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Thompson Hine LLP, a full-service business law firm with approximately 400 lawyers in 8 offices, was ranked number 1 in the category “Most innovative North American law firms: New working models” by The Financial Times and was 1 of 7 firms shortlisted for The American Lawyer’s inaugural Legal Services Innovation Award. The firm has been recognized by the National Law Journal as a Legal Technology Trailblazer and featured by Bloomberg for its innovative service delivery models, which drive accuracy and predictability. The firm’s commitment to innovation is embodied in Thompson Hine SmartPaTHTM – a smarter way to work – predictable, efficient and aligned with client goals. For more information, please visit ThompsonHine.com and ThompsonHine.com/SmartPaTH.

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<a>On May 14, 2024, the U.S. Trade Representative (USTR) released the long-awaited </a><a href="https://ustr.gov/sites/default/files/USTR%20Report%20Four%20Year%20Review%20of%20China%20Tech%20Transfer%20Section%20301.pdf">Four-Year Review of Actions Taken in the Section 301 Investigation: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation</a>. In response to this statutory review, President Joe Biden announced that China continues to “flood[] global markets with artificially low-priced exports” and that he was directing USTR Katherine Tai to increase tariffs under Section 301 of the Trade Act of 1974 on $18 billion of imports from China to protect American workers and businesses. USTR Tai has also recommended that products from China currently subject to Section 301 tariffs remain in place.

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The USTR Report addresses: (i) the effectiveness of the tariff actions in achieving the objective of the investigation, (ii) other actions that could be taken, and (iii) the overall effects of the tariff actions on the U.S. economy. It also suggests modifications to strengthen the actions and makes certain recommendations. Significantly, not only does USTR  Tai recommend that products from China currently subject to Section 301 tariffs remain in place, but the USTR Report also recommends new tariffs on imports from China in several strategic sectors.

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The USTR Report recommends modifying the China Section 301 actions by adding or increasing Section 301 tariffs for certain products in strategic sectors. See additional details below under President Biden’s Further Actions. The USTR concluded that many sectors are either targeted by China for dominance or are sectors where the United States has recently made significant investments.

The USTR Report also recommends establishing a product exclusion process targeting machinery used in domestic manufacturing. The proposed exclusion process will be limited to machinery under certain 8-digit tariff lines in Chapter 84 and Chapter 85 of the Harmonized Tariff Schedule of the United States (HTSUS). Included in Appendix K of the USTR Report is a list of 8-digit tariff lines that are proposed for this exclusion process. The USTR also proposes 19 temporary exclusions for certain solar manufacturing equipment to support investment in U.S. solar manufacturing. Appendix L of the USTR Report includes 19 proposed temporary exclusions, including appropriate HTSUS subheadings.

The USTR Report also makes recommendations for: (1) allocating additional funds to U.S. Customs and Border Protection (CBP) for greater enforcement of Section 301 actions and to assist in combating evasion of Section 301 duties, (2) greater collaboration and cooperation between private companies and government authorities to combat state-sponsored technology theft, and (3) continuing to assess approaches to support diversification of supply chains to enhance U.S. supply chain resilience.

Given the findings of the USTR Report, the White House announced that further actions were necessary to counter China’s unfair trade practices and that such actions were carefully targeted at strategic industry sectors to “encourage China to eliminate its unfair trade practices regarding technology transfer, intellectual property, and innovation.”  In a <a href="https://www.whitehouse.gov/briefing-room/presidential-actions/2024/05/14/memorandum-on-actions-by-the-united-states-related-to-the-statutory-4-year-review-of-the-section-301-investigation-of-chinas-acts-policies-and-practices-related-to-technology-transfer-intellectua/">memorandum to USTR Tai</a>, President Biden directed the USTR to “maintain, as appropriate …, the ad valorem rates of duty and lists of products subject to the two actions” taken under the previous Section 301 investigation by the Trump administration.

