The Consumer Technology Association is considering a lawsuit to challenge the proposed tariffs on $200 billion worth of goods from China under Section 301, the trade group said in a news release. “We are reviewing all options,” emailed spokeswoman Izzy Santa when asked if CTA will sue to block the levies. CTA's comments "detail how these tariffs may be vulnerable to a legal challenge because they are not based on the required legal finding of unfair business practices by China, and instead are retaliatory in nature and require a separate Section 301 investigation, which USTR did not conduct," it said. Gary Shapiro, CTA's CEO, said "we are skeptical the $200 billion tariffs will be upheld in court if challenged."
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.
China is a bigger problem than Canada, President Donald Trump told reporters Sept. 7 on Air Force One, and said he has tariffs ready to go on all the other Chinese products that have not faced additional tariffs in the trade war thus far. "Nobody has ever done what I’ve done. The $200 billion we’re talking about, could take place very soon, depending what happens with them," he said, referring to the third tranche of Chinese goods subject to Section 301 tariffs (see 1807110050), whose comment period ended Sept. 6. "And I hate to say that, but behind that, there’s another $267 billion ready to go on short notice, if I want. That totally changes the equation," he said, according to various media reports.
Continuing the “tit-for-tat tariff escalation” with China by enacting a third tranche of proposed Section 301 duties on $200 billion worth of Chinese imports “only serves to expand the harm to more U.S. economic interests, including farmers, families, businesses, and workers,” wrote the National Customs Brokers & Forwarders Association of America, the National Retail Federation and 148 other trade groups in a letter to U.S. Trade Representative Robert Lighthizer at the Sept. 6 deadline for comments in docket USTR-2018-0026. “Unilaterally imposing tariffs on hundreds of billions of dollars in goods invites retaliation,” said the groups, which also included the National Association of Foreign-Trade Zones, the American Association of Exporters and Importers, the Information Technology Industry Council and the Telecommunications Industry Association. Implementing the first two rounds of tariffs July 6 and Aug. 23 “has not resulted in meaningful negotiations or concessions” from the Chinese, they said.
Though the vast majority of the nearly 3,000 comments in docket USTR-2018-0026 opposed a third tranche of Section 301 tariffs on Chinese goods, Veeco Instruments supports the proposed duties on “indicator panels incorporating LCDs or LEDs” imported from China under the Harmonized Tariff Schedule’s 8531.20.00 subheading, the company said in Aug. 30 comments posted in the docket. Veeco also wants U.S. Trade Representative Robert Lighthizer to impose duties on six more tariffs lines of LED-related goods not currently proposed in the third tranche, the company said in a document heavily redacted to hide “business confidential” information. The eight-page document also contained roughly two dozen redactions to hide Veeco's identity, except for one reference by name to Veeco that apparently slipped through. A revised document later posted in the docket deleted that one Veeco reference and replaced the previous document, which is now listed in the docket as "restricted to show metadata only because it contains confidential business information data." The publicly traded Veeco did about $485 million in 2017 revenue, mainly through the sales of semiconductor process equipment used to produce LEDs and other components, said the company’s most recent 10-K at the Securities and Exchange Commission. Imposing tariffs on LEDs and products containing them will “ensure that Chinese producers” positioned to manufacture those products “will not benefit from having unfettered access to the U.S. market,” Veeco said. The tariffs also “will encourage U.S. consumers to purchase such products from other sources that do not rely on stolen intellectual property to make these products,” it said. Luke Meisner, the Schagrin Associates lawyer who filed the comments on his client’s behalf, declined to comment.
International Trade Today is providing readers with some of the top stories for Aug. 27-31 in case they were missed.
President Donald Trump is in favor of moving forward with proposed Section 301 tariffs on a broad group of products from China, according to a report from Bloomberg. The proposed tariffs on $200 billion worth of Chinese imports (see 1808010070) could come soon after the comment period on the proposal ends on Sept. 6, the report said. Asked to confirm the report during an interview, Trump called it "not totally wrong."
No records exist at the Office of the U.S. Trade Representative explaining how and why the agency removed finished TVs from China from the first tranche of Section 301 tariffs imposed July 6 (see 1806150003), USTR said in an email on Aug. 30. A Freedom of Information Act request submitted Aug. 6 asked for copies of all emails, reports and any other physical or electronic documentation shared among the 17 members of the interagency Section 301 committee charged with deciding which tariffs would stay and which would go from the list released April 6. The request, submitted by a sister publication to International Trade Today, sought documents that would shed light on the deliberations among the committee members that led the agency to spare TVs from the 25 percent tariffs. The agency did an automated search of the records stash of four USTR officials who serve on the committee using an “eDiscovery tool,” and also did a “manual search,” but found no materials that were “responsive” to our FOIA request, it said. The four officials whose records the agency said it searched included: Arthur Tsao, assistant general counsel and lead attorney in the Section 301 tariffs proceedings; Julia Howe, director-China; William Busis, deputy assistant USTR for monitoring and enforcement, and chairman of the Section 301 committee; and Terry McCartin, assistant USTR for China affairs.
Seafood importers should make certain that Chapter 98 exemptions for goods returned to the U.S. after being advanced in value are applicable when filing such claims to reduce exposure to Section 301 duties, a lawyer at a seafood company said during a recent interview with Seafood Source. Ian Moores, general counsel at seafood company F.W. Bryce in Massachusetts, said that the duty exceptions in Harmonized Tariff Schedule subheading 9802.00.50 for goods returned after repair or alteration only apply to U.S. raw fish material processed in China. Additionally, CBP has ruled that headed and gutted raw material that is cut, frozen and packaged goes beyond "alteration," Moore said. The Office of the U.S. Trade Representative recently said the Section 301 tariffs will only be applied to the operation performed in China, not the full value of the good, for imports under the Chapter 98 provisions (see 1808160049). Seafood is not currently subject to Section 301 tariffs, but is on the list of $200 billion of goods proposed for the third round of duties (see 1807100070).
Marketers of low-end consumer electronics (CE) products will be especially vulnerable if the Trump administration imposes a third tranche of 25 percent Section 301 tariffs on Chinese imports, companies said in comments in docket USTR-2018-0026. Both said their businesses are too profit-poor to absorb higher customs duties, and they worry about the pass-along impact of higher pricing.
China began a World Trade Organization challenge of 25 percent Section 301 tariffs on a second group of $16 billion in Chinese goods that began Aug. 23, the WTO said in a news release. China requested consultations with the U.S. on Aug. 23, saying the measures violate WTO rules by imposing higher tariffs on China than on other countries, exceeding U.S.-agreed bound rates and retaliating against China without first filing a WTO dispute. Under WTO rules, China may request the formation of a panel to adjudicate the case if consultations don’t resolve the dispute after 60 days. China has already filed a challenge of the first group of $34 billion in goods subject to Section 301 tariffs since July 6 (see 1807060012), as well as proposed tariffs on a third group of $200 billion in Chinese goods (see 1807160046).