The Office of the United States Trade Representative (“USTR”) has recently initiated a statutory four-year review of the two actions taken under Section 301 of the Trade Act of 1974, as amended, in the investigation of China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation.  The two specific actions under review are the imposition of additional tariffs under Section 301 on products on List 1(covering $34 billion in imports as of 2018) and List 2 ($16 million in imports), which were subsequently modified by the imposition of List 3 and List 4A.

This “review of necessity” is being conducted pursuant to 19 U.S.C. § 2417(c), which obligates USTR to revoke any action taken under Section 301 after four years unless parties that benefit from that action requests its continuation.  If continuation is requested, USTR is then required to evaluate the “effectiveness in achieving the objectives of Section 301” and the “effects of such actions on the United States economy, including consumers” for any action taken under Section 301.

As part of the first step in the review process, USTR is notifying representatives of domestic industries which benefit from the trade actions of the review, and providing them an opportunity to request continuation of the actions. In addition to publishing the notice of initiation of the review in the Federal Register, USTR will also mail notices to interested parties that previously submitted comments in the investigation expressing support for the actions. Requests for continuation must be received in the 60-day window prior to the four-year anniversary of the respective actions.

In addition to duties on products in Lists 1 and 2, USTR also imposed duties on a much larger set of products in List 3 ($250 billion in imports) and List 4A ($125 billion in imports).  However, USTR is not considering these to be separate actions.  Rather, USTR has stated that it “will consider the List 3 and List 4A modifications as applicable to both the July 6, 2018, action and August 23, 2018, action.”  Thus, comments in support of the List 3 or List 4A tariffs must be submitted together with comments on List 1 or List 2.  Any commenter interested in supporting both List 1 and List 2 would need to file twice, once in each portal.

The USTR’s comment portal will be open to receive comments from parties in support of continuation of these duties during the following windows:

  • For the July 6, 2018 action (List 1, List, and List 4A): May 7, 2022 through July 5, 2022
  • For the August 23, 2018 action (List 2, List 3, and List 4A): June 24, 2022 through August 22, 2022

Comments in support of the continuation of these duties will not be publicly posted, but instead will be summarized in USTR’s decision whether to maintain these Section 301 duties in place.

If the USTR does not receive any input from supporters of these tariffs by the end of these comment windows, the Section 301 tariffs will automatically be terminated.

By contrast, if the USTR receives requests for continuation form domestic industries which benefit from the trade actions, which seems highly likely, the USTR will conduct a broader review of the effectiveness of the action on the United States economy. At that point, the USTR will open a separate portal for interested persons to submit comments on, among other matters, the effectiveness of the action in achieving the objectives of Section 301, other actions that could be taken, and the effects of such actions on the United States economy, including consumers. This phase of the review will occur via a subsequent notice published after completion of the first phase of review.

This statutory review provision has not previously been involved, so there is no precedent for how USTR will conduct this review.  For example, there is no guidance as to how many parties need to support the Section 301 duties for them not to be revoked; it is possible that a single comment could suffice.  Moreover, there is no timeline for USTR to take action on either phases of this review, nor is there any requirement for USTR to modify the tariffs on the basis of comments received.  Nevertheless, particularly for those parties opposed to the continuation of  the Section 301 tariffs, this is good opportunity to express that viewpoint once the portal opens for those comments.