USTR Expands Section 301 Tariff Exclusions for Medical Products; New Tariff Relief Under Consideration | White & Case srl
On May 27, 2022, the Office of the United States Trade Representative (USTR) issued a Federal Register Notice expanding Section 301 tariff exclusions for certain Chinese-origin medical products needed to address the COVID-19 pandemic.1 The USTR notice extends 81 specific product exclusions for a period of six months (i.e. until December 1, 2022). Separately, Biden administration officials and members of Congress continue to consider further Section 301 tariff relief, though no final decision has been made..
Exclusions extended for COVID-related products
Latest USTR Notice Expands Tariff Exclusions for Certain Types of Personal Protective Equipment; devices used in magnetic resonance imaging (MRI), x-ray and computed tomography (CT) equipment; microscopes and various types of plastic containers, tubes and liners used in medical settings, among other products. The USTR first granted exclusions for these products in December 2020, then extended the exclusions in November 2021. The exclusions were previously set to expire on May 31, 2022 and will now be extended for an additional six months.
In addition to the COVID-related exclusions covered by the latest USTR notice, the USTR reinstated 352 other product exclusions in a separate action announced in March 2022.2 However, the vast majority of product exclusions granted by the USTR in the Section 301 action have expired and the USTR is not currently accepting new exclusion requests.
Discussions on further tariff relief
Over the past several weeks, senior Biden administration officials have indicated that they are actively considering providing further relief from Section 301 tariffs, either through additional debarment processes or by other actions. On May 18, U.S. Treasury Secretary Janet Yellen said interagency discussions on this topic were underway, and she expressed support for removing some of the Section 301 tariffs “not only because of the inflation, but because there would be benefits for consumers and businesses”.[.]”3 Secretary Yellen argued that some of the Section 301 tariffs “seem to impose more harm on consumers and businesses and are not very strategic in the sense of addressing the real issues we have with China.”[.]However, she acknowledged that some administration officials had different views on the merits of further tariff relief. “very, very keen to take steps to be responsive to today’s challenges . . . that would undermine our longer-term strategic approaches” to preserving U.S. competitiveness.4
The USTR is currently conducting a review of the need for Section 301 tariffs before their fourth anniversary, as required by Section 307(c) of the Commerce Act.5 Section 307(c) provides that Section 301 actions expire four years after they take effect, unless the petitioner or a representative of the domestic industry benefiting from the action submits to the ‘USTR request for further action. The USTR exam is conducted in two stages:
- In the first stage, which is ongoing, domestic industries that benefit from “actions” under Section 301 (i.e. Schedules 1 and 2 tariff schedules “as amended ” by Lists 3 and 4A) may request continuation of the actions. If the USTR receives such requests, it will announce further relevant actions. To date, the USTR has received 17 submissions under the first stage of the procedure, but has not made the submissions public. The deadline for applications to continue List 1 action is July 5, 2022; the deadline for applications to continue the remaining actions is August 22, 2022.
- During the second stage (and assuming that the USTR continues each action under Section 301), the USTR will undertake a review of each action. As part of this review, the USTR intends to allow “interested persons” to submit comments on, among other things, the effectiveness of the action in achieving the objectives of Section 301, other actions that might be taken and the effects of those actions on the US economy, including consumers. This procedure would likely give interested persons (including importers) the ability to request the elimination of Section 301 duties on particular products, among other changes. USTR officials said an upcoming Federal Register notice will specify the criteria that commenters must meet when requesting changes to Section 301 actions.
On May 25, USTR General Counsel Ms. Greta Peisch said that the USTR’s “necessity review” would likely take several months. However, Ms. Peisch pointed out that the USTR may provide further tariff relief before this review is complete, and is currently considering that possibility. Ms. Peisch said that establishing a new exclusion process or changing rates “is something we are looking at outside of the review . . . [i]It is certainly possible that an exclusion process or other action will proceed before this review is complete.”
Meanwhile, the U.S. Congress continues to debate legislation that would provide limited Section 301 tariff relief. On May 12, members of the U.S. Senate and House of Representatives formally convened a conference committee that will seek reconcile the differences between the US Innovation and Competition Act (S. 1260) and the US COMPETES Act (HR 4521). Among other notable differences, Section 1260 includes provisions that would reinstate certain Section 301 tariff exclusions and require the USTR to accept new exclusion requests, while HR 4521 omits these provisions. This is expected to be one of the most difficult issues to resolve at the conference. Democratic congressional leaders hope to reach agreement on a conference bill by July 4, but participants have made little progress in resolving differences between the trade titles of the two bills, including in what regarding Section 301 tariffs.
1 The USTR opinion can be viewed here.
2 Please refer to White & Case’s US Trade Alert dated March 24, 2022.
3 Transcript of Treasury Secretary Janet L. Yellen’s press conference in Bonn, Germany, U.S. Treasury Department, May 18, 2022.
4 Testimony of Ambassador Katherine Tai before the House Ways and Means Committee, March 30, 2022.
5 For more information on the USTR review process, please see White & Case US Trade Alert dated May 4, 2022.