Former Rep. Beto O'Rourke's presidential campaign released a detailed trade agenda that talked about how he would undo some of what he called President Donald Trump's "disastrous trade war," and how he would advance trade liberalization, if he were elected.
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.
Movado Group downgraded its forecast in virtually all metrics for fiscal year 2020 ending Jan. 31, blaming market volatility it sees worsening with the 15 percent List 4A Section 301 tariffs taking effect Sept. 1 on fashion watches and smartwatches imported from China. It's “very early on in the process” to forecast with any precision the impact of the List 4A tariffs taking effect in a few days, CEO Efraim Grinberg said on a fiscal Q2 call. The tariffs will “definitely have an impact, I believe, on U.S. business,” he said. “We will take certain actions in terms of pricing initiatives, in terms of working with our suppliers,” to mitigate the fallout, he said. “Some will have an effect to gross profits.”
Protests in Hong Kong could cut off an escape route importers have been using to avoid Section 301 tariffs, according to a blog post by trade consultant David Trumbull. The 1992 Hong Kong Policy Act “gives Congress and the President, or the President alone by Executive Order, the power to suspend U.S. recognition of the separate Hong Kong Customs Territory if the U.S. determines that Mainland China has suppressed Hong Kong's autonomy,” Trumbull said. “The current tension in Hong Kong, with protesters saying that China is attempting to do just that could trigger President Trump to invoke the Hong Kong Policy Act and subject goods of Hong Kong origin to the Section 301 tariffs,” he said. “Companies relocating production from Mainland China to Hong Kong to avoid the Section 301 tariffs on China are getting the jitters” over concerns that the U.S. could use the law to end Hong Kong’s status as a separate customs territory from China, he said.
The Office of the U.S. Trade Representative announced Aug. 29 that it is seeking comments through Regulations.gov on the efficacy of increasing Section 301 tariffs from 25 percent to 30 percent in order to convince China to stop trade abuses. The office also invites businesses and trade groups to explain if the increase on any particular product would cause disproportionate harm to U.S. consumers or businesses. Comments are due by Sept. 20; the increase is scheduled to take effect Oct. 1.
Almost half of companies that responded to the U.S.-China Business Council's annual survey on the business climate in China said they have lost sales in China since the trade war began. The most common reason is because of retaliatory tariffs on U.S. imports to China, according to these 100 multinational firms based in the U.S. Another third said they lost sales because of U.S. tariffs.
International Trade Today is providing readers with some of the top stories for Aug. 19-23 in case they were missed.
The Office of the U.S. Trade Representative will publish a notice in the Federal Register Aug. 30 that says that List 4 products under the Section 301 action will face an additional 15 percent tariff, not 10 percent, as earlier announced. President Donald Trump had tweeted this change four days ago (see 1908230059). The change in the rate does not affect the dates the goods will face the tariff. One group of products, nearly 3,800 8-digit tariff lines, will be taxed starting Sept. 1; consumer electronics largely will wait until Dec. 15.
Derek Scissors, a China scholar at the American Enterprise Institute, has been arguing for decoupling from China for years. He says whether President Donald Trump wins a second term, or a Democrat replaces him, it's likely tech companies will have to change their supply chains and reverse the international approach to research and development. Scissors said in an interview that while apparel and other low-value goods manufacturers were already moving to cheaper countries in Asia, consumer technology firms were happy in China before the trade war began. "You could easily get a Democratic administration that wants to get tech out of China," he said. "Biden's people say they want that."
The manufacturing of major Roomba robotic vacuum subassemblies that occurs in Malaysia is enough for the vacuum to be considered of Malaysian origin, CBP said in a July 31 ruling. Sandler Travis lawyer Paula Connelly, representing iRobot, sought CBP's input on the country of origin. The agency also said the retail set that includes the vacuum is of Malaysia. The vacuum is classified in subheading 8508.11.0000, which was included in the third tranche of Section 301 tariffs on goods from China.
CBP created Harmonized System Update (HSU) 1914 on Aug. 13, containing 531 Automated Broker Interface records and 94 Harmonized Tariff Schedule records, it said in a CSMS message. The update includes adjustments required by the Office of the U.S. Trade Representative's announcement of two new sets of exemptions from Section 301 tariffs on China (see 1907290023 and 1908080019). Modifications required by the verification of the 2019 HTS and to support Partner Government Agency message set functionality are included as well.