Section 301 Update: USTR Announces Initiation of "Review of Necessity"

5 min

On May 3, 2022, the Office of the United States Trade Representative (USTR) announced it would be "commencing the statutory four-year review" of the Section 301 actions, effectively starting a process to potentially terminate the Section 301 tariffs on $370 billion worth of Chinese goods, pursuant to Title III of the Trade Act of 1971 (19 U.S.C. §§ 2411, 2420), titled Relief from Unfair Trade Practices. The Federal Register notice was published on May 5, 2022. See 87 Fed. Reg. 26797 (May 5, 2022).

Mandatory Four Year "Review of Necessity"

According to Section 301, duties imposed are subject to a mandatory review every four years, the "Review of Necessity," in order to determine if the domestic industry that benefits from the duties continues to support the tariffs. A request to continue the tariffs must be made within the last 60 days of the relevant four-year period.

If USTR receives such a request, it will launch a formal review that will include a comment process for any interested stakeholders. In the absence of such a continuation request, the statute requires the duties to automatically terminate.

The Current China Section 301 Tariffs

The currently pending Section 301 tariffs were applied in four waves: 25 percent tariffs on $34 billion worth of Chinese goods effective July 6, 2018 (List 1); 25 percent tariffs on $16 billion worth of Chinese goods effective Aug. 23, 2018 (List 2); 10 percent tariffs on $200 billion worth of Chinese goods effective Sept. 24, 2018 (List 3); and 15 percent tariffs on $120 billion worth of Chinese goods effective Sept. 1, 2019 (List 4A). The List 3 tariffs were increased to 25 percent effective May 10, 2019, and the List 4A tariffs were reduced to 7.5 percent effective February 14, 2020 when the U.S.-China Phase One agreement took effect.

Impending Review Process

USTR is considering all of the current Section 301 tariff lists, Lists 1, 2, 3, and 4A, as part of this Review of Necessity. Notably, Lists 3 and 4A are treated as modifications to both Lists 1 and 2.

The Notice specifies that USTR will mail notices to parties that submitted comments in support of the tariffs (approximately 600 stakeholders) regarding the possibility of termination, and the opportunity to request continuation during two specified time frames.

Specifically, there will be two 60-day windows for commenting on the tariffs – List 1 tariffs, as modified (May 7, 2022 – July 5, 2022) and List 2 tariffs, as modified (June 24, 2022 – August 22, 2022).

Absent a request for continuation within the relevant 60-day period, the Federal Register notice contemplates that USTR will not announce a formal review and that Lists 1 and 2, as modified, will by statute automatically terminate on either July 6, 2022 or August 23, 2022, the four-year anniversary dates for Lists 1 and 2, respectively.

In subsequent notices, USTR will report whether it has "received a request for continuation from a representative of a domestic industry which benefits from an action." If a formal review is commenced, USTR will then open a separate portal for interested parties to submit comments on the effectiveness of the tariffs (or alternative actions) in achieving the objectives of Section 301 and their effect on the U.S. economy, including consumers.

Considering the previous significant interest in these tariffs, we anticipate formal reviews for Lists 1, 2, 3, and 4A to be likely. Those wishing to support the current tariffs must submit continuation requests identifying the specific industry concerned and how the domestic industry benefits from the tariffs, by July 5, 2022 for the List 1 tariffs, as modified, and by August 22, 2022 for the List 2 tariffs, as modified. Notably, USTR will consider Lists 3 and 4A as applying to both actions; therefore, those seeking continuation of Lists 3 and 4A should submit comments to either the List 1 or List 2 portals, by the respective deadlines. Those seeking continuation of the tariffs can also provide supporting comments in the formal review. For those looking for an end to tariffs, it will be critical to monitor this process to determine whether USTR has a received a continuance request from an industry of interest and to timely submit opposition comments in the formal review.

Section 301 stakeholders may also consider submitting comments in the United States International Trade Commission (ITC) fact-finding investigation into the economic impact of Section 301 (and Section 232) tariffs, which were in effect as of March 15, 2022. See Economic Impact of Section 232 and 301 Tariffs on U.S. Industries, Inv. 332-591. The House and Senate Appropriations Committees directed the USITC to conduct this investigation as part of the Omnibus Appropriations Act, which was signed into law on March 15, 2022. The public is invited to submit comments to the ITC and participate in the public hearing scheduled for July 21, 2022.

Requests to appear at the hearing are due by July 6, 2022. Those selected to testify will be able to submit both pre-hearing and post-hearing comments. All other comments are due by August 24, 2022. Thereafter, the ITC will submit a report to Congress with trade, production, and price data for U.S. industries most affected by the tariffs. The submission of the report to Congress is expected by March 15, 2023.

If your business has been impacted by the Section 301 tariffs and you want to participate in these Section 301 industry engagement opportunities or have any questions, please reach out to Venable's International Trade Group for guidance.