On April 3, 2018, under the authority of the Trade Act as amended, and following an investigation initiated in 2017, the United States Trade Representative issued a press release announcing its proposed list of products imported from China that are valued at "approximately $50 billion in terms of estimated annual trade value for calendar year 2018" that would be subject to an additional 25 percent ad valorem rate of duty ("tariff").

The agency set forth the process by which it will accept public comments on the products that are included in this proposed list, including a public hearing.

Thus, companies have the opportunity to present their views on specific products listed under the proposal for higher tariffs before the list is finalized and the tariffs become effective, in an effort to seek the removal of a product from the final list. But there are less than two months before the window completely closes.

Interested parties must submit a request to appear at the hearing and a summary of its testimony by April 23.

  • Written comments are due on May 11.
  • There will be a public hearing on May 15.
  • Post-hearing comments (to rebut statements made at the hearing) are due May 22.

USTR will then review these comments before issuing a final list.

In its notice, the USTR requests that the comments include the following:

  • The specific products to be subject to increased duties, including whether products listed in the Annex should be retained or removed, or whether products not currently on the list should be added.
  • The level of the increase, if any, in the rate of duty.
  • The appropriate aggregate level of trade to be covered by additional duties.

Commentators recommending that a product be removed from the list should explain why the inclusion of the specific product will not be effective in curbing China's actions that are targeted by this Section 301 action, and also how the tariff would negatively impact US persons (including the affected company and its customers).

In this regard, the notice specifically states:

"USTR requests that commenters address specifically whether imposing increased duties on a particular product would be practicable or effective to obtain the elimination of China's acts, policies, and practices, and whether maintaining or imposing additional duties on a particular product would cause disproportionate economic harm to U.S. interests, including small- or medium-size businesses and consumers."

How did we get here?

Section 301 of the Trade Act of 1974, as amended requires the United States Trade Representative (USTR), subject to the specific direction, if any, of the President regarding such action, to take appropriate and feasible action in response to a foreign government's violation of a trade agreement, or any other international agreement the breach of which burdens or restricts United States commerce; and authorizes the Trade Representative, subject to the specific direction of the President, if any, to take action to obtain the elimination of acts, policies, and practices of foreign countries that are unjustifiable, unreasonable, or discriminatory and burden or restrict United States commerce. See 19 U.S.C. §2411(a)(1).

Pursuant to section 302 of the Trade Act (codified under 19 U.S.C. §2412) section 301 investigations may be initiated as a result of a petition filed with the Trade Representative requesting such action. On the other hand, as in the case of the 2017 Section 301 Investigation into China's Acts, Policies, and Practices related to Technology Transfer, Intellectual Property, and Innovation, the investigation may be initiated pursuant to Presidential direction after publication in the Federal Register of the determination to initiate such an investigation. See 19 U.S.C.§ 2412(b) and Addressing China's Laws, Policies, Practices, and Actions Related to Intellectual Property, Innovation and Technology, 82 Fed. Reg. 39007 (August 17, 2017).

As referenced above, the 2017 China Section 301 Investigation was initiated in August 2017, and following the required public hearing on October 10, 2017 and consideration of public comments, on March 22, 2018 the USTR reported its "Findings of the Investigation into China's Acts, Policies and Practices related to Technology Transfer, Intellectual Property, and Innovation under Section 301 of the Trade Act of 1974." On the same date as the reported findings, the President directed the USTR as follows:

Section 1. Tariffs. (a) The Trade Representative should take all appropriate action under section 301 of the Act (19 U.S.C. 2411) to address the acts, policies, and practices of China that are unreasonable or discriminatory and that burden or restrict U.S. commerce. The Trade Representative shall consider whether such action should include increased tariffs on goods from China

(b) To advance the purposes of subsection (a) of this section, the Trade Representative shall publish a proposed list of products and any intended tariff increases within 15 days of the date of this memorandum. After a period of notice and comment in accordance with section 304(b) of the Act (19 U.S.C. §2414(b)), and after consultation with appropriate agencies and committees, the Trade Representative shall, as appropriate and consistent with law, publish a final list of products and tariff increases, if any, and implement any such tariffs.

See Memorandum of March 22, 2018-Actions by the United States Related to the Section 301 Investigation of China's Law, Policies, Practices, or Actions related to Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 13099 (March 27, 2018). For more information about the additional actions directed by the President in the March 22 Memorandum, ie, WTO dispute settlement and investment restrictions, please see the USTR Fact Sheet.

Unlike the tariffs imposed under Section 201 and Section 232 proceedings earlier this year, the list of products proposed for tariff increases under Section 301 need not be linked to the reasons for taking the Section 301 actions in the first place.1 In fact, the authorizing statute states:

…(3)The actions the Trade Representative is authorized to take under subsection (a) or (b) of this section may be taken against any goods or economic sector –

(A) on a nondiscriminatory basis or solely against the foreign country described in such subsection, and

(B) without regard to whether or not such goods or economic sector were involved in the act, policy, or practice that is the subject of such action.

See 19 U.S.C. §2411(c)(3).

Silver lining: there is time to make your views heard

Also, but more significantly different from the circumstances in the Section 201 and Section 232 tariffs imposed earlier this year, under this Section 301 Proceeding, as we noted at the beginning, there is time to make your views heard before the tariffs are imposed.

In addition, companies will have an opportunity to seek the removal of products before they become subject to the duty increase, if they can make their case and meet the criteria discussed above. One key criterion mentioned in the USTR's announcement is whether the additional duties on your product would cause disproportionate economic harm to US interests, small and medium businesses and consumers.

To see the USTR notice with the list of proposed products, visit this page.