On February 27, 2019, United States Trade Representative (“USTR”) Robert Lighthizer testified before the House Ways and Means Committee to address the trade relationship between the United States and China. At the hearing, the Committee members largely focused on the progress being made in the on-going trade agreement talks between the two countries. They also pressed Ambassador Lighthizer on the status of the tariffs imposed on Chinese imports under Section 301. Section 301 is the statute that allows the President to impose duties on imports from countries that do not adequately protect the intellectual property rights of U.S. entities doing business in those countries.

The United States and China initiated the current round of trade talks to address the United States’ longstanding concerns over China’s trade policies, which have resulted in growing trade tensions between the two countries. Over the past year, tensions have escalated due to the United States’ imposition of additional tariffs on approximately $250 billion of Chinese imports under Section 301 of the Trade Act of 1974, as well as China’s decision to impose retaliatory duties on U.S. exports to China worth approximately $110 billion.

During Ambassador Lighthizer’s testimony, members of the Ways and Means Committee emphasized the importance of achieving a favorable outcome in the negotiations, noting that their constituents had been harmed both by China’s unfair trade practices and the Section 301 tariffs. Throughout the hearing, Committee members pressed Ambassador Lighthizer on the breadth of any potential trade agreement with China and the United States’ ability to enforce that agreement. In response, Ambassador Lighthizer assured the Committee that, if an agreement were reached, it would address the major trade issues faced by U.S. entities in China. He also emphasized that the United States had a plan for enforcing an agreement with China. Mr. Lighthizer added that, although there was still much to be done in the negotiations to reach a satisfactory outcome, U.S. negotiators were working to achieve a comprehensive agreement covering a range of issues, including services, currency, subsidies, and unfair intellectual property practices, among other things.

In addition, the Committee addressed the status of an exclusion process for the third round of tariffs imposed on Chinese imports under Section 301. When prompted by members of the Committee to address the status of an exclusion process for these additional imports from China, which represent approximately $200 billion worth of imports, Ambassador Lighthizer indicated that USTR would not necessarily establish an exclusion process for the third group of products. When pressed on this issue by the Committee, Ambassador Lighthizer stated that, “I have certainly taken the position that if we go to 25 percent we will have an exclusion process. Short of that I want to sort of see where we are, and I hope [affected companies are] thinking about more ways to manufacture in the U.S.”