Understanding 301 Tariffs

Date of publication: December 2, 2020

Due to the current political climate, many businesses are experiencing challenges like additional tariffs and difficult-to-anticipate rate increases, particularly in regards to recent 301 tariffs on China origin items. For importers it is critical that businesses understand the details, background, and challenges posed by 301 tariffs.

Understanding 301 Tariffs

Section 301 of the Trade Act of 1974 is a principal statutory means that the United States uses to enforce United States rights under trade agreements and to address any unfair foreign barriers to United States commerce. Section 301 applies to foreign acts, politics, and practice that are determined by the Office of the United States Trade Representative (USTR) to either:

  • Violate, or be inconsistent with a trade agreement
  • Impose a burden or restriction on United States commerce

When a foreign country is determined by the USTR to have committed one of these violations, burdens, or inconsistencies, Section 301 sets procedures and timetables for taking actions to address the trade barrier. During a section 301 investigation, the USTR seeks a settlement, through compensation or elimination of the barrier, with the foreign country.

The Background of the Current 301 Tariffs

The current 301 tariffs against China began in March 2018 after an alleged theft of United States intellectual property, along with technology violations. In retaliation against the theft, President Donald Trump announced $50 billion worth of tariffs on Chinese imports, including tariffs on steel and aluminum products. China then responded with its own initial retaliations, including a tariff on 128 food and beverage products from the United States, including wines, nuts, and fruits. By August of 2018, the United States had increased tariff rates from 15% to 20% to further encourage China to implement fairer trade policies, but China continued to respond with its own retaliatory tariffs. By September of 2018, included tariffs on products such as:

  • Medical equipment
  • Coal
  • Copper scrap
  • Fuel
  • Buses
  • Agricultural equipment
  • Machinery
  • Chemicals and textiles

Since the initial tariffs and retaliations began, the United States and China have restarted trade negotiations, including a June 2019 meeting between President Trump and Chinese president Xi Jingping, which resulted in an agreement that China would increase its purchase of United States farm and agricultural equipment, while the United States would postpone certain tariffs and list some restrictions against Huawei, a major Chinese company. However, due to China failing to uphold certain agreements, both countries have continued to impose tariffs.

Can Businesses Request an Exclusion?

For businesses who deal with any of the impacted products, these 301 tariffs can lead to delays, uncertainty, and even a threat to their business. It can be difficult for businesses to determine the rapidly-changing rates or what products are being affected. However, there are options for businesses seeking to request product exclusions.

According to the USTR, any interested persons, including trade association, can submit a request for exclusion from the additional duties of a particular product. For people interested in filing a request for exclusion, the first step is identifying their HTS subheading. Each product subjected to a proposed or ongoing 301 Tariff has an 8-digit or 10-digit HTS subheading. The person requesting an exclusion must also find their HTS subheading. HTS subheadings are broken into four categories:

  • List 1 (The $34 Billion Tariff Action)
  • List 2 (The $16 Billion Tariff Action)
  • List 3 (The $200 Billion Tariff Action)
  • List 4 (The $300 Billion Tariff Action)

More details about identifying a product’s HTS subheading can be found here. Before submitting a request for exclusion, interested people must also know the identification of the product in terms of its physical characteristics, such as dimensions or material composition, that distinguish it from other products within the subheading. Additionally, they must know the annual quantity and value of the Chinese-origin product that the requestor purchased in each of the last three years.

How to Request an Exclusion

Once the above information is gathered, interested parties can submit a request for exclusion based on their HTS subheading. If the product exclusion request period is open for a 301tariff action, the due date of their HTS subheading will include a hyperlink, which directs to the relevant electronic docket at regulations.gov. There, a product exclusion request may be submitted.

More information can be found here, or additional questions can be directed to the Section 301 Hotline at (202)-395-5725.

This content is intended for informational purposes. Due to the generality of this content, the provided information may not be applicable in all situations. We encourage the reader to review the most up-date-regulations directly with the U.S. government’s sources on 301 Tariffs, which can be found here.