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1 1 (September 9, 2021)

handle is hein.crs/govehlg0001 and id is 1 raw text is: Congr ssianaI Rese r h Service Infor mun th Veis ative debat since 1914 0 Updated September 9, 2021 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. To counter them and obtain their elimination, the Trump Administration imposed, under Section 301, 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 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. 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, 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. The agency 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 recent actions have been limited in scope to medical supplies related to the Coronavirus Disease 2019 (COVID-19) pandemic, and not aimed at providing broader tariff relief. 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 under four separate actions (per Lists 1-4). 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 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 for certain medical-care products, such as personal protective equipment (PPE). Figure I. Section 301 Exclusions Exclusion Requests Granted Denied List I List 2 List 3 List 4 0 Exclusions Granted HTSUS Specific subheadings Products 17 716 4 270 46 956 32 187 8,000 16,000 24000 32,000 0910812021I 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. Section 301i Tariff Exclusion 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 reportedly reviewing all actions related to the investigation, including decisions on whether and how to accept new exclusion requests. 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 determining which requests to grant, it considered 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 were also granted for reasons that are thought to include, among others, U.S. national security interests and demonstrable economic hardship from the tariffs for small businesses.

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