June 19, 2020
Section 301: Tariff Exclusions on U.S. Imports from China
In 2018, the U.S. Trade Representative (USTR) determined,
to establish one. The determination to do so appears to be
pursuant to an investigation under “Section 301” (Title III
solely at the USTR’s discretion.
of the Trade Act of 1974, 19 U.S.C. §§2411-2420), that
China’s acts, policies, and practices related to technology
With the COVID-19 pandemic, the agency has recently
prioritized the review of exclusion requests concerning
transfer, intellectual property (IP), and innovation are
medical products, resulting in new exclusions for some
unreasonable or discriminatory and burden or restrict U.S.
personal protective equipment (PPE) in short supply.
commerce. To counter them and obtain their elimination,
Separately, the USTR recently requested public comments
the Trump Administration imposed, under Section 301, four
on whether to remove additional products covered by any
rounds of increased tariffs on approximately two-thirds of
list that are relevant to the U.S. response to COVID-19.
U.S. imports from China. However, to avoid harm to U.S.
interests, the USTR instituted “tariff exclusions” for certain
Figure 1. Section 301 Exclusions
U.S. imports that would otherwise be subject to tariffs. This
is the first time that the agency has established an exclusion
request process, and several Members of Congress have
raised concerns about its implementation.
In particular, some Members have questioned USTR’s
ability to “pick winners and losers” through granting or
denying requests or have pushed for broad tariff relief amid
concerns about the negative impact of tariffs on the U.S.
economy. Others, however, not wanting to undermine the
use of Section 301 to address China’s unfair trade practices,
have discouraged the USTR from granting tariff exclusions
at all. To date, the agency has established an exclusion
process for each of the four stages of tariff increases under
Section 301—all of which have now closed. The USTR’s

latest action in response to the COVID-19 pandemic seems
Source: CRS with information from the Of ice of the USTR.
to indicate that new exclusions might be limited in scope to
Notes: Figures may not reflect amendments to product specific exclusions.
medical supplies related to COVID-19, and not be aimed at
Section 301 Tariff Exclusion Process
providing broader tariff relief.
The tariff exclusion process enabled interested parties—
Background
including law firms, trade associations, and customs
In August 2017, longstanding concerns over China’s
brokers—to petition for an exemption from the Section 301
policies on IP, subsidies, technology, and innovation led the
tariff increases for specific imports classified within a ten-
USTR to launch an investigation—under Section 301—into
digit Harmonized Tariff Schedule of the United States
those policies and their impact on U.S. stakeholders. The
(HTSUS) subheading. The time window to submit new
investigation concluded that four broad policies or practices
exclusion requests is now closed, but the USTR continues
justified U.S. action: (1) China’s forced technology transfer
to review requests from List 4 and is considering extensions
requirements, (2) cyber-enabled theft of U.S. IP and trade
of exclusions granted from Lists 1 and 2. While the USTR
secrets, (3) discriminatory and non-market-based licensing
approved, on average, 36% of requests under the first two
practices, and (4) state-funded strategic acquisition of U.S.
actions, the approval rate under the third action was 5%.
assets. Subsequently, as part of its efforts to pressure China
According to the USTR, all requests are evaluated on a
to change these practices, the United States imposed
case-by-case basis. Although it is not entirely clear to CRS
additional tariffs, of up to 25%, on certain U.S. imports
how the process works internally, the agency has indicated
from China under four separate actions (per Lists 1, 2, 3,
that, in determining which requests to grant, it considers the
and 4).
following: (1) availability of the product in question from
During the Section 301 notice, hearing, and comment
non-Chinese sources, (2) attempts by the importer to source
period on proposed tariff increases, the USTR heard
the product from the United States or third countries, (3) the
numerous U.S. stakeholders who expressed concerns about
extent to which the imposition of Section 301 tariffs on the
how additional tariffs could affect their businesses, as well
particular product will cause severe economic harm to the
as U.S. consumers. In response, for each Section 301 action
importer or other U.S. interests, and (4) the strategic
regarding a new list of covered products, the USTR created
importance of the product to “Made in China 2025” or other
a process whereby interested parties could request that a
Chinese industrial programs. Past exclusions also have been
particular product be excluded from the tariffs , subject to
granted for reasons that are thought to include, among
certain criteria. Title III of the Trade Act of 1974 does not
others, U.S. national security interests and demonstrable
outline a formal process for exclusions or require the USTR
economic hardship from the tariffs for small businesses.
https://crsreports.congress.gov

