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1 1 (July 17, 2020)

handle is hein.crs/govdayj0001 and id is 1 raw text is: 01;0i E.$~ & Updated July 17, 2020 Section 301: Tariff Exclusions on U.S. Imports from China In 2018, the U.S. Trade Representative (USTR) determined, pursuant to an investigation under Section 301 (Title III of the Trade Act of 1974, 19 U.S.C. §§2411-2420), that China's acts, policies, and practices related to technology transfer, intellectual property (IP), and innovation are unreasonable or discriminatory and burden or restrict U.S. commerce. To counter them and obtain their elimination, the Trump Administration imposed, under Section 301, four rounds of increased tariffs on approximately two-thirds of U.S. imports from China. However, to avoid harm to U.S. interests, the USTR instituted tariff exclusions for certain U.S. imports that would otherwise be subject to tariffs. This is the first time that the agency has established an exclusion request process, and several Members of Congress have raised concerns about its implementation. In particular, some Members have questioned USTR's ability to pick winners and losers through granting or denying requests or have pushed for broad tariff relief amid concerns about the negative impact of tariffs on the U.S. economy. Others, however, not wanting to undermine the use of Section 301 to address China's unfair trade practices, have discouraged the USTR from granting tariff exclusions at all. To date, the agency has established an exclusion process for each of the four stages of tariff increases under Section 301 all of which have now closed. The USTR's latest action in response to the COVID-19 pandemic seems to indicate that new exclusions might be limited in scope to medical supplies related to COVID-19, and not be aimed at providing broader tariff relief. In August 2017, long-standing concerns over China's policies on IP, subsidies, technology, and innovation led the USTR to launch an investigation under Section 301 into those policies and their impact on U.S. stakeholders. The investigation concluded that four broad policies or practices justified U.S. action: (1) China's forced technology transfer requirements, (2) cyber-enabled theft of U.S. IP and trade secrets, (3) discriminatory and non-market-based licensing practices, and (4) state-funded strategic acquisition of U.S. assets. Subsequently, as part of its efforts to pressure China to change these practices, the United States imposed additional tariffs, of up to 25%, on certain U.S. imports from China under four separate actions (per Lists 1, 2, 3, and 4). During the Section 301 notice, hearing, and comment period on proposed tariff increases, the USTR heard numerous U.S. stakeholders who expressed concerns about how additional tariffs could affect their businesses, as well as U.S. consumers. In response, for each Section 301 action regarding a new list of covered products, the USTR created a process whereby interested parties could request that a particular product be excluded from the tariffs, subject to certain criteria. Title III of the Trade Act of 1974 does not outline a formal process for exclusions or require the USTR to establish one. The determination to do so appears to be solely at the USTR's discretion. With the COVID-19 pandemic, the agency has recently prioritized the review of exclusion requests concerning medical products, resulting in new exclusions for some personal protective equipment (PPE) in short supply. Separately, the USTR recently requested public comments on whether to remove additional products covered by any list that are relevant to the U.S. response to COVID-19. Figure I. Section 301 Exclusions Exclusion Requests :\ Gran.ted \S Denied :::Pending List I 1 List 2 List 3 List 4 Exclusions Granted HT$U$ Spcic 17 714 0 270 42 950 18 124 8000 16000 24000 32000 Source: CRS with information from the Office of the USTR. Note: Figures may not reflect amendments to product specific exclusions. se.<-k-t.. 3 . T .rff Exk. .... Nrwk-,- The tariff exclusion process enabled interested parties including law firms, trade associations, and customs brokers to petition for an exemption from the Section 301 tariff increases for specific imports classified within a 10- digit Harmonized Tariff Schedule of the United States (HTSUS) subheading. The time window to submit new exclusion requests is now closed, but the USTR continues to review requests from List 4 and is considering extensions of exclusions granted from Lists 1, 2, 3, and 4. While the USTR approved, on average, 36% of requests under the first two actions, the approval rate under the third action was 5%. According to the USTR, all requests are evaluated on a case-by-case basis. Although it is not entirely clear to CRS how the process works internally, the agency has indicated that, in determining which requests to grant, it considers the following: (1) availability of the product in question from non-Chinese sources, (2) attempts by the importer to source the product from the United States or third countries, (3) the extent to which the imposition of Section 301 tariffs on the particular product will cause severe economic harm to the importer or other U.S. interests, and (4) the strategic importance of the product to Made in China 2025 or other Chinese industrial programs. Past exclusions also have been granted for reasons that are thought to include, among p\w -- , gn'a', goo mppm qq\ a , q 'S I 11LIANJILiN,

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