USTR Launches “Phase 2” of Four-Year China Tariff Review

As detailed in our previous alerts, the Section 301 statute (19 USC § 2417), includes a “termination provision” stating that the Section 301 tariffs will terminate after a period of 4 years, unless a representative of the domestic industry submits a written request for their continuation. In May, the U.S. Trade Representative (USTR), the agency responsible for implementing the Section 301 tariffs on imports from China, issued a notice initiating “Phase 1” of the USTR’s review. Following the conclusion of “Phase 1,” the USTR released a notice on October 12, 2022, initiating “Phase 2” of its review. A summary of both phases of the review and upcoming deadlines in “Phase 2” is provided below.

Phase 1

As required by the statute, the USTR notified members of the domestic industry of the tariffs’ 4-year termination on May 5, 2022, and provided an opportunity for parties benefitting from the tariffs to submit requests for continuation. The deadline for such requests was July 5, 2022, for Lists 1 and 3 and August 22, 2022, for Lists 2 and 4A. Submission of comments in Phase 1 limited to parties in favor of the tariffs and requesting that they be continued.

On September 2, 2022, the USTR notified parties that Phase 1 of its 4-year review had concluded and that requests to continue the tariffs on Lists 1-4A had been received. The USTR’s Comment Portal provides a summaries of the 333 comments submitted on Lists 1 and 3 and of the 159 comments submitted on Lists 2 and 4A in support of continuing the tariffs.

Phase 2

On October 12, 2022, the UTSR announced that its 4-year review has moved to Phase 2, whereby all interested parties – including parties objecting to the continuation of the tariffs – will have an opportunity to comment. The USTR will open a new docket between November 15, 2022, and January 17, 2023. To facilitate the preparation of comments, the USTR will provide a copy of questions mirroring the public docket on November 1, 2022.

The USTR is specifically seeking comments on the following:

- The effectiveness of the actions in obtaining the elimination of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation;

- The effectiveness of the actions in counteracting China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation;

- Other actions or modifications that would be more effective in obtaining the elimination of or in counteracting China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation;

- The effects of the actions on the U.S. economy, including U.S. consumers;

- The effects of the actions on domestic manufacturing, including in terms of capital investments, domestic capacity and production levels, industry concentrations, and profits;

- The effects of the actions on U.S. technology, including in terms of U.S. technological leadership and U.S. technological development;

- The effects of the actions on U.S. workers, including with respect to employment and wages;

- The effects of the actions on U.S. small businesses;

- The effects of the actions on U.S. supply chain resilience;

- The effects of the actions on the goals of U.S. critical supply chains outlined in Executive Order 14017 and in subsequent reports and findings; and

- Whether the actions have resulted in higher additional duties on inputs used for additional manufacturing in the United States than the additional duties on particular downstream product(s) or finished good(s) incorporating those inputs.

The USTR will evaluate whether any further opportunities for public comment, including additional written comments or public hearings, are necessary.

Where Things Stand

Until the USTR concludes its review, the Section 301 tariffs remain in effect. Depending on the comments received in Phase 2, the USTR has the discretion to modify or eliminate the tariffs on entire product lists or on specific products. This process may therefore result in significant changes to the Section 301 tariffs on a wide range of products from China.

Importers and others affected by these tariffs are urged to consider filing written comments with the USTR before the January 17, 2023, deadline. ArentFox Schiff’s International Trade and Investment team is experienced both in counseling companies trading with China and in navigating the effects of Section 301 tariffs. If you would like more information, please contact any ArentFox Schiff Customs & Import Compliance group member listed below.