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Section 301: Tariff Exclusions on U.S. Imports from China
There is no timetable for providing responses to filed
duties on “medical-care products” related to the COVID-19
requests, but the agency periodically announces decisions
response. Accordingly, the USTR opened a new comment
on pending requests through Federal Register notices. The
period, which will remain open until at least June 25, 2020.
“index” on the “USTR Exclusion Portal” also indicates the
Comments may be submitted regarding any medical
status of each request in the review process: (1) “Public
product subject to Section 301 tariffs, whether or not the
Comment Period,” (2) “Initial Substantive Review,” (3)
product is subject to a pending or denied exclusion request.
“Administrability Review,” (4) “Publication in Progress,”
(5) “Granted,” and (6) “Denied.” When the
The notice provides no further guidance on the types of
USTR issues an
products that the USTR considers to be “medical-care
exclusion, it is generally valid for one year after the
products.” In terms of the substance of the comments, they
exclusion notice is published in the Federal Register and
“must identify [specifically] the particular product of
retroactive to the imposition of the tariffs (with the starting
concern and explain precisely how the product relates to the
date varying by applicable list). Exclusions are not specific
response to the COVID-19 outbreak.” For example,
to the requestor, so any party importing a product covered
comments “may address whether a product is directly used
by an exclusion may do so under the exclusion and request
to treat COVID-19 or to limit the outbreak, and/or whether
retroactive tariff refunds from U.S. Customs and Border
the product is used in the production of needed medical-
Protection.
care products.” In addition, comments are asked to include,
Through January 31, 2020, the USTR received a total of
to the extent possible, the ten-digit “subheading of the
52,746 exclusion requests, pertinent to all four actions. Of
HTSUS applicable to the product, and the identity of the
these, 6,450 (12.2%) have been granted, 39,782 (75.4%)
particular product in terms of its functionality and physical
have been denied, and 6,514 (12.3%) are under review (as
characteristics (e.g., dimensions, material composition, or
of June 11, 2020) (Figure 1). Specifically, the exclusions
other characteristics).”
are reflected in approximately 80 ten-digit HTSUS tariff
The review of comments is to run parallel to, and is not to
subheadings and 2,000 specially prepared product
affect, the ongoing product exclusion requests still under
descriptions—all of which cover 6,514 separate requests.
review. The USTR has not indicated what form the
Because most exclusions apply to specific products within a
response will take or when it will respond to comments—
relevant subheading—not to entire subheadings, CRS could
only that it will review them on a rolling basis. These
not determine the exact amount of trade covered by the
comments may already be informing product exclusion
exclusions.
decisions, or may lead to the establishment of a new formal
COVID-19 and Medical-Care Products
exclusion process, akin to that used for Lists 3 and 4, but
The USTR announced on March 20, 2020 that, prior to the
strictly for medical products.
COVID-19 outbreak, the agency had been working with the
Issues for Congress
U.S. Department of Health and Human Services “to ensure
In recent years, some Members have raised the issue with
that critical medicines and other essential medical products
the USTR of establishing or streamlining an exclusion
were not subject to additional Section 301 tariffs.”
process during hearings and in letters to the USTR. For
Consequently, the United States had not imposed tariffs on
instance, for the third and largest action (List 3), a
certain critical products, such as ventilators, oxygen masks,
bipartisan group of more than 160 Representatives urged
and nebulizers. Moreover, the USTR indicated that, in
the Administration to consider granting exclusions.
recent months, it has prioritized the review of requests for
Subsequently, the joint explanatory statement to the
exclusions on medical care products, resulting in exclusions
FY2019 appropriations law (P.L. 116-6) directed the USTR
granted on basic medical supplies, including gloves, soaps,
to establish a product exclusion process for that third stage
facemasks, surgical drapes, and hospital gowns.
of tariffs within 30 days of the law’s enactment. During the
Since March 2020, the USTR has exempted certain medical
first session of the 116th Congress, some Members
products from Section 301 tariffs in ten rounds of
introduced legislation to limit USTR’s discretion on
exclusions. CRS could not determine exactly how many of
whether and how to grant or deny exclusion requests. These
them have been exempted on the basis of COVID-19
proposals included the “American Business Tariff Relief
concerns, as the USTR does not specify the rationale for
Act of 2019” (S. 2362) and the “Import Tax Relief Act of
granting exclusions in its announcements. While some
2019” (S. 577/H.R. 1452).
products can be easily identified, there are others with
known or potential medical uses—or inputs for the
As the Trump Administration makes more active use of
manufacture thereof—that have received exclusions but
Section 301 authorities to pressure other countries to
whose ultimate purpose cannot always be ascertained from
eliminate their trade barriers, Congress could consider
HTSUS subheadings or the provided product descriptions
amending Section 301. It could establish a formal product
(e.g., organic chemicals or textiles for the manufacture of
exclusion process or set specific guidelines for when and
pharmaceuticals or PPE).
how to grant exclusions. This could promote transparency,
New Exclusion Process?
consistency, and proper application of standards in
reviewing exclusion requests, thereby ensuring that the
On March 25, 2020, the USTR published a Federal Register
USTR carries out Section 301 objectives as prescribed by
notice seeking comments to determine if further
Congress.
modifications to the Section 301 tariffs on U.S. imports of
from China are necessary to respond to the COVID-19
Andres B. Schwarzenberg, Analyst in International Trade
pandemic in the United States. Specifically, the agency is
and Finance
requesting comments on whether to remove Section 301
IF11582
https://crsreports.congress.gov

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Section 301: Tariff Exclusions on U.S. Imports from China


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https://crsreports.congress.gov | IF11582 · VERSION 1 · NEW

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