadvantaged U.S. firms. Additionally, it pointed to alleged weaknesses in the WTO trade dispute settlement process to justify many of its tariff actions—particularly against China. The administration also cited failures in previous trade agreements to enhance foreign market access for U.S. firms and workers.
The Trump Administration launched a Section 301 investigation into Chinese trade policies in August 2017. Following the investigation, President Trump ordered the USTR to take five tariff actions between 2018 and 2019. Almost three quarters of U.S. imports from China were subject to Section 301 tariffs, which ranged from 15% to 25%. The U.S. and China engaged in negotiations resulting in the “U.S.-China Phase One Trade Agreement”, signed in January 2020.
The Biden Administration took steps in 2021 to eliminate foreign policies subject to Section 301 investigations. The administration has extended and reinstated many of the tariffs enacted during the Trump administration but is conducting a review of all Section 301 actions against China.
International Trade Today is providing readers with some of the top stories for July 8-12 in case they were missed.
The country of origin for watches is largely based upon where the watch "movement" is produced, but the origin of watch bands and cases is determined by whether the assembly is completed in the same country where the movement was made, CBP said in a June 25 ruling. Seiko Watch of America, through Ernst & Young, asked CBP to rule on how the company should declare country of origin in four scenarios and whether Section 301 duties might apply. CBP found that only in one of the scenarios would the proposed fourth list of Section 301 tariffs not apply.
Freshman Democrat Stephanie Murphy of Florida is already making a name for herself on trade, both during House Ways and Means Committee hearings and through leading an effort to restrict the administration's ability to levy tariffs on national security grounds without congressional approval.
CBP will add the ability in ACE for importers to file entries with the sixth group of exclusions from the first tranche of Section 301 tariffs on July 11, it said in a CSMS message. Filers of imported products that were granted an exclusion (see 1907080023) should report the regular Chapter 84, 85 or 90 Harmonized Tariff Schedule number, as well as subheading 9903.88.11, for products subject to Section 301 duties on products from China but that have been granted an exclusion by the Office of the U.S. Trade Representative. “Importers shall not submit the corresponding Chapter 99 HTS number for the Section 301 duties when HTS 9903.88.11 is submitted,” CBP said.
Two Wiley Rein lawyers blogged July 11 that the Section 301 investigation into French taxation of digital services is not a twin to the 301 investigation of China's abuses of the trading system. "This is not the start of a trade war with France," Stephen Claeys and Timothy Brightbill wrote. There will not necessarily be tariffs on French goods as a result of this investigation, they said. The U.S. trade representative could enter into negotiations with France, restrict service sector access for French firms, or take other actions short of tariffs.
Though President Donald Trump delayed imposition of List 4 Section 301 tariffs to restart negotiations with China toward a comprehensive trade deal, retailers continue stocking up on inventory as a hedge against the duties taking effect on short notice, the National Retail Federation said July 10. Imports at major U.S. retail container ports will remain at high levels this summer, “but are expected to grow only modestly compared with last year’s rush to bring merchandise into the country ahead of scheduled tariff increases,” the NRF said. “Retailers still want to protect their customers against potential price increases that would come with any additional tariffs, but with the latest proposed tariffs on hold for now and warehouses bulging, there’s only so much they can do,” it said. “We will still see some near-record numbers this summer, but right now no one knows whether there will be additional tariffs or not.” U.S. ports handled 1.85 million 20-foot-long cargo containers or their equivalents in May, up 6 percent from April and a 1.4 percent increase from May 2018, the NRF said. It’s estimated that ports handled 1.87 million containers in June, an increase of only 0.8 percent year-over-year. The July forecast is for 1.93 million containers to be handled, which would be 1.3 percent higher than the July 2018 volume, it said: “The small year-over-year increases expected in the next few months compare with double-digit growth in multiple months last year as retailers rushed to import Chinese merchandise ahead of expected tariff increases.”
The Office of the U.S. Trade Representative issued a sixth list of product exclusions from Section 301 tariffs on goods from China. Newly exempt from the tariffs are "110 specially prepared product descriptions," the agency said. The exclusions cover 362 separate requests, according to the notice, which is scheduled for publication in the July 9 Federal Register. The product exclusions apply retroactively to July 6, 2018, the date the first set of tariffs took effect, and will remain in effect until one year after the notice is published.
The Office of the U.S. Trade Representative is publishing its latest list of product exclusions from the first tranche of $34 billion in Section 301 tariffs on China (see 1907080008). This sixth list of exclusions includes 110 subsets of tariff numbers in chapters 84, 85 and 90. The new exclusions take effect retroactively from July 6, 2018, when the $34 billion in tariffs originally entered into force, and will remain for one year following publication of USTR’s notice. USTR is creating Harmonized Tariff Schedule subheading 9903.88.11 for the new set of exclusions.
Objections to the exemption of low value shipments from the Section 301 duties on goods from China demonstrates the need for a change in law to allow for de minimis exemptions for goods withdrawn from foreign-trade zones, the 321 Coalition said in comments to the Office of the U.S. Trade Representative. The comments were part of the docket on the fourth tranche of Section 301 tariffs on goods from China, which are now on hold as the U.S. and China work toward a trade deal (see 1907010012). The coalition similarly said it would like to see federal law changed to allow for de minimis entry for goods from foreign-trade zones as part of CBP's customs framework review (see 1902140022).