China Tariffs Continue – Per USTR

Written by Susan Kohn Ross

One of the hopes of the trade community when the Biden Administration was sworn in was that “something” would be done about the China 301 tariffs. To this point, there are no changes. In fact, while there was optimism at the outset, the reality is that no one in D.C. has a “better” vehicle for trying to rein in China’s policies and practices, so those tariffs continue. Any doubt about what would happen was erased last Friday, September 2, 2022, when the U.S. Trade Representative (“USTR”) issued a press release confirming that the 301 tariffs on Lists 1 and 2 would continue. The same can be expected when it comes to Lists 3 and 4A, but their review period has not yet ripened.

The tariffs on the goods on List 1 became effective on July 6, 2018 and those on List 2 were subjected to the 301 tariff on August 23, 2018. Given the four (4) year review period in the law, see 19 U.S.C. 2417(c)(1)(B), USTR issued notices permitting domestic industry to request extensions of these tariffs. According to a pre-publication version of a Federal Register notice, USTR received 244 requests from domestic producers and 44 requests from trade associations seeking to extend the 301 tariff on the List 1 goods. USTR also stated 114 domestic producers and 32 trade associations made similar requests regarding the goods on List 2. All it took was one (1) request per list, so the tariffs will continue, but will be further reviewed!

In the pre-publication Federal Register notice, USTR stated the parties asserted these tariffs provide incentives for the Chinese government to stop its harmful intellectual property rights and other practices, allowed those companies to better compete against Chinese imports, invest in new technologies, expand domestic production and hire additional workers. The tariffs were also said to create more leverage to induce China to eliminate the complained about policies and procedures, have helped to address unfair competition from China’s technology transfer policies and practices and encouraged better policies and practices.

All of this makes interesting reading, but, of course, totally ignores the impact on the American consumer and the economy. In a declaration filed in August 2021, Customs and Border Protection acknowledged having collected “over” $1 billion in the tariffs on goods on Lists 3 and 4A! Of course, the tariff on List 4A goods in particular is not the same 25% as the tariff on the Lists 1 and 2 goods, so one can only imagine how much has actually been collected!

Regarding the review process, USTR stated it will publish one or more separate notices regarding that process, and will open a docket allowing interested parties to submit comments addressing at least the following points: the effectiveness of the actions taken in achieving the objectives of the investigation (reining in China’s technology and other complained about policies and practices), other actions that could be taken, and the effects of such actions on the U.S. economy, including consumers. One of the factors many American importers used to support their exclusion claims when those were possible was they could not move production out of China as quickly as the original tariffs demanded. Given that four (4) years have passed, that is no longer likely to be seen as a valid point. However, increased costs, exclusive of supply chain delays, could be a viable argument. So, American importers start gathering your facts!

Another point we can expect many importers to make it a plea to USTR to reopen the exclusion process and make it more objective and transparent. What might also be a good idea is to request USTR include an appeal procedure, so that inconsistent decisions regarding very similar products can be reconciled.

As has been the case with these China tariffs from the outset – stay tuned for more developments!