USTR Publishes Sec. 301 Tariff Report

The USTR released its report and  findings of the Section 301 investigation of China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation.   

To encourage further elimination of the PRC’s technology transfer-related acts, policies, and practices, Ambassador Tai has recommended that products from the PRC currently subject to Section 301 tariffs should remain.

Additionally, in light of the increased burden on U.S. commerce, President Biden is directing Ambassador Tai to take action to add or increase tariffs for certain products. As the Report details, Ambassador Tai will propose the following modifications in strategic sectors:
 

The Report also makes recommendations for:

1. establishing an exclusion process targeting machinery used in domestic manufacturing, including proposals for 19 exclusions for certain solar manufacturing equipment;
2.  allocating additional funds to United States Customs and Border Protection for greater enforcement of Section 301 actions;
3.  greater collaboration and cooperation between private companies and government authorities to combat state-sponsored technology theft; and
4.  continuing to assess approaches to support diversification of supply chains to enhance our own supply chain resilience.
    
   President Biden is also directing Ambassador Tai to establish an exclusion process for machinery used in domestic manufacturing and to prioritize, in particular, exclusions for certain solar manufacturing equipment.

Background

In May 2022, USTR commenced the statutory four-year review process by notifying representatives of domestic industries that benefit from the tariff actions of the possible termination of those actions and of the opportunity for the representatives to request continuation.  USTR received nearly 1,500 comments.

Specifically, the Report concludes:

• The Section 301 actions have been effective in encouraging the PRC to take steps toward eliminating some of its technology transfer-related acts, policies, and practices and have reduced some of the exposure of U.S. persons and businesses to these technology transfer-related acts, policies, and practices.
   
• The PRC has not eliminated many of its technology transfer-related acts, policies, and practices, which continue to impose a burden or restriction on U.S. commerce. Instead of pursuing fundamental reform, the PRC has persisted, and in some cases become aggressive, including through cyber intrusions and cybertheft, in its attempts to acquire and absorb foreign technology, which further burden or restrict U.S. commerce.
   
• Economic analyses generally find that tariffs (particularly PRC retaliation) have had small negative effects on U.S. aggregate economic welfare, positive impacts on U.S. production in the 10 sectors most directly affected by the tariffs, and minimal impacts on economy-wide prices and employment.
   
• Negative effects on the United States are particularly associated with retaliatory tariffs that the PRC has applied to U.S. exports.
   
• Critically, these analyses examine the tariff actions as isolated policy measures without reference to the policy landscape that may be reinforcing or undermining the effects of the tariffs.
   
• Economic analyses, including the principal U.S. Government analysis published by the U.S. International Trade Commission, generally find that the Section 301 tariffs have contributed to reducing U.S. imports of goods from the PRC and increasing imports from alternate sources, including U.S. allies and partners, thereby potentially supporting U.S. supply chain diversification and resilience. 

White House Memorandum 

* USTR press release  

* report statutory four-year review

* White House  fact sheet