USTR Releases Section 301 China Tariff Necessity Review Comment Form

Key Points

• On November 1, USTR released a comment form prescribing the submission format for public comments in the “necessity review” process for the Section 301 China tariffs. USTR first announced the public comment phase of the necessity review in October. It will open the docket for comments from November 15, 2022 to January 17, 2023.
• The comment form seeks detailed stakeholder input on the economy-wide and industry-specific impact of the tariffs, and on whether tariffs on specific HTSUS subheadings should be maintained, eliminated, modified or added. The process thus appears to be an opportunity to seek “permanent exclusions” for specific tariff subheadings.
• The USTR form is now requesting significantly more information than identified in the initial Federal Register notice announcing the public comment phase of the review. This poses a significant burden on stakeholders seeking to participate in this process.

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Background: Section 301 Necessity Review

In August 2017, the Office of the United States Trade Representative (USTR) launched an investigation into China’s allegedly unreasonable and discriminatory trade practices under Section 301 of the Trade Act of 1974. USTR ultimately concluded that China was engaged in unfair trade practices related to technology transfer, intellectual property and innovation, resulting in the imposition of tariffs in four stages between 2018 and 2019 (“Section 301 tariffs”). 

USTR is required by statute to conduct a “necessity review” of Section 301 tariffs—not dissimilar to the five-year “sunset review” of antidumping or countervailing duty tariffs—every four years to determine (1) the effectiveness of the tariffs in achieving their objectives, and (2) the detrimental impact of the tariffs on the U.S. economy, including consumers.

In the first phase of the necessity review, USTR accepted requests to continue the Section 301 tariffs from domestic industry representatives and subsequently confirmed continuation of the tariffs on September 8. Now, in this second phase, USTR is seeking input from other stakeholders on the two specific elements of the review, as noted above. USTR will open the docket on November 15, 2022 and will accept comments until January 17, 2023.

Information Requested by USTR

On November 1, USTR posted the form that all stakeholders must use to submit comments on the necessity review docket. The form comprises three primary sections. Section A seeks information related to the economy-wide impact of the Section 301 tariffs. The section contains questions designed to elicit information on the general effectiveness of the tariffs in eliminating, changing or “counteracting” China’s discriminatory practices. Section B seeks information related to industry/sector specific impacts, as defined by North American Industry Classification System (NAICS) codes. The type of information sought in this section is largely similar to Section A, focusing on the “effectiveness” of the tariffs in eliminating or modifying Chinese practices specific to the sector and eliciting industry-specific metrics on the tariff impacts (e.g., on production levels, investments, employment, wages and supply chain resiliency). Section C then requests comments on specific Harmonized Tariff Schedule of the United States (HTSUS) tariff subheadings covered by the action and whether those tariffs should be maintained, eliminated or modified.  

As with previous rounds of public comment, stakeholders are permitted to submit business confidential information on certain questions if accompanied by a public version of the response.

Implications

The comment form is significantly more detailed than the original Federal Register notice issued by USTR, which identified only 11 questions related to the effectiveness of the Section 301 tariffs and impact on the U.S. economy. In contrast, the form requests a voluminous amount of information, particularly with respect to comments on the product-specific impact of the tariffs in Section C. The form is disjointed in its approach, and the prescribed format poses a higher burden on stakeholders wishing to comment. Companies wishing to weigh in that have limited resources and/or a large number of HTSUS line items affected by the tariffs will be most impacted, as the form requires detailed information for each tariff subheading indicated. 

Nonetheless, this process is the only process currently available by which the Biden-Harris administration is considering permanently excluding products imported from China, from the Section 301 tariffs. Companies should strongly consider submitting comments, including if they have previously benefitted from the product-specific exclusion process for the Section 301 tariffs, because there may be no other opportunity to do so in the near future.