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1 1 (May 26, 2022)

handle is hein.crs/govehle0001 and id is 1 raw text is: Congr ssionaI Res ar h Servic Infor mun Ih Veis ative debt sin'e 1914 Updated May 26, 2022 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 were unreasonable or discriminatory and burdened or restricted U.S. commerce. In order to counter them and obtain their elimination, the Trump Administration used Section 301 authorities to impose four rounds of increased tariffs on about two-thirds of U.S. imports from China. However, to avoid harm to U.S. interests, the USTR introduced a new policy allowing stakeholders to request tariff exclusions for U.S. imports that would otherwise have been subject to tariffs. Some policymakers and stakeholders have raised concerns about the implementation of the exclusion request process. In particular, some Member of Congress 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. This has been the case particularly in the aftermath of the COVID-19 pandemic, which has affected the United States' ability to obtain certain products domestically or from countries other than China. Other Members oppose granting any exclusions on the ground that doing so may undermine Section 301's effectiveness at addressing China's unfair trade practices or hinder U.S. efforts to incentivize domestic manufacturing of certain critical goods. The agency established an exclusion process for each of the four stages of tariff increases under Section 301, as well as opportunities for interested parties to submit comments on whether to extend or reinstate exclusions. The Biden Administration continues to review its trade strategy for China. Actions by the USTR during 2021 and early 2022 were not aimed at providing broader tariff relief. They were limited to extending unexpired exclusions on medical supplies relevant to combatting the COVID-19 pandemic and reinstating certain exclusions that were previously extended. In May 2022, the agency announced a review of all Section 301 actions against China. Background 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 in four separate lists (Lists 1-4A). Figure I. Section 301 Exclusions Exclusion Requests Granted Denied List I List 2 List 3 List 4 Exclusions Granted HTSUS Specific Subheadings Products 17 716 4 270 46 956 32 187 ( 1,00 6,000 24,000 32,000 Source: CRS with information from the Office of the USTR. Note: Figures may not reflect amendments to product-specific exclusions and do not include requests submitted on or after March 25, 2020, in response to 85 FR 16987. However, exclusions granted through December 2020 and noted here may have been informed by those requests. During the Section 301 notice, hearing, and comment period on proposed tariff increases, the USTR heard from numerous U.S. stakeholders who expressed concerns about how additional tariffs could affect U.S. businesses and consumers. In response, for each 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 began to prioritize the review of exclusion requests concerning medical products in short supply. Separately, the USTR also requested public comments on whether to remove additional products covered by any list that were relevant to the U.S. response to the pandemic. As a result, it granted new exclusions or extensions for certain of these products. Section 30 I Tariff Exdusion Process The tariff exclusion process enabled interested parties- including law firms and trade associations-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 requests is closed, but the USTR is reviewing all actions related to the investigation, including decisions on whether and how to accept new exclusion requests (see Four-Year Review Process discussion below). While the USTR approved, on average, 35% of new requests under the first two actions, the approval rates under the third and fourth actions were 5% and 7%, respectively. According to the USTR, all requests were evaluated on a case-by-case basis. The agency indicated that, in

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