In August 2017, the Office of United States Trade Representative (USTR) initiated an investigation, under Section 301 of the Trade Act of 1974, to determine whether certain acts, policies and practices of the Chinese government related to “…technology transfers, intellectual property, and innovation are unreasonable, unjustifiable, or discriminatory and burden or restrict U.S. commerce.”
After public hearings, comment periods and consultation with U.S. government interagency representatives (the Section 301 Committee), the USTR prepared a comprehensive report of the findings.
President Trump signed a memorandum on March 22, 2018, directing U.S. government agencies to take “appropriate” actions in response to China’s “acts, policies, and practices.” This includes: (1) an action before the World Trade Organization (WTO) to address China’s licensing practices; and (2) an additional 25 percent ad valorem tariff on certain products of China. The proposed list of products will include aerospace, information and communication technology, and machinery. Additional products will be published in the Federal Register, within 15 days of the memorandum.
Once the publication and comment period is completed, the USTR will announce its final determination regarding the products chosen for assessment of additional duties, which will then be published in the Federal Register.
In view of the fact that numerous products produced abroad require multiple countries of manufacture prior to importation into the U.S., this may cause significant issues as to whether a specific product is a “product of China” for purposes of the additional assessment of duties. Foreign manufacturers and particularly U.S. importers subject to additional tariff duties should maintain clear and accurate evidence of production activities in order to support any issues relating to country of origin of the imported product. Importers and other interested parties should consider the submission of requests for U.S. Customs binding rulings relating to the classification under the Harmonized Tariff Schedules of the U.S. and the product’s country of origin.
Another significant aspect of the March 22 memorandum pertains to the president’s directive to various U.S. government agencies, including the Committee on Foreign Investment in the United States (CFIUS), to respond to “Chinese investment aimed at obtaining key U.S. technologies” and “addressing…investment practices involving the acquisition of sensitive technologies.”