President Biden also directed the USTR to increase tariffs on imports from China in the following sectors: (i) steel and aluminum, (ii) semiconductors, (iii) electric vehicles, (iv) batteries, battery components, and critical minerals, (v) solar cells, (vi) ship-to-shore cranes, and (vii) medical products. The increased tariffs are as follows:

As indicated previously, some of these tariff increases will occur in 2024, while others will be allowed a “transition phase” for implementation in 2025 and 2026 after domestic production has increased. In <a href="https://www.whitehouse.gov/briefing-room/speeches-remarks/2024/05/14/remarks-by-president-biden-remarks-by-president-biden-on-his-actions-to-protect-american-workers-and-businesses-from-chinas-unfair-trade-practices/">remarks to the press</a>, President Biden stated that these new tariffs are necessary because “China heavily subsidized all these products, pushing Chinese companies to produce far more than the rest of the world can absorb. And then dumping the excess products onto the market at unfairly low prices, driving other manufacturers around the world out of business.”

President Biden highlighted two specific sectors – EVs and solar panels – and the need for significant tariff increases. For EVs, extensive subsidies and non-market practices have led to substantial risks of overcapacity, since China’s exports of EVs grew by 70% from 2022 to 2023, thus jeopardizing productive investments elsewhere. For solar panels, China has used unfair practices to dominate 80 to 90% of certain parts of the global solar panel supply chain, and Chinese policies and nonmarket practices are causing global markets to be flooded with artificially cheap solar modules and panels, undermining investment in solar manufacturing outside of China.

President Biden has also directed USTR Tai to establish an exclusion process for machinery used in domestic manufacturing and to prioritize, in particular, exclusions for certain solar manufacturing equipment. The Office of the USTR has announced that next week, it will issue a Federal Register notice announcing procedures for interested persons to comment on the proposed modifications and information concerning an exclusion process for machinery used in domestic manufacturing.

China’s Ministry of Commerce released a short statement noting that it “firmly opposes” the additional Section 301 tariffs and that the United States is “politicizing and instrumentalizing economic and trade issues.” The statement indicates that “[t]he US should immediately correct its wrong approach and lift the additional tariffs imposed on China. China will take resolute measures to defend its rights and interests.”

On August 18, 2017, the Office of the USTR initiated an investigation under Section 301 of the Trade Act of 1974, as amended (19 U.S.C. § 2411), to determine whether the acts, policies, and practices of the Government of China related to technology transfer, intellectual property, and innovation were unreasonable or discriminatory and burden or restrict U.S. commerce. On March 22, 2018, the USTR released the findings of this investigation and, shortly thereafter, implemented ad valorem duties on thousands of products imported from China. On May 5, 2022, the Office of the USTR commenced the statutorily mandated review of these Section 301 actions, including a review of the process by which interested persons could request the exclusion of particular products covered by the actions.

For additional background information on the statutory Section 301 review, see Thompson Hine Updates of <a href="https://www.thompsonhinesmartrade.com/2022/05/ustr-initiates-four-year-review-of-section-301-tariff-actions-on-imports-of-certain-chinese-products/">May 3, 2022</a>, <a href="https://www.thompsonhinesmartrade.com/2022/09/ustr-to-continue-section-301-tariffs-on-china-during-four-year-review-process/">September 6, 2022</a>, <a href="https://www.thompsonhinesmartrade.com/2022/10/ustr-seeks-comments-in-four-year-review-of-china-section-301-tariffs/">October 13, 2022</a>, <a href="https://www.thompsonhinesmartrade.com/2022/11/ustr-provides-preview-of-questions-for-china-section-301-four-year-review/">November 2, 2022</a>, and <a href="https://www.thompsonhinesmartrade.com/2022/11/ustr-portal-for-accepting-china-section-301-tariff-comments-now-open/">November 21, 2022</a>. For more recent history on the China Section 301 Product Exclusions, see Thompson Hine Updates of <a href="https://www.thompsonhinesmartrade.com/2022/12/ustr-extends-termination-date-for-certain-chinese-products-subject-to-section-301-tariff-exclusions/">December 16, 2022</a>, <a href="https://www.thompsonhinesmartrade.com/2023/05/ustr-again-extends-section-301-tariff-exclusions-for-chinese-covid-19-medical-products/">May 15, 2023</a>, <a href="https://www.thompsonhinesmartrade.com/2023/09/ustr-extends-certain-china-section-301-product-exclusions/">September 7, 2023</a>, and <a href="https://www.thompsonhinesmartrade.com/2023/12/ustr-again-extends-certain-china-section-301-product-exclusions/">December 29, 2023</a>.

This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.

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Biden Administration Releases China Section 301 Four-Year Review Report and Announces Tariff Updates to Counter China’s Unfair Trade Practices

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