Updated August 24, 2020
Section 301: Tariff Exclusions on U.S. Imports from China
In 2018, the U.S. Trade Representative (USTR) determined,
outline a formal process for exclusions or require the USTR
pursuant to an investigation under “Section 301” (Title III
to establish one. The determination to do so appears to be
of the Trade Act of 1974, 19 U.S.C. §§2411-2420), that
solely at the USTR’s discretion.
China’s acts, policies, and practices related to technology
With the COVID-19 pandemic, the agency has recently
transfer, intellectual property (IP), and innovation are
prioritized the review of exclusion requests concerning
unreasonable or discriminatory and burden or restrict U.S.
medical products, resulting in new exclusions for some
commerce. To counter them and obtain their elimination,
personal protective equipment (PPE) in short supply.
the Trump Administration imposed, under Section 301, four
Separately, the USTR recently requested public comments
rounds of increased tariffs on approximately two-thirds of
on whether to remove additional products covered by any
U.S. imports from China. However, to avoid harm to U.S.
list that are relevant to the U.S. response to COVID-19.
interests, the USTR instituted “tariff exclusions” for certain
U.S. imports that would otherwise be subject to tariffs. This
Figure 1. Section 301 Exclusions
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 Coronavirus Disease 2019
(COVID-19) pandemic seems to indicate that new

