TVs were the big winner Friday when the Office of the U.S. Trade Representative eliminated them from its final list of Chinese imports earmarked for Trade Act Section 301 tariffs of 25 percent. Other sectors didn’t fare so well, including those that import Chinese printer parts, thermostats and computer equipment used in artificial intelligence and blockchain technology. China vowed to retaliate "immediately."
Section 301 Tariffs
Section 301 Tariffs are levied under the Trade Act of 1974 which grants the Office of the United States Trade Representative (USTR) authority to investigate and take action to protect U.S. rights from trade agreements and respond to foreign trade practices. Section 301 of the Trade Act of 1974 provides statutory means allowing the United States to impose sanctions on foreign countries violating U.S. trade agreements or engaging in acts that are “unjustifiable” or “unreasonable” and burdensome to U.S. commerce. Prior to 1995, the U.S. frequently used Section 301 to eliminate trade barriers and pressure other countries to open markets to U.S. goods.
The founding of the World Trade Organization in 1995 created an enforceable dispute settlement mechanism, reducing U.S. use of Section 301. The Trump Administration began using Section 301 in 2018 to unilaterally enforce tariffs on countries and industries it deemed unfair to U.S. industries. The Trump Administration adopted the policy shift to close what it deemed a persistent "trade gap" between the U.S. and foreign governments that it said disadvantaged U.S. firms. Additionally, it pointed to alleged weaknesses in the WTO trade dispute settlement process to justify many of its tariff actions—particularly against China. The administration also cited failures in previous trade agreements to enhance foreign market access for U.S. firms and workers.
The Trump Administration launched a Section 301 investigation into Chinese trade policies in August 2017. Following the investigation, President Trump ordered the USTR to take five tariff actions between 2018 and 2019. Almost three quarters of U.S. imports from China were subject to Section 301 tariffs, which ranged from 15% to 25%. The U.S. and China engaged in negotiations resulting in the “U.S.-China Phase One Trade Agreement”, signed in January 2020.
The Biden Administration took steps in 2021 to eliminate foreign policies subject to Section 301 investigations. The administration has extended and reinstated many of the tariffs enacted during the Trump administration but is conducting a review of all Section 301 actions against China.
A second U.S. House member from North Carolina went to bat for Cree’s attempt (see 1806110033) to fend off Trade Act Section 301 tariffs on U.S. imports of LEDs from China. The company produces LED wafers at its plant in Durham, North Carolina, exports them to China for making them into finished packaged chips and re-imports those chips to the U.S., said David Price (D) in a June 8 letter to U.S. Trade Representative Robert Lighthizer posted Wednesday in docket USTR-2018-0005. Cree would be forced to pay 25 percent higher duties on the devices, “despite the fact that approximately 70 percent of the value of these LED chips and components" is based on U.S. IP, Price said.
House Republicans went to bat for constituent tech companies trying to fend off Trade Act Section 301 tariffs of 25 percent on imports from China over intellectual property disputes. Seven GOP members from Texas want U.S. Trade Representative Robert Lighthizer to heed “requests” of Dell and Hewlett Packard Enterprise to remove Chinese imports of hard disk drives and solid state drives, said a May 18 letter posted Friday in docket USTR-2018-0005. Ted Poe, Pete Sessions, Mac Thornberry, John Carter, Roger Williams, Lamar Smith and Bill Flores said the devices are “critical components, and major cost drivers” for the “cutting edge” servers and storage products Dell and HPE make in the U.S. Cree in the past decade invested $2.3 billion in R&D and capital expenditures in Durham, said Rep. George Holding, R-N.C., so tariffs on its LED imports from China would help non-U.S. rivals. The White House announced May 29 the USTR’s office will release its final tariffs list by Friday (see 1805290046).
U.S. Trade Representative Robert Lighthizer should “do everything possible” to address China’s allegedly unfair trade practices without “imposing tariffs” or enacting measures that “might harm large numbers" of U.S. workers, consumers and businesses, said a Wednesday letter signed by 34 House Democrats and Republicans and released Thursday. The letter to Lighthizer comes before the USTR's office releases its final list of duties by June 15 and a day after the White House announced its decision to proceed with the tariffs on Chinese imports (see 1805290046).
Much of the tech industry -- though CTA was silent -- blasted the Trump administration Tuesday for announcing it plans to go ahead with 25 percent Trade Act Section 301 tariffs on $50 billion worth of Chinese imports. The products affected won’t be known until the U.S. Trade Representative's office releases its final tariffs list by June 15. Tariffs will be imposed “shortly thereafter,” said the White House.
