U.S. Trade Representative Katherine Tai, in her second day of testimony on Capitol Hill, heard again and again from members of Congress who are hearing from companies in their districts that they want Section 301 tariff exclusions back. She heard repeatedly that the 9% countervailing duties on Canadian lumber are making a bad situation worse. And she heard that the Miscellaneous Tariff Bill and Generalized System of Preferences benefits program should be renewed. On each topic, both Democrats and Republicans shared concerns, though on GSP, Republicans only spoke of the cost to importers, while Democrats worried about the effects of GSP on the eligible countries. Tai testified for more than four hours in front of the House Ways and Means Committee on May 13.
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.
U.S. Trade Representative Katherine Tai generally avoided being pinned down on timing as she was asked about rekindling trade negotiations with the United Kingdom and Kenya, the pause on tariffs on European imports, and a solution for steel overcapacity that could make way for the lifting of Section 232 tariffs.
First-quarter consumer tech imports in the key categories of smartphones, laptops, tablets and TVs declined somewhat from Q4, but remained well ahead of their Q1 2020 volumes, according to Census data accessed through the International Trade Commission’s DataWeb tool. As the National Retail Federation reported, the robust year-over-year Q1 growth rates in some import categories may have been “artificially high” due to comparisons with first quarter 2020, when much of the Asian supply chain was mired in the first COVID-19 global lockdowns.
Very few businesses testified at a live hearing May 6 on the tariff targets for the United Kingdom, Italy, Spain and Austria, in response to those countries' digital services taxes, but dozens of firms and trade groups submitted comments to the Office of the U.S. Trade Representative.
The following lawsuits were filed at the Court of International Trade during the week of April 26 - May 2:
Trade groups whose members would have to pay foreign digital services taxes and trade groups whose members would have to pay if tariffs are hiked up to 25% on products from the countries imposing DSTs agree that DSTs are wrong and that the government should use all its persuasive power to convince countries like India, the United Kingdom and Spain not to impose these taxes. But the internet trade groups split on whether tariffs are the right tool to convince countries to roll back or never pass DSTs, and retailers and apparel and footwear companies say the tariffs will hurt American businesses and consumers more than the targeted exporters.
The International Trade Commission on April 26 issued Revision 3 to the 2021 Basic Edition of the Harmonized Tariff Schedule. The only change was the addition of language to apply Section 301 exclusions to goods on the water in May-June 2019 at the time an increase in the tariffs, from 10% to 25%, was announced (see 2104230047). U.S. Note 20(l) to Subchapter III of Chapter 99 is amended to add the following: “the product exclusions provided by headings 9903.88.13, 9903.88.18, 9903.88.33, 9903.88.34, 9903.88.35, 9903.88.36, 9903.88.37, 9903.88.38, 9903.88.40, 9903.88.41, 9903.88.43, 9903.88.45, 9903.88.46 and 9903.88.48 shall apply to articles the product of China that were entered under heading 9903.88.09 and that are provided for in this subdivision." A compiler’s note says: “The last sentence of this paragraph applied to such articles exported before May 10, 2019, and entered for consumption, or withdrawn from warehouse for consumption, into the United States on or after May 10, 2019, and before June 15, 2019.”
Two Democrats and two Republicans on the House Ways and Means Committee, along with 98 colleagues, are asking the Office of the U.S. Trade Representative to re-establish an application process for exclusions to Section 301 tariffs. In an April 27 letter, led by Reps. Ron Kind, D-Wis., Jackie Walorski, R-Ind., Suzan DelBene, D-Wash., and Rep. Darin LaHood, R-Ill., they also say they believe companies that had exclusions that have expired should have expedited procedures for getting a new exclusion.
U.S. Trade Representative Katherine Tai heard many bipartisan complaints about the pain of both Section 301 tariffs and Europe's retaliatory tariffs in response to steel tariffs, but stood her ground on both during a hearing in front of a Senate Appropriations subcommittee responsible for funding the Office of the U.S. Trade Representative.
The Customs Rulings Online Search System (CROSS) was updated April 27. The following headquarters rulings were modified recently, according to CBP: