USTR Extends Section 301 Tariff Exclusions for Medical Products; Further Tariff Relief Under Consideration

On May 27, 2022, the Office of the US Trade Representative (USTR) published a Federal Register notice extending Section 301 tariff exclusions for certain China-origin medical products needed to address the COVID-19 pandemic.¹ USTR's notice extends 81 product-specific 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 decisions have been made.

Exclusions extended for COVID-related products

USTR's latest notice extends 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, tubing, and coverings used in medical settings, among other products. USTR first granted exclusions for these products in December 2020 and subsequently extended the exclusions in November 2021. The exclusions were previously scheduled 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 USTR's latest notice, USTR reinstated 352 other product exclusions in a separate action announced in March 2022.² However, the vast majority of the product exclusions USTR has granted in connection with the Section 301 action have expired, and USTR currently is not accepting new exclusion requests.

Discussions on further tariff relief

In recent weeks, senior Biden Administration officials have indicated that they are actively considering whether to provide further relief from the Section 301 tariffs, either through additional exclusion processes or other actions. On May 18, US Treasury Secretary Janet Yellen stated that interagency discussions on this topic are underway, and she expressed support for removing some of the Section 301 tariffs "not only because of inflation, but because there would be benefits to consumers and firms[.]"³ Secretary Yellen argued that some of the Section 301 tariffs "seem as though they impose more harm on consumers and businesses and aren't very strategic in the sense of addressing real issues we have with China[.]" However, she acknowledged that some Administration officials have different views on the merits of further tariff relief.  In recent public appearances, US Trade Representative Katherine Tai has stated that Section 301 tariff relief would have only a small impact on inflation, that she would be "very, very concerned about taking steps to be reactive to today's challenges . . . that would undermine our longer-term strategic approaches" to preserving US competitiveness.⁴

USTR is currently conducting a review of the necessity of the Section 301 tariffs in advance of their four-year anniversary, as required by Section 307(c) of the Trade Act.⁵ Section 307(c) provides that Section 301 actions are to expire four years after they take effect, unless the petitioner or a representative of the domestic industry that benefits from the action submits to USTR a request for continuation of the action. USTR's review is proceeding in two stages:

• During the first stage, which is ongoing, domestic industries that benefit from the Section 301 "actions" (i.e., tariff lists List 1 and 2 "as modified" by Lists 3 and 4A) can request the continuation of the actions. If USTR receives such requests, it will announce the continuation of the relevant actions.  To date, USTR has received 17 submissions in connection with the first stage of the proceeding, but has not made the submissions public. The deadline for requests to continue the List 1 action is July 5, 2022; the deadline for requests to continue the remaining actions is August 22, 2022.  
• During the second stage (and assuming that USTR continues each Section 301 action), USTR will undertake a review of each action. As part of this review, USTR intends to allow "interested persons" to submit comments on, among other matters, the effectiveness of the action in achieving the objectives of Section 301, other actions that could be taken, and the effects of such actions on the US economy, including consumers. This proceeding presumably would afford interested persons (including importers) the opportunity to request the elimination of Section 301 tariffs on particular products, among other changes. USTR officials have indicated that a forthcoming Federal Register notice will specify the criteria that commenters should address when seeking changes to the Section 301 actions.
   

On May 25, USTR's General Counsel, Ms. Greta Peisch, stated that USTR's "review of necessity" would likely take several months to complete. However, Ms. Peisch emphasized that USTR could provide new tariff relief before that review is completed, and is currently considering this possibility.  Ms. Peisch stated that establishing a new exclusion process or otherwise modifying the tariffs "is something we are examining apart from the review . . . [i]t is certainly possible that an exclusion process or some other action will go forward before that review is finished."  

Separately, the US Congress continues to debate legislation that would provide limited relief from the Section 301 tariffs.  On May 12, Members of the US Senate and the House of Representatives formally convened a conference committee that will seek to reconcile differences between the US Innovation and Competition Act (S. 1260) and the America COMPETES Act (H.R. 4521). Among other notable differences, S. 1260 includes provisions that would reinstate certain Section 301 tariff exclusions and require USTR to accept new exclusion requests, whereas H.R. 4521 omits such provisions.  This is expected to be among the most challenging issues to resolve in conference. Democratic leaders in Congress hope to reach agreement on a conference bill by July 4, but conferees have made little progress toward resolving differences between the trade titles of the two bills, including with respect to Section 301 tariffs. 

_{1 USTR's notice can be viewed here.
2 Please refer to the White & Case US Trade Alert dated March 24, 2022.
3 Transcript of Press Conference from Secretary of the Treasury Janet L. Yellen in Bonn, Germany, US 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 USTR's review process, please refer to the White & Case US Trade Alert dated May 4, 2022.}

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