CTA, the National Retail Federation and 50 other trade groups from various industries want the U.S. Trade Representative’s office to “immediately make public” the details of the Trade Act Section 301 "process" it will use to add more Chinese-sourced products to the proposed 25 percent tariffs list, if it heeds the suggestions of "several stakeholders” to do so, they said in comments posted Thursday in docket USTR-2018-0005. “We strongly believe there needs to be additional public input for any products that USTR is considering adding to the proposed list,” said the comments, which also were signed by the Information Technology Industry Council, the Internet Association and the Telecommunications Industry Association.
A wide range of industries asked to be spared -- or protected -- in the first day of a U.S. Trade Representative office hearing on the proposed Chinese tariffs that to include more than 120 companies, a major union and many trade associations in sessions that run through Thursday. The agency will refine the list of products subject to 25 percent tariffs over China's alleged unfair trade practices. In testimony through Tuesday, Best Buy and Roku were among many opposing full-on IP tariffs. Mike Mohan, chief merchandise officer at Best Buy, dismissed the argument of General Counsel David Baer of TV maker Element Electronics, which supports keeping the proposed tariffs on finished TV sets from China. Tariffs could raise retail prices as much as 23 percent, Mohan said. Chas Smith of Roku, which employs 800 of its 900 worldwide employees in the U.S., said if fewer TVs are bought because of price increases from the tariffs, that will harm its ability to add more users. That won't just cut licensing fees from its Chinese manufacturing partners but also advertising and content distribution revenue, the hearing was told.
It’s “time for quick action” for companies that want to sway the U.S. Trade Representative’s office against imposing Trade Act Section 301 tariffs of 25 percent on 1,200 classifications of goods imported from China in the list released Tuesday (see 1804040054 or 1804040023), said DLA Piper in an "international trade alert." Companies “have the opportunity to present their views on specific products listed under the proposal for higher tariffs before the list is finalized and the tariffs become effective, in an effort to seek the removal of a product from the final list,” said the law firm Wednesday. Written comments are due May 11, with an April 23 deadline for requesting to appear at a May 15 public hearing, it said. May 22 is the deadline for written comments to “rebut statements made at the hearing,” it noted. The USTR notice spells out how someone who wants a product removed from the list should file comments and what those comments should say, said the alert: Commenters “should explain why the inclusion of the specific product will not be effective in curbing China's actions that are targeted by this Section 301 action, and also how the tariff would negatively impact US persons (including the affected company and its customers)." USTR didn't comment Thursday on whether the May 15 public hearing at the International Trade Commission building will be streamed live. The agency's recent history has been to hold hearings "off-camera." U.S.-threatened sanctions and the Chinese response to "reciprocate" are likely stage setting for future negotiations, Merrill Lynch analysts emailed investors. "Despite the exchange of tariff threats, we believe there is still room for negotiation between the US and China," said Helen Qiao and Sylvia Sheng Tuesday. "We maintain our view that China will continue its 'carrot and stick approach,' threatening retaliation but also proposing to expand its imports of US products, cut the auto duty, and ease restrictions for US companies investing and selling in China," they said. "We expect the final version of both the US and China trade measures to be more toned down."
The Office of the U.S. Trade Representative proposed tariffs on some $50 billion worth of Chinese imports, with an accompanying list including some tech and telecom-related products. "Sectors subject to the proposed tariffs include industries such as aerospace, information and communication technology, robotics, and machinery," the USTR announced. The tariffs likely wouldn't take effect before June as a result of the administrative process. A result of a Trade Act Section 301 investigation, the levies are meant as a response to a pattern of forced technology transfers, intellectual property theft and cyber business espionage. The Chinese ambassador to the U.S. warned Monday that China would likely retaliate with tariffs of similar scope in response to Section 301 tariffs. We couldn't reach anyone right away Tuesday at that country's embassy. Tech groups have opposed the U.S. move (see 1803220043). Comments are due May 11, and there is a May 15 USTR hearing, at 10 a.m. in the main hearing room of the International Trade Commission, 500 E St. SW.
The FCC will consider an NPRM at its April 17 meeting proposing to bar the use of money in any of the four USF programs to buy equipment or services from companies that “pose a national security threat” to U.S. communications networks or the communications supply chain. The NPRM appears mainly aimed at Chinese wireless equipment makers Huawei and ZTE, industry experts said. The biggest potential negative could be for smaller carriers, who sometimes find they must rely on Huawei as a low-cost handset provider for markets some larger companies don’t want to serve, industry officials said.