COVID-19 Impact on Section 301 China Tariffs: USTR Excludes Some Healthcare Products, Solicits Requests to Exclude More
On Wednesday, March 25, 2020, the U.S. Trade Representative (USTR) published a Federal Register notice requesting comments on the removal of Section 301 tariffs from Chinese medical-care products—including those that have been previously denied an exclusion—needed to respond to the COVID–19 outbreak.
We have previously reported that Section 301 of the Trade Act of 1974, 19 U.S.C. § 2411, authorizes the president to take retaliatory action if it is determined that a trade act, policy, or practice of a foreign government is unreasonable or discriminatory and that it burdens or restricts US commerce. In retaliation for certain acts, policies, and practices of the Chinese Government related to technology transfer, intellectual property, and innovation, President Trump has used this authority to impose additional tariffs ranging between 7.5% and 25% on four lists of imported Chinese goods valued at nearly $370 billion annually.
As the novel coronavirus spreads across the United States, the Administration is navigating how to reconcile these measures with its response to the growing pandemic. Even while President Trump has so far publicly resisted calls for broad tariff relief, USTR is considering the removal of targeted products from the scope of the Section 301 tariffs.
New Section 301 Exclusions Granted
Each Section 301 action regarding a new list of covered products has been accompanied by a process whereby interested parties could request that a particular product be excluded from the tariffs based on certain criteria, namely that the product is available only from China, that the imposition of additional duties on the product would cause severe economic harm to the requester or other US interests, and that the particular product is not strategically important or related to “Made in China 2025” or other Chinese industrial programs.
USTR is currently undergoing review on requests for product exclusions from Lists 3 and 4A, and has prioritized the review of exclusion requests addressed to medical-care products related to the U.S. response to COVID–19. In the past two weeks, this has resulted in new exclusions for certain personal protective equipment (PPE) that has been in short supply such as gloves, surgical masks, and N95 respirators. See 85 FR 13970 (Mar. 10, 2020), 85 FR 15015 (Mar. 16, 2020), and 85 FR 15244 (Mar. 17, 2020). USTR notes that certain other essential health care products, including ventilators, were never subject to the tariff or were previously excluded.
Proposal to Exclude COVID–19-Related Products
USTR is now separately inviting public comments on whether to remove additional products, covered by any list, that are “needed to address the COVID–19 outbreak.” Similar to the list-based exclusion request processes, the party “must identify the particular product of concern” by including “the ten-digit HTSUS subheading applicable to the product, and the identity of the particular product in terms of its functionality and physical characteristics (e.g., dimensions, material composition, or other characteristics).” But instead of satisfying the above three criteria, each comment must “explain precisely how the product relates to the response to the COVID–19 outbreak.” As the criteria are different, a product is eligible for removal even if an exclusion request for the product is pending or has been denied. We note that USTR will review not just products “directly used to treat COVID–19 or to limit the outbreak,” but also products “used in the production of needed medical-care products.”
Although comments will be accepted through at least June 25, 2020, USTR advises that interested parties “should submit comments as promptly as possible” and as has been seen with past exclusion processes will review the comments on a rolling basis. USTR recommends that any response to a comment be submitted within three days. Whereas the product exclusion request process for Lists 3 and 4A utilized the USTR Exclusion Portal, this process resembles the processes for Lists 1 and 2, for which USTR accepted submissions via regulations.gov. The docket number for this comment submission is USTR-2020-0014.
As manufacturers of medical-care products ramp up production and unrelated supply chains shift to the global fight against COVID–19, consider whether Section 301 tariffs are impeding your company’s ability to contribute to the cause. Arent Fox has experienced customs attorneys to help you navigate the Section 301 tariffs and a multidisciplinary COVID–19 task force to guide you through this crisis.
