Hot Topics in International Trade – April 2022 – Critical Updates from the U.S. Trade Representative – The U.S.-China Trade Relationship | Braumiller Law Group, PLLC
Since taking office as United States Trade Representative (“USTR”), Katherine Tai has prioritized trade policies focused on protecting the rights of American workers and promoting sustainable environmental practices through trade agreements. . In addition to this, the USTR is now in charge of realigning the trade relationship between the United States and China. Earlier this year, the USTR released its policy agenda and four-year strategic plan (link below), testified before Congress regarding its trade agenda, and extended 352 tariff exclusions to goods subject to Section 301 duties. Later this year, the USTR is tasked with responding to the Court of International Trade’s referral of Schedules 3 and 4a of China’s tariffs, as well as reviewing Schedules 1 and 2 before they expire.
I. The U.S.-China Relationship – USTR Urges Lawmakers to Pass U.S. Innovation and Competition Act
In his testimony earlier this year before the House Ways & Means Committee on March 30and before the Senate Finance Committee on March 31, Katherine Tai urged Congress to pass the bipartisan Innovation Bill, also known as the U.S. Innovation and Competition Act. Addressing US-China relations, Tai said:
“[A] the major element of our trade program is the realignment of the trade relationship between the United States and China. . . over time, it became clear that the PRC would only honor trade obligations that matched its own interests. It’s a familiar pattern with the PRC – from its actions at the WTO and in various high-level bilateral dialogues. The United States has repeatedly requested and obtained commitments from China, only to find that follow-up or real change remains elusive. . . To truly boost America’s competitiveness, we urge Congress to quickly pass the Bipartisan Innovation Act.
Tai’s testimony follows the USTR’s releases of the President’s 2022 Trade Policy Agenda and 2021 Annual Report and Strategic Plan for Fiscal Year 2022-2026 on March 1, 2022. These releases reinforce the idea that the United States is “lucid” when it comes to China’s unfair trade practices targeting certain industries (such as the semiconductor industry), that the USTR will continue to administer trade remedies in the form of tariffs (such as Section 301 of the Trade Act of 1974) and that the USTR will appeal China’s market behavior to the World Trade Organization.
But what is the Innovation Bill in the context of trade relations with China? The United States Innovation and Competition Act (“USICA”), passed by the Senate in May 2021, would reinstate all Section 301 tariff exclusions that would apply from the date the bill becomes law until as of December 31, 2022. For any exclusions that expired on December 31, 2020, importers could recover 301 duty on entries made after December 31, 2020, up to the date the bill is enacted. In addition, the USICA would impose a statutory 301 exclusion process, additional oversight, and additional requirements on the USTR specifically relating to Section 301 rights on goods made in China. USICA provides guidance on how the USTR would maintain an exclusion process for future Section 301 investigations, such as timelines for decisions on exclusion requests and audits of the exclusion process. exclusion.
However, Congress must reconcile USICA with the America COMPETES Act, which is a bill passed by the House earlier this year that also addresses a range of issues related to commerce, technology, agriculture and workers’ rights. Before either bill is passed, the House and Senate must reach a compromise and reconcile the bills into one for the President’s signature. USICA co-sponsor Sen. Todd Young of Indiana said in a bipartisan videoconference with Commerce Department Secretary Gina Raimondo that a compromise would be reached later this year.
Katherine Tai’s support for USICA, which includes a statutory overhaul of the Section 301 tariff exclusion process, shows that the current administration wants a clear and transparent process for 301 exclusion notices and comments and Congressional guidelines regarding the criteria used to make exclusion determinations. A more effective 301(k) exclusion process would result in relief focused on supporting middle-class American consumers and industries impacted by COVID-19, a trade policy advocated by the Biden administration in the government’s trade policy agenda. president 2022.
II. USTR extended 352 tariff exclusions for goods from China
On March 23, 2022, the USTR extended 352 of the 549 previously extended Section 301 tariff exclusions. Importers may request these exclusions to avoid paying Section 301 duties as long as their goods meet the product-specific descriptions in the exclusions and are classified under the 10-digit Harmonized Tariff Schedule (“HTS”) code of exclusion. Some exclusions apply generally to any product classified under the 10-digit HTS code, while others require the merchandise to meet narrow descriptions or certain specifications, such as dimensions, production capacity, value or weight. For example, all products classified under HTSUS 9030.90.4600 are excluded from Section 301 duties, while products classified under HTSUS 8412.39.0080 are only excluded from tariffs if they are “direct acting pneumatic actuators and spring return, each rated at a maximum pressure of 10 bar and worth more than $68 but not more than $72 per unit.The Federal Register Notice which contains a list of reinstated exclusions can be viewed at USTR web here Exclusions may be applied to goods entered on or after October 12, 2021, through December 21, 2022, and may be claimed upon entry, by post-summary correction, or by protest.
III. Section 301 Litigation – USTR Ordered by Court of International Trade to Review and Explain Lists 3 and 4a
On April 1, 2022, the United States Court of International Trade ruled that the United States Trade Representative (“USTR”) had the authority to impose Section 301 duties on List 3 and 4a products, but that the USTR needed to reconsider and provide further explanation for its rationale. In its opinion, which can be viewed on the Court’s website here, the Court dismissed the USTR’s decisions to implement Section 301 tariffs, finding that the USTR failed to respond for adequately to comments submitted prior to tariffs. The Court said that Lists 3 and 4a “require reconsideration or additional explanation regarding the USTR’s justification for imposing the tariffs and, if necessary, the USTR’s reasons for placing products on the Lists or in removed products”. The USTR has until June 30, 2022 to respond to the Court’s remand, and the Court has ruled that the tariffs will remain in place while the USTR reconsiders its action regarding these comments.
IV. Lists 1 and 2 are due to expire in the summer of 2022 – USTR will ask for comments
The USTR is due to review Lists 1 and 2 of Section 301 obligations implemented under the Trump administration in July and August 2018. List 1 is due to expire on July 6 and List 2 is due to expire on August 23. Actions under Section 301 of the Commerce Act terminate at the end of four years, unless the USTR receives an application to continue the domestic industry within 60 days prior to the expiration of the action. If the USTR receives comments from the domestic industry to extend the tariffs, it must conduct a review of the tariffs implemented during the four-year period. This review should include an analysis of the effectiveness in achieving the objectives of the Section 301 action and the effects of those actions on the US economy, including consumers. (See US Code Title 19 Section 2417). The USTR may decide to continue implementing Chinese tariffs or let them expire.
The commercial industry will see a number of developments from the USTR this year, particularly regarding Chinese tariffs and the US-China trade relationship; dismissal of Lists 3 and 4a and a decision on the expiration of Lists 1 and 2. With promises to combat China’s unfair economic practices, in part through the use of retaliatory trade remedies and agreements with American allies, we expect a new USTR regime that aims to adjust the trade relationship between the United States and China. The USTR has made clear that it is willing to enter into trade agreements with the Chinese government to limit the superpower’s anti-competitive business practices, but the USTR is also willing to defend current Section 301 actions and put implement new actions, including tariffs, if necessary.
Stay tuned for the latest USTR actions through the office’s website at www.ustr.gov.
 The transcript of the USTR’s testimony in the House can be viewed on the USTR’s website here.
 The transcript of the USTR’s Senate testimony can be viewed on the USTR’s website here.