exclusions might be limited in scope to medical supplies
Source: CRS with information from the Office of the USTR.
Note: Figures may not reflect amendments to product specific exclusions and
related to COVID-19, and not be aimed at providing
do not include requests submitted on or after 03/25/2020 in response to 85
broader tariff relief.
FR 16987. However, exclusions granted to date and noted here may have been
Background
informed by those requests.
In August 2017, long-standing concerns over China’s
Section 301 Tariff Exclusion Process
policies on IP, subsidies, technology, and innovation led the
The tariff exclusion process enabled interested parties—
USTR to launch an investigation—under Section 301—into
including law firms, trade associations, and customs
those policies and their impact on U.S. stakeholders. The
brokers—to petition for an exemption from the Section 301
investigation concluded that four broad policies or practices
tariff increases for specific imports classified within a 10-
justified U.S. action: (1) China’s forced technology transfer
digit Harmonized Tariff Schedule of the United States
requirements, (2) cyber-enabled theft of U.S. IP and trade
(HTSUS) subheading. The time window to submit new
secrets, (3) discriminatory and non-market-based licensing
exclusion requests is now closed, but the USTR is
practices, and (4) state-funded strategic acquisition of U.S.
considering extensions of exclusions granted from Lists 1,
assets. Subsequently, as part of its efforts to pressure China
2, 3, and 4. While the USTR approved, on average, 35% of
to change these practices, the United States imposed
requests under the first two actions, the approval rates under
additional tariffs, of up to 25%, on certain U.S. imports
the third and four actions were 5% and 7%, respectively.
from China under four separate actions (per Lists 1, 2, 3,
According to the USTR, all requests are evaluated on a
and 4).
case-by-case basis. Although it is not entirely clear to CRS
During the Section 301 notice, hearing, and comment
how the process works internally, the agency has indicated
period on proposed tariff increases, the USTR heard
that, in determining which requests to grant, it considers the
numerous U.S. stakeholders who expressed concerns about
following: (1) availability of the product in question from
how additional tariffs could affect their businesses, as well
non-Chinese sources, (2) attempts by the importer to source
as U.S. consumers. In response, for each Section 301 action
the product from the United States or third countries, (3) the
regarding a new list of covered products, the USTR created
extent to which the imposition of Section 301 tariffs on the
a process whereby interested parties could request that a
particular product will cause severe economic harm to the
particular product be excluded from the tariffs, subject to
importer or other U.S. interests, and (4) the strategic
certain criteria. Title III of the Trade Act of 1974 does not
importance of the product to “Made in China 2025” or other
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link to page 1 Section 301: Tariff Exclusions on U.S. Imports from China
Chinese industrial programs. Past exclusions also have been
duties on “medical-care products” related to the COVID-19
granted for reasons that are thought to include, among
response. Accordingly, the USTR opened a new comment
others, U.S. national security interests and demonstrable
period, which remained open until June 25, 2020.
economic hardship from the tariffs for small businesses.
Comments could be submitted regarding any medical
product subject to Section 301 tariffs, whether or not it was
There is no timetable for providing responses to filed
subject to a pending or denied exclusion request.
requests, but the agency periodically announces decisions
on pending requests through Federal Register notices. The
The notice provided no further guidance on the types of
“index” on the “USTR Exclusion Portal” also indicates the
products that the USTR considers to be “medical-care
status of each request in the review process. When the
products.” In terms of the substance of the comments, they
USTR issues an exclusion, it is generally valid for one year
had to “identify [specifically] the particular product of
after the exclusion notice is published in the Federal
concern and explain precisely how the product relates to the
Register and retroactive to the imposition of the tariffs
response to the COVID-19 outbreak.” For example,
(with the starting date varying by applicable list).
comments could “address whether a product is directly used
Exclusions are not specific to the requestor, so any party
to treat COVID-19 or to limit the outbreak, and/or whether
importing a product covered by an exclusion may do so
the product is used in the production of needed medical-
under the exclusion and request retroactive tariff refunds
care products.” In addition, comments were asked to
from U.S. Customs and Border Protection.
include, to the extent possible, the 10-digit “subheading of
the HTSUS applicable to the product, and the identity of the
Through January 31, 2020, the USTR received a total of
particular product in terms of its functionality and physical
52,746 exclusion requests, pertinent to all four actions. Of
characteristics (e.g., dimensions, material composition, or
these, 6,804 (13%) have been granted and 45,942 (87%)
other characteristics).”
have been denied (as of August 24, 2020) (Figure 1).
Specifically, the exclusions are reflected in approximately
The review of comments is to run parallel to, and is not to
90 10-digit HTSUS tariff subheadings and 2,120 specially
affect, any ongoing product exclusion requests still under
prepared product descriptions—all of which cover 6,804
review. The USTR has not indicated what form the
separate requests. Because most exclusions apply to
response will take or when it will respond to comments—
specific products within a relevant subheading—not to
only that it will review them on a rolling basis. These
entire subheadings, CRS could not determine the exact
comments may already be informing product exclusion
amount of trade covered by the 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
strictly for medical products.
The USTR announced on March 20, 2020, that, prior to the
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 Trump 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
first session of the 116th Congress, some Members
Since March 2020, the USTR has exempted certain medical
introduced legislation to limit USTR’s discretion on
products from Section 301 tariffs in several rounds of
whether and how to grant or deny exclusion requests. These
exclusions. CRS could not determine exactly how many of
proposals included the American Business Tariff Relief Act
them have been exempted on the basis of COVID-19
of 2019 (S. 2362) and the Import Tax Relief Act of 2019 (S.
concerns, as the USTR does not specify the rationale for
577/H.R. 1452).
granting exclusions in its announcements. While some
products can be easily identified, there are others with
As the Administration makes more active use of Section
known or potential medical uses—or inputs for the
301 authorities to pressure other countries to eliminate their
manufacture thereof—that have received exclusions but
trade barriers, Congress could consider amending Section
whose ultimate purpose cannot always be ascertained from
301. It could establish a formal product exclusion process
HTSUS subheadings or the provided product descriptions
or set specific guidelines for when and how to grant
(e.g., organic chemicals or textiles for the manufacture of
exclusions. This could promote transparency, consistency,
pharmaceuticals or PPE).
and proper application of standards in reviewing exclusion
requests, thereby ensuring that the USTR carries out
New Exclusion Process?
Section 301 objectives as prescribed by Congress.
On March 25, 2020, the USTR published a Federal
Register notice seeking comments to determine if further
Andres B. Schwarzenberg, Analyst in International Trade
modifications to the Section 301 tariffs on U.S. imports of
and Finance
from China are necessary to respond to the COVID-19
pandemic in the United States. Specifically, the agency
IF11582
requested comments on whether to remove Section 301
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Section 301: Tariff Exclusions on U.S. Imports from China


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https://crsreports.congress.gov | IF11582 · VERSION 4 · UPDATED

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