The Coalition for a Prosperous America, a nonprofit allied with President Donald Trump's views on trade, is arguing not to extend exclusions for Section 301 tariffs because companies have had “ample time” to move their supply chains out of China. “Any bemoaning from the import lobby that relies on China should have looked to home first. There are plenty of Americans and American businesses that can fulfill their supply chain needs,” CPA Chairman Dan DiMicco and CEO Michael Stumo wrote to U.S. Trade Representative Robert Lighthizer.
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.
The following lawsuits were filed at the Court of International Trade during the week of Nov. 30 - Dec. 6:
House Ways and Means Committee member Stephanie Murphy, D-Fla., said that although “the politics of trade are fairly tricky,” she feels confident in saying “things can't get any worse” for free trade during the Biden administration. Murphy, one of two members of the House speaking on a Cato Institute webinar about what to expect in trade with a new president, said she's encouraged by President-elect Joe Biden's choices for the secretaries of the treasury and state, and the head of the National Security Council, because all of the individuals recognize that trade is an important tool in foreign policy.
President-elect Joe Biden won't remove Section 301 tariffs until he makes a full review of the phase 1 agreement and consults with Japan, South Korea and Europe “so we can develop a coherent strategy,” New York Times columnist Thomas Friedman reported Dec. 2. Biden said free-market countries need more leverage to “actually produce progress on China’s abusive practices,” such as illegal subsidies to corporations, forced tech transfers and stealing intellectual property.
Section 301 tariffs raised IBM's sourcing costs by tens of millions of dollars, and on Dec. 2 the company asked the incoming administration to “immediately” remove the tariffs on tech inputs such as mechanical parts, fans, power distribution units, power supplies, cables and printed circuit board assemblies. “A limited, early removal of the most counter-productive of the China tariffs could provide relief for U.S. manufacturing, while leaving the new Administration space to negotiate further tariff changes based on Chinese market access commitments,” said Alan Kohlscheen, IBM's import compliance executive, and Michael DiPaula-Coyle, IBM's director of international trade policy.
The following lawsuits were filed at the Court of International Trade during the week of Nov. 23-29:
A Finding Nemo story and picture book doesn't meet the classification requirements for heading 4903, which covers “Children’s picture, drawing or coloring books,” CBP said in a Sept. 15 ruling. CBP previously ruled that the book wasn't classifiable as a children's book and the company, Phidal Publishing in Montreal, requested reconsideration of that ruling. CBP's earlier ruling found the book to be classifiable in heading 4901 for “printed books.”
Just as the recent flood of Section 301 litigation had appeared to slow to a trickle, importers added more than two dozen more lawsuits last week to the multitude of cases currently before the Court of International Trade. But while the new complaints restate the same arguments made by thousands of other plaintiffs in the sprawling litigation, many of the new cases differ in that they seek to invalidate only List 4 tariffs, excluding List 3 from the requests.
With President-elect Joe Biden said to be reluctant to commit to changing 25% tariffs on $250 million worth of imports from China, a recent Congressional Research Service report contains suggestions that could point to a possible off-ramp. The report, released Nov. 23, says that Section 301 actions terminate automatically after four years, unless the Office of the U.S. Trade Representative receives a request for continuation, and conducts a review that determines the tariffs should continue.
The following lawsuits were filed at the Court of International Trade during the week of Nov. 